Hamptons Real Estate: Sizing Up the Season
by c.j. hughes
Edgefield, a 2.7-acre, $19.75 million estate in Bridgehampton, listed by Corcoran
Load your sports car with the Lily Pulitzer and Louis Vuitton totes, and grab a checkbook. Like a returning tide, the Hamptons vacation home market will continue to make its way back this summer, according to brokers, developers, and real estate analysts, after a choppy 2011.
Few expect houses to fetch pre-recession prices—just yet. But on the easternmost end of Long Island, across the 50-mile stretch of towns and villages that make up the Hamptons, brokers are confident that the getaway’s worst real estate days are behind it. “I am cautiously bullish on this season, even if everybody considers that to be broker babble,” says Gary DePersia, a Corcoran Group broker and 16-year Hamptons veteran. Prices are inching up. Sales inquires have been notably robust. And inventory that has languished since the post-Lehman-collapse period is finally off the shelves. “Everything feels more buoyant.”
If there is an upsurge, the Bridgehampton-Sagaponack corridor would seem to be on its crest, as home prices show. In the fourth quarter 2011, the average sale price in Bridge-Sag, which includes Water Mill and Wainscott, was $5.6 million versus $4.1 million in the yearago quarter, according to Corcoran Group data—a hefty 36 percent increase.
That tracks nicely with last year’s Forbes report that Sagaponack’s zip code, 11962, has the country’s third most expensive home prices. (Water Mill was number eight and Wainscott was number 29, while Amagansett—the next Hamptons town on the list—was 37.) In sharp contrast, East Hampton saw its prices tumble to $800,000 from $1.1 million, a 29 percent drop, the Corcoran figures show.
With little of the nightlife bustle of points east— after all, a prominent landmark is Candy Kitchen, a diner—and enough grassy fields to make you forget you’re near water, Bridge-Sag might seem an unlikely contender for the top spot on the trend meter. But that rural flavor is precisely the point, says Jim Oxnam, a broker with Brown Harris Stevens on the East End. “This is for people who want a country, open feel, to be around lots of undeveloped land,” he says. “That doesn’t really exist anywhere else [in the Hamptons].”
Others extol its relative accessibility, about two and a half hours in traffic in summer from Midtown by car, versus three and a half for East Hampton-Montauk. Plus, the Bridge-Sag area is not shoehorned onto a barrier beach. It’s sprawling, with lots of back roads, which means weekenders don’t always have to deal with the bumper-car mayhem of Route 27 to get to another Hampton, says builder Joe Farrell, who’s constructed large spec homes in the area for years.
In a move that offers a clue to the next frontier in Hamptons real estate, Farrell is now putting his chips on the area “north of the highway”—in other words, the inland side of Route 27 that had for years been seen as a no-go for wealthy weekenders, and where Farrell hasn’t built for years. “The stigma of the north has faded,” he says.
This winter, Farrell purchased a 10-acre former nursery on Deerfield Road, next to a plot where TV host Matt Lauer is developing a horse farm, where he plans on putting up seven spec homes priced from $4 million to $5 million, all with pools, which are de rigueur for the typical Hamptons weekender.
Price-wise, Farrell might be on to something. The $3.5 million to $5 million bracket has by far shown the most growth in the last year, according to data from Town & Country Real Estate; there were 49 sales at that level through September 2011, versus 38 in the same period in 2010.
At the $5 million to $10 million price point, sales have been flat, though the segment of the market just above it—call it the higher high end, or $10 million to $20 million—seems to be heating up like skin on Main Beach at high noon in July.
In fact, at the end of last year, a 6,000-squarefoot estate on East Hampton’s Highway Behind the Pond, as in Hook Pond, sold for $17 million, DePersia says. And it sat on a driving range of the Maidstone Club’s golf course, so there are “golf balls flying all around,” he jokes.
The once-written-off-for-dead über-high end, too, has been active, though after hefty discounts. The biggest deal in 2011 was the $36 million purchase of 400 Ferry Road, in the North Haven section of Sag Harbor, by Jeff Greene, the former Florida Senate candidate. With a lagoon that evokes a “location for the next pirate movie,” according to its listing, the 55-acre waterfront parcel, known as Tyndal Point, boasts three houses and the option, via zoning, to build another six. However, it’s probably important to mention that this property was listed in 2007 for $80 million, which means it traded at a whopping 55 percent discount.
Still, there were other big-ticket sales, like the $25 million deal for a 9,000-square-foot mansion, styled like a French cottage, on Meadow Lane. Convinced those deals are a taste of things to come, brokers point to a transaction that took place this winter: the $25 million purchase of a centuryold, 11-bedroom Queen Anne on Lee Avenue, in the heart of East Hampton’s village. The property, designed by Carnegie Hall’s architect, William Tuthill, came on the market around Thanksgiving and immediately received several offers, brokers say. (As of press time, the property had not closed yet.) Few expect bidding wars to return en masse to the Hamptons soon; prices are still about 10 percent below their pre-recession peaks, though some were down 20 percent at one point.
Other areas have struggled, relatively speaking. Amagansett, which lies east of East Hampton, saw average prices fall 4 percent from 2010 to fourth quarter 2011, according to the Corcoran data. Why? Pinpointing what makes some Hamptons cool, or not, is about as easy as navigating the aisles of Citarella on a Friday night. And the evidence can often be contradictory.
Amagansett “is more laissez-faire and not as glitzy as some of the other Hamptons,” says Beate Moore, of Sotheby’s International Realty, who sold that Lee Avenue home. Then again, glitzier areas are not necessarily benefiting from that drop-off. Southampton, which seems to have lost some of its luster in recent years, suffers because “people can feel it is too formal, too Park Avenue,” Moore explains.
Yet it’s clear with each private jet that touches down at East Hampton’s airport, that the Hamptons has hardly been abandoned by the A-list. “Well-established people… doctors, artists, Wall Street types who never lost their jobs and have lots of money, they spend it as they want,” says Peggy Darling, a sales associate with Prudential Douglas Elliman.
Even members of the one percent like deals, though, which is why Darling steers clients to the area Remsemburg through Quogue, where a house can go for half, or possibly less, than properties further east, and sit within an hourand- a-half drive from New York.But nobody in the $5 million and below category appears to be jumping in headfirst. Some buyers now will rent for a year or more to test the waters, and there is a robust rental market to cater to them. While many renters may have reduced the length of their stay on the East End in recent years—instead of a full season, they took just an August rental—they came all the same, brokers say.
“The rental market is starting earlier and is more consistent,” says Michael Schultz, a senior vice president and associate broker at The Corcoran Group. “It used to be that people would come out right before Memorial Day, thinking they were getting a better deal, but I’ve already seen an uptick in rentals starting now.” Starter rentals might be found in Montauk, where a two-bedroom contemporary can run $20,000 for the season, or $10,000 a bedroom, though that’s up sharply in recent years on account of a lively nighttime and restaurant scene, including such spots as Surf Lodge and Ruschmeyer’s, which promise to prosper again this year. “Montauk is sort of the Downtown to East Hampton,” Schultz adds.
In the mid-market category—that is, from $100,000 to $200,000—a seasonal renter can end up with a roomy house with a pool, south of the highway, like in Bridgehampton, where a six-bedroom home built in 2005, with a stone and clapboard exterior, on Kellis Pond, is $200,000 Memorial Day to Labor Day.
The most dazzling $200,000 to $400,000 compounds, meanwhile, seem to be tucked this year in and around East Hampton. On Skimhampton Road is a six-bedroom contemporary designed by Robert A.M. Stern with a pool and tennis courts for $250,000, for the Memorial Day to Labor Day period; on Egypt Lane is a six-bedroom on almost two acres, also with pool and tennis, for $350,000 for July and August.
Are foreign buyers popping up in the Hamptons market as they have in Manhattan? Yes and no. Russians, who were highly visible a few years ago, seem to be less so now, brokers say, although overall demographics are windening: there are more Chinese, Brazilian, and even debt-crisis-stricken Europeans, brokers explain, in far greater numbers than a decade ago.
Across the board, rentals have inched up about 5 percent a year since the depths of the Great Recession (or 10 percent from pre-recession levels), says Bill Stoecker, a Town & Country broker; people who otherwise would have bought homes but sat out the market are putting pressure on rents, he says, adding, “The rental market has always been relatively strong, but it picked up a lot in the last four years with all the uncertainty.”
Stoecker also says that if the sales market improves this season, as many predict, don’t look for the rental market to soften—demands for rentals will still be huge, he predicts, as people still want to try the area before committing.
Ultimately, the Hamptons are a trailing indicator of what happens in New York, so when the city’s fortunes improve, the East End’s will quickly follow. Says Jane Gill, a vice president with Saunders & Associates, “The money always trickles down the LIE and ends up here.”