Well-heeled New Yorkers have long been escaping the city to seaside homes in the Hamptons, the cluster of seaside villages known for beautiful beaches, trendy restaurants and celebrity sightings. In the villages of Southampton and East Hampton, properties usually come with a hectare of land, a pool, a tennis court, a surplus of bedrooms and a price tag upwards of US$25 million. Homeowners here include several Forbes billionaires, hedge fund managers and celebrities like Jennifer Lopez, Scarlett Johansson and Paul McCartney.
Like many wealthy second-home markets, the Hamptons exist on a separate tier. In contrast to the rest of America’s housing market, sales are driven by a population of millionaires and billionaires who are seeking a second or third home or turning to real estate as an alternative investment. While the market is not immune to fluctuations on Wall Street— during the financial crisis, sales in the Hamptons stagnated as sellers held onto properties hoping to ride out the market— it has proven remarkably resilient.
By 2013, year-on-year transactions jumped by 52 percent and average prices soared by 40 percent hitting US$17.4 million in some prime areas. In 2014, the Hamptons had a record-breaking number of home sales at record-breaking prices. One house on a premier 18-acre beachfront location sold for US$147 million, making it the most expensive sale to date in the Unites States.
After a record-breaking number of home sales in 2014, things are beginning to cool down. Both sales and median prices of Hamptons real estate are down in 2015 from where they were last year, according to a recent report from Douglas Elliman Real Estate. The median sales price for a home in the Hamptons declined 6.5 percent to US$849,000 compared to 2014, according to the report. The number of homes that were sold fell 15.7 percent to 590 this year, down from 700 sales at this time last year. However, the average home price rose 2.5 percent year over year. Jonathan Miller, president of Miller Samuel Real Estate Appraisers who authored the report, says 2014 saw an explosion of pent-up demand as people began to consider real estate again for the first time since the housing crisis. That demand resulted in 700 sales, a record number.
- In the second quarter of 2015, Hamptons market conditions fell short of the torrid pace set over the previous year. Housing prices were mixed, while the number of sales declined and listing inventory edged higher.
- There were 590 sales during the second quarter of 2015, which is 15.7 percent fewer sales than the prior year quarter and the lowest sales activity seen for a second quarter in three years. The number of sales to date was down 7.9 percent from the same period.
- Price indicators for the luxury housing market—the top 10 percent of all sales— saw more gains over the same period. Luxury median sales price edged 1.8 percent higher to US$5,293,750 and luxury average sales price increased 6.6 percent to US$6,775, 823.
“That demand has mostly been absorbed, so what we have now is the prices showing mixed trends, but sales are down,” he says. “There isn’t the same sense of urgency by buyers that there was a year ago.”
Paul Brennan of Douglas Elliman Real Estate in Bridgehampton says, so far this year, sales have been busy on the lower end, between US$1 to 5 million, but high-end sales have been surprisingly slow. “Last year saw a number of record-breaking deals. Everyone is asking why the activity dropped. Perhaps there is a little price resistance.”
While sales aren’t breaking records, agents say overall they are still healthy. Part of the issue, according to Zach Vachinsky at Bespoke Real Estate in Southampton, is the lack of inventory to meet buyer demand. “The salable inventory does not equal the demand that we are seeing. In this train of thought, the buyers at the price point are extremely savvy and patient for the right thing. Waterfront is still king, and we are seeing trades happen at full-ask and very quickly.” Vachinsky and his brother founded Bespoke Real Estate in 2014 and deal exclusively with properties priced over US$10 million. Vachinsky says luxury homebuyers look closely at the quality of materials, landscaping and layout. “When a buyer at this level walks into a home they can quickly discern the level of construction and finish,” he says. Many buyers will expect heated gunite pools, indoor spas, gyms, wine cellars, theatres, media rooms, sunken tennis courts, smart home systems and even virtual sports rooms.
Traditionally, the most desirable territory has been south of Montauk Highway where the best beaches are. The line of demarcation has blurred, and properties as far as Montauk and the North Shore have become desirable. The North Fork is quieter and less developed and home to farms, vineyards and smaller properties with lower price points.
But the range is significant. A large winery estate is currently on the market for US$25 million. Montauk, located on the Eastern tip of Long Island, is changing too. A waterfront estate once owned by artist Andy Warhol is currently listed for US$85 million. The compound, which includes six cottages and a nearby horse ranch, was originally built as a fishing camp. Warhol and Paul Morrissey, who directed several of the artist’s films, purchased the compound for US$225,000 in 1971. The property’s current owner is J.Crew CEO, Mickey Drexler. He purchased Warhol’s estate in 2007 for US$27 million and enlisted the acclaimed architect Thierry Despont to renovate the interiors. “This estate is unique on the East Coast,” says Paul Brennan, who has the listing. “It personifies Montauk. You could never build it again.”
This story was first published in Palace Magazine