Hamptons’ real estate no longer immune to falling home values
Rewind a couple of years to the first column I penned for Pulse. The focus was on the Hamptons real estate market and its apparent immunity to the ills being faced by other markets both locally and nationally.
At the time, the strength of the East End region was attributed to its location, the type of housing market and buyer it catered to, and the cache of the region. How could the Hamptons ever be subjected to the same rules as the rest of Long Island? It, like those who could afford multi-million dollar abodes, did not play by the same rules.
Fast forward to the present. A recent article in the New York Times noted that this summer the Hamptons will be more about the beaches than the bling—marking a return to simpler, less complicated forms of fun that originally drew the crowds to the East End, a mix of flip flops and Ferraris.
Obviously, this is due to an economy that appears to be at or near its bottom following a stupendous decline spurred on by Wall Street greed and the preposterous belief—then and now—that real estate values would continue to rise unabated. Even the mighty Hamptons could not stave off the real estate downturn and has suffered the same fate as rest of Long Island and the country. With declining home values, fewer sales and—gasp!—foreclosures.
“At the moment, the market is in a state of transition,”
Don’t get me wrong, the East End housing market could easily be described as the strongest on Long Island, at least from a price perspective, but it has taken a hit. If one would have predicted that the median sale price would have plummeted 25 percent from first quarter 2008 to first quarter 2009—$950,000 to $725,000 according to East Hampton-based Town & Country Real Estate—he would have been deemed a crazy person. Further, if one would have asserted that home prices in the Village of East Hampton, what may well be the most desirable Hamptons hamlet, that its median price from 2008 to 2009 would plummet a staggering 64 percent, people would have recommended a visit to the hospital for further observation. At the time, the clientele to which the Hamptons cater was seen as being above the fray.
“At the moment, the market is in a state of transition,” observed John MacLachlan, partner at the East Hampton based law firm MacLachlan & Egan. “Homeowners are being educated on the value of their homes and they’re not what they used to be.”
When I first interviewed the market with MacLachlan, he was bullish on how the Hamptons would weather the economic downturn noting the region’s prime markets were still robust.
That was before the likes of Bear Stearns, Bernie Madoff and Agape.
He noted that the limited number of transactions has hidden where that price bar will be set once the economy and the real estate market begin to recover. “Until then we won’t know what those new standards will be.”
Town & Country statistics note that the number of homes sold in the first quarter of 2008 to the first quarter of 2009 declined 67 percent with the greatest decline in the high end sales (those $3.5 million and above), which were down as much as 76 percent based on the category being reviewed.
He noted that the Hamptons market’s direct connection to Wall Street has had an immediate effect, a direct impact. “The misdeeds of Wall Street may be having a negative influence on Kansas, but it is having a direct impact here.”
I wonder how well Ferrari’s run on regular unleaded.