Market Remains Shaky, but Newly Emboldened Wall Streeters are Returning

The Wall Street Journal

When Mala Sander listed a 2,800-square-foot beachfront home overlooking Sag Harbor on Aug. 6, she hoped for a few nibbles that might lead to an offer near her asking price of $4.35 million. Then 30 brokers showed up at the first open house, resulting in an offer, at full asking price, in four days. Amazed, the owners rejected the offer and raised the price tag to $4.5 million. Another buyer matched the new price two days later.

“I’m completely booked every weekend,” says Ms. Sander, of Corcoran Group.

While the luxury real-estate market remains moribund in most parts of the country, there are a few signs of a nascent turnaround in the Hamptons, a string of beach communities housing some of New York’s wealthiest. The number of new deals put into contract jumped to 156 in August from 62 in July, says Corcoran’s Rick Hoffman, who tracks a listing system shared with other companies in eastern Long Island. Home sales also rose 34% to 344 units in the second quarter from the prior quarter, according to Suffolk Research Service Inc., a local real estate data firm. While up, that’s far less than the 576 units sold in the second quarter of 2008.

Hamptons developer Joe Farrell, who built his last spec home for more than $7 million two years ago, is ramping up again. Earlier in the spring, he says it was no problem getting 10% to 15% discounts on “blue-chip” lots south of Montauk Highway and within walking distance to the beach. Now, “some stuff is going into bidding wars,” says Mr. Farrell, who recently lost out on a one-acre lot on Bridgehampton’s Sand Piper Drive near the beach for $3.15 million.

Brokers remain circumspect about whether the surge heralds a real recovery. From May 1 to Aug. 31, pre-foreclosure filings in the Hamptons jumped 31% to 294 from year-earlier levels, according to Long Island Profiles, a publisher of real-estate and foreclosure data. Summer sales were “mediocre at best,” says Peter Turino of Brown Harris Stevens. “This is probably a temporary improvement. I think we’ll have a very slow winter.”

The sales jump partially reflects lower prices, but brokers say the increased activity also reflects changes on Wall Street, whose workers represent the largest proportion of Hamptons buyers. “I think word is that bonuses are going to be good,” says Ms. Sander, who notes the buyers of her Sag Harbor home work in finance. “I think it gives them confidence to buy.” The return of rank-and-file Wall Streeters helped activity increase most for homes under $6 million, considered here the middle-luxury tier of the market. Brokers say employees from Goldman Sachs, which recently reported net income of $3.44 billion for the quarter ended June 26, are particularly well-represented.

Everyone agrees that the Hamptons are a long way from total recovery. The median sale price of a home on Long Island’s East End was $560,000 in the spring of this year, down 32% from the peak price of $825,000 in the first half of 2007, according to Suffolk Research. Inventory remains high: In August there were 4,900 homes for sale in the Hamptons, or roughly the equivalent of about three years of inventory, according to StreetEasy, a New York-based online listing service. Some seasoned brokers say pent-up demand and a delayed spring selling season are responsible for the summer surge in activity. The market is “going sideways,” says Dottie Herman, president and CEO of Prudential Douglas Elliman.

At the ultra-high end, sales remain rare. Former advertising executive-turned-car dealership mogul Carl Spielvogel and his wife, Barbaralee, are still trying to sell their 25-acre Southampton estate for $28 million. A five-acre estate on Southampton’s Meadow Lane with a pool and tennis court is listed for $25.9 million; a similar property sold for $30.5 million two years ago. Some of the biggest sales were staged by government regulators, who successfully auctioned off the Southampton house of indicted former hedge-fund manager James Nicholson for $25.9 million. The Montauk home of Bernard Madoff garnered four bids and went into contract for more than its $8.75 million asking price after just two weeks on the market.

These days, everyone is looking for the good deal. In Montauk, a 0.36-acre property went into contract three weeks ago for close to $1 million, about 44% off its original December 2008 asking price of $1.8 million. The buyer never set foot inside the 500-square-foot house, says listing agent Peter Moore of Corcoran, because he plans to tear it down. Nearby in Montauk, Charles Entenmann, whose family created the baked-goods empire, sold his home at 93 Prospect Hill Lane, for $2.2 million in July after originally asking $4.2 million.

And while Wall Streeters still predominate, brokers say the new pricing also is enticing buyers from other fields. JoLee Sanchez, a 38-year-old homemaker whose husband is about to sell his general-contracting business, says she has seen 100 houses since she started shopping for an investment property “in the high 900s,” in April. Southampton Village “would’ve been a little out of reach for us a couple of years ago,” Ms. Sanchez says. Now, “with our circumstances the way they are, it’s going to happen.”