Long Island’s East End was hit hard by the real estate downturn, but not by Hurricane Sandy, which largely bypassed the area. Thanks to that stroke of good luck — coupled with the improving economy — the popular vacation spots in the Hamptons and North Fork are now seeing a definite rebound from the post-financial crisis slump.
This month, The Real Deal asked residential brokers for the lay of the land on the East End. Hamptons sales activity leaped 29 percent between 2011 and 2012, according to the Corcoran Group, and brokers said they are now seeing bidding wars as the number of homes on the market dwindles. In another positive sign, developers are once again building multimillion-dollar spec homes. Sales prices have now stabilized, brokers said, though they are still off 15 to 20 percent from their boom-time highs. The median price in the Hamptons for the fourth quarter of 2012 climbed slightly from 2011 to $1.81 million, according to Corcoran.
As for the upcoming summer season, brokers said rates for rental homes are roughly on par with last year, and would-be vacationers started looking earlier than usual. But not to worry — “there still are plenty of great homes available for rent” this summer, said Timothy Haftel, a broker in Halstead Property’s Southampton office.
On the retail front, brokers said trendy new hot spots in Montauk — such as the Surf Lodge, Ruschmeyer’s hotel and the Sloppy Tuna restaurant — are prompting home seekers to look farther east for summer vacation locales, among other factors.
For more on the upcoming rental season and more, we turn to our panel of experts.
Ernie Cervi, executive managing director in Bridgehampton, the Corcoran Group
How is overall residential sales volume in the Hamptons right now, and how does that compare to a year ago, two years ago and during the boom?
The market is reminiscent of the boom in terms of activity. In the fourth quarter of 2012, sales volume was up 29 percent over 2011. There was a rush to close before the end of the year, so there was heavy activity in December, which is unusual. This year I can tell you that brokers have been involved in bidding wars and well-priced properties coming on to the market are selling.
What’s going on with Hamptons rentals for this upcoming summer? Is the market more or less active than last year at this time?
More active. I can tell you our [number of] rentals is up 20 percent just for January and February. There will be another rush of rental activity coming up in early April.
Are rental prices higher or lower than last year at this time?
They are about the same, and we have encouraged landlords that rented with us last year to keep prices the same. We are not in a discount phase, so things are renting at listing price, for the most part. For the things that are not priced properly, there will be a discount, but it’s too early on to talk about that. The rental season is far from over.
What new and different trends are you seeing this season?
There is a trend of people going farther east, heading toward Amagansett and Montauk, more than in the past. The new venues attract people. People also feel that they can get more for their money the farther out they go, and that is sometimes true. We have seen an increase on the North Fork as well.
Are sales prices up or down compared to a year ago, two years ago and during the boom?
The median price in the Hamptons for the fourth quarter of 2012 was up 7 percent over 2011 to $1.81 million. But [more notably], there was a 28 percent increase in sales activity in 2012 over 2011.
How are residential sales prices on the North Fork, and how does that compare to the boom?
The median sales price for 2008 on the North Fork was $460,000; the median sales price for 2012 was $415,000.
Which price ranges and housing types in the Hamptons are performing best right now?
We have more activity in the $2 to 5 million price range than we had seen in a while. That was probably where most of the inventory was sitting, and that inventory seems to be moving. We have a lot of new developments. For example, in Bridgehampton, a developer is doing 22 homes [priced] from $3.5 to $4 million. There is another investor about to break ground on 30 homes in the mid-$2 million range. And there are other builders doing high-end, luxury homes. That tells you that there is confidence in that market and it is selling.
Which price ranges and housing types in the Hamptons are struggling right now? [Homes in] the $15 million-plus range that are not on the water are not moving fast. But the high end of the market is off to a good start this year, and it was last year as well. At the end of the fourth quarter of 2012, luxury-sales volume was up 13 percent over 2011.
What was the impact of Hurricane Sandy on the Hamptons sales and rental markets?
We were lucky. We didn’t have a lot of damage. There were waterfront homes that had docks that had to be repaired. But we were not devastated the way other beach communities were. People were looking at waterfront property right after the storm. We are seeing people who would have rented in those affected beach communities coming here to rent. They are test-driving the Hamptons, and that can only bring good things.
What other factors do you think are going to have a big impact on the East End market now or in the near future?
Hedge funds are adding Hamptons properties and commercial properties to their portfolios. So that says something.
What areas of the Hamptons are the strongest for retail? What buzz-worthy new restaurants or stores are debuting this season?
Typically the larger towns like Easthampton and Southampton attract anchor-type stores like Ralph Lauren, Tiffany’s and Michael Kors. There is talk about a Pottery Barn coming to Southampton. We get excited about new restaurants, so it does draw people in.
What is the inventory of available residential homes on the East End and how does that compare to a year ago, two years ago and during the boom?
At the end of the fourth quarter there were 8,088 units available. At the end of 2011 there were 8,271. So we are seeing a steady decline in inventory. At the low point in 2007, the inventory was down to around 6,200.
Beate Moore, senior vice president, Sotheby’s International Realty
What’s going on with Hamptons rentals for this summer?
The activity level is about the same. Prices are slightly up from last year, but within reason.
Which price ranges and housing types in the Hamptons are performing best right now?
Entry-level homes are being snapped up, but all price ranges are active provided [homes] are priced realistically.
What is the impact of new nightlife destinations in Montauk — such as Surf Lodge, Ruschmeyer’s and the Sloppy Tuna — on the residential market?
The Montauk nightlife attracts the young, hip crowd, but that has not yet translated into more sales.
Diane Saatchi, senior vice president, Saunders & Associates
How is overall sales volume in the Hamptons right now?
First-quarter 2013 sales volume is up compared to last year and way, way up compared to prior years. Last year was not bad but was spotty. In some segments now we are short on inventory and are seeing signs of a seller’s market.
Which price ranges and housing types in the Hamptons are performing best right now?
Seems like most buyers want new construction. I’m not sure if those $3 to $4 million [homes] north of the Montauk Highway and $6 to $15 million [homes] south of the highway are popular because of demand, or because that is the available supply. The under–$2 million [market] is also strong, mainly for resales.
Which towns on the East End are the strongest right now, and which are struggling the most?
Bridgehampton, Sagaponack and Water Mill — south of the highway — are the current center of gravity and have been for the past few years.
What are the most surprising trends you’re seeing in the Hamptons market?
I did not think the market would rebound as quickly as it has. I have even begun to hear about sellers who are considering increasing prices of long-listed, unsold properties.
What are the biggest challenges to selling or renting homes in the Hamptons today?
Managing expectations is the hardest part of this work. It is especially challenging in a transitioning market, when both buyers and sellers have some cause for hope.
Peter Turino, president, Brown Harris Stevens of the Hamptons
How is overall residential sales volume in the Hamptons right now?
There is a lot more volume and bidding wars and less inventory. It’s different from the previous three years — it started in the middle of 2012.
What’s going on with Hamptons rentals for this upcoming year?
Rentals have been good every year for the last five years, so they are doing very nicely. Rental prices are slightly higher, maybe 5 percent higher.
What new trends are you seeing this season?
In general there are more short-term rentals than there used to be. I always used to say that about 80 percent of the rental business was full season [from Memorial Day to Labor Day], and 20 percent was shorter-term — one- or two-month rentals. I think we are seeing more two-, three- and four-week rentals than we used to. So the full-season percentage is probably 70 to 75.
When did renters start inquiring about properties this year — earlier or later than usual?
They started in November, earlier than usual. That’s a trend — that happened last year, too. A significant number of people shopped for rentals before the New Year.
What’s going on with residential sales prices in the Hamptons?
We know the market is cyclical, but the prices are not going up yet. Prices are stable, and more sellers are getting their price than they did the three to four previous years. So the first thing we need to establish is that kind of stability, and then we will probably see higher prices. I think within the next two years we can expect that prices will drift higher again. But for now I think everyone is quite satisfied with the fact that it is possible to sell a house. For a long time it was very difficult to sell a house at a realistic price, with the weak demand and fear of buying. But that has been alleviated.
Which price ranges and housing types in the Hamptons are performing best right now?
There is a hot market under $1 million. That is largely for people who are moving to the area, leaving the city or the suburbs for the Hamptons to live and work. That has been a good market for the last few years and continues to do well. Another busy area is houses that are selling for between $2 and $3 million. That had been rather quiet during the last four years but has revived nicely. Then you have the high-end market, which is above $5 million, and that is also reviving nicely. We’ve had a lot of sales lately in the $6 to $8 million range, where previously that had been up and down.
Are there any other factors that you think are going to have a big impact on the East End market now or in the near future?
Each year there are more people who choose the area as a permanent residence. What used to be a 5 percent share of the market is easily 15 percent, and that will grow in the next 10 years to be 20 to 25 percent of people buying to live permanently. We need that. That adds a whole other dimension of permanence and stability to the marketplace.
Where are prices and sales volume of spec homes right now in the Hamptons?
I think the spec homes are a lot more realistically priced now than they have been — a lot of them were overpriced. There are spec houses in every category, from under $1 million to $30 million, in all shapes and sizes, in all neighborhoods. In the recovering market, these houses are going to sell more quickly than they did during the recession, when it wasn’t uncommon to wait two and a half years to sell a house.
How long are homes staying on the market in the Hamptons overall?
They are definitely staying on the market for a shorter period of time. The average house will sell in less than a year’s time. Previously, it was more than a year’s time.
Timothy Haftel, associate broker, Halstead Property
How is overall residential sales volume in the Hamptons right now?
There was a definite uptick in sales volume in 2012 in the Hamptons compared to 2011 and 2010. This could be attributed to a very strong fourth quarter. Owners were looking to close before the year-end to avoid the increase in capital gains in 2013. The first quarter of this year has continued to be very strong. The milder weather in January and February, along with the positive economic outlook and Wall Street’s strong showing, have certainly helped. Also, the continued interest from foreign investors and the return of developers and speculative builders have added to the positive momentum. However, sales volume is still off 25 percent from the sales volume in the boom periods of the mid-2000’s.
What’s going on with Hamptons rentals for this upcoming summer?
This year’s rental season started early and has been strong. Much of the inventory in key areas has been depleted and many tenants are resecuring their rentals from last season.
Where are home sale prices in the Hamptons?
Prices have remained steady since 2011. Overall sales prices are off 15 to 20 percent from their highs.
Which price ranges and housing types in the Hamptons are performing best?
The under-$1 million market is performing well, in large part due to continued low interest rates and investors looking to enter the market. The $3 million–plus market is still going strong as foreign investors and Wall Streeters are looking for places to invest their money.
What type of Hamptons home is struggling the most?
Most buyers are looking for properties that don’t need a lot of work. In a second-home market, they don’t want to spend a lot of time on renovations.
What has been the impact of Hurricane Sandy on the Hamptons sales and rental markets?
Sandy didn’t have nearly the impact in the Hamptons as it had up island. It has had only minimal influence on sales and rental inventory. There are some instances where people are not renting while doing repairs, or are taking their own rentals while repairs are happening to their homes.
What other factors will impact the East End market now or in the near future?
Wall Street’s success means a healthy Hamptons market. If mortgage rates remain low, demand will remain strong for the lower end of the market.
What areas of the Hamptons are the strongest for retail? What new restaurants, stores or other retail are debuting this season that you think will generate attention?
East Hampton continues its strong retail presence. Most retailers have renewed their leases for this season. Southampton should benefit from the introduction of Pottery Barn in the old Saks Fifth Avenue location. Also, Delmonico’s is taking over the old Savanna’s location by the train station.
What are the most surprising trends you’re seeing in the Hamptons residential market right now?
A renewed interest in the modern home. The cedar-sided traditional still rules, but requests for the sleek styling of modern designs are definitely on the rise.
Judi Desiderio, CEO, Town & Country Real Estate
How is overall residential sales volume in the Hamptons right now?
Real estate sales in the Hamptons are at levels not seen in the past five years. [But] we are not near the levels of 2005, which had the highest number of home sales, or 2007, the biggest year for high-end sales.
What’s going on with Hamptons rentals for this upcoming summer?
We are seeing visitors who might otherwise rent on the Jersey Shore or Fire Island coming to the East End for the summer. Also, during the Great Recession, tenants curtailed their stay. Sometimes two families split a rental. Now it’s back to full terms and one family [per] house. Prices remain steady for the most part.
What is the impact of Hurricane Sandy on the Hamptons sales and rental markets?
We dodged a bullet with Sandy, and won by default when it comes to rentals.