The Real Deal

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Route 27 marks market in Hamptons

The home at 71 Jermain Avenue in Sag Harbor, which is north of Route 27, was originally listed for $3.59 million. The price was dropped to $2.59 million.

Bending and curving east along the South Fork to the tip of Montauk, Route 27 is the main road that funnels traffic in and out of the Hamptons.

But more than simply being a congestion headache on Friday afternoons this past summer as usual, the highway has traditionally acted as a dividing line, partitioning the area's most exclusive homes on the ocean side on the south from the mix of pricey and mid-range homes on the bay side to the north.

As the housing market has slowed this year in the Hamptons, some local brokers say the gap between the markets on either side of the highway appears to be widening.

"South of the highway remains fine, because it's a prime location and it has much more limited inventory, which is often perceived as a safer investment," said John Gicking, a senior vice president with Sotheby's International Realty. "North of the highway is a much larger geographic area. Not only are there some $10 to $20 million properties, but there is a huge supply of new houses that were built in the last five to 10 years ... [and] buyers often don't perceive as much value [there]."

During the recent boom times, the stark divide between the two markets was muddied, as the lesser-developed land to the north lured affluent buyers and speculators eager to capitalize on the robust market for mid-range properties — at least mid-range by Hamptons standards.

But even though the market for prime properties has remained somewhat healthy on the north side of the highway, the bulk of the market there is hurting as sales volume and prices both slip, brokers said.

For starters, there is simply a greater inventory of homes there. But those homes, including many in the $1 to $3 million range, are also more vulnerable to market fluctuation compared to the south side, where mega deals are more frequent.

While market reports do not break down sales volume pegged to the highway divide, figures for prices are more concrete, showing just how real the Route 27 marker actually is.

During the second quarter of the year, the median sale price of properties on the north side of Route 27 fell to $870,000, down 18.1 percent compared to the same quarter last year, while prices stayed steady to the south, rising by 1 percent to $1.55 million, according to a market report by Miller Samuel and Prudential Douglas Elliman.

Also during the second quarter of this year, four properties sold for over $15 million south of the highway (three of which went for between $20 and $27 million), while only one property north of the highway, a $17 million transaction, eclipsed the same barometer, according to records compiled for The Real Deal by the consulting firm Suffolk Research Service.

Since the housing market south of the highway has long been saturated with lavish oceanfront homes and estates with high-manicured hedges, prior to the credit crunch speculators zeroed in on the north and its greater stock of undeveloped land. In turn, they built a glut of homes that have now become difficult to flip.

Susan Breitenbach, a senior vice president with Corcoran, said the hardest sells right now are properties in the $3 million range that speculators built prior to the credit crunch "way north in the woods, or on not-so-special properties."

However, she said as the market remains rocky, speculators are becoming more negotiable and buyers are finding deals, a trend she doesn't think will last. She said that's because post-credit crunch, speculators are more reluctant to take on new projects.

"These builders aren't going to have three or four spec projects going at one time any longer, and if they're only building one house, they're going to be less negotiable," she said.

Brokers said that the majority of foreclosures that have taken place this year in the Hamptons have occurred to the north of the highway and on the western part of the fork. But they insist that the severity of the foreclosure problem has been blown out of proportion when it comes to the Hamptons.

In May, the New York Post reported that banks had launched a record number of preliminary foreclosure actions against borrowers in the towns of East Hampton and Southampton during the first three months of the year.

"Only a small fraction of those cases ended up on the gavel," said Judi Desiderio, the founder and president of Town & Country Real Estate.

So far this year, 10 homes have been foreclosed on in Amagansett, Bridgehampton, East Hampton and Southampton, according to records compiled by the real estate consulting firm Long Island Profiles. Seven of those properties are located north of the highway.

Several local brokers pointed to Wall Street's woes as a major reason why the market north of the highway is spiraling downward, saying that the boom prior to the credit crisis in the north's middle market, which ranges from $1 million to $3 million (at least for weekenders), was fueled chiefly by the big bonuses that were being doled out to bankers.

With many of those same buyers now unsure about their job security, they have been less apt to buy second homes, several brokers said.

However, other local experts are more skeptical as to why the market is down.

"I don't care what kind of market you're in, it could be soybeans or stocks or real estate, some people get cautious and they won't sell. Others panic and reduce prices or hold on," the president of Suffolk Research, George Simpson, said. "You can never be positive of what causes the trends."