With its flashy beachfront mansions and trendy designer boutiques, the South Fork is widely viewed as a playground for the rich and famous. Yet below the radar of the eye-popping property deals, the market share of residential properties valued in the more modest $1 to $5 million price range has grown in recent years.
“The high end was first to come out of recession, and has done its thing,” said Jonathan Miller, the CEO of the Manhattan real estate appraisal firm Miller Samuel. In 2015, mid-tier properties gained ground; however, there were signs of softening in that segment in early 2016.
Since the middle of 2014, homes priced between $1 and $5 million have ranged from 38 to 44 percent of all residential transactions in the Hamptons, up from around 34 percent in 2012. Meanwhile, homes priced above $5 million generally range from 5 to 10 percent of deals. Although sales of modestly priced homes — those selling for less than $1 million — are still slightly more than half of the residential market, their share has been dwindling as home prices inch upwards.
Admittedly, homes selling for between $1 to $5 million may be considered mid-tier only in well-heeled regions like the Hamptons, where beachfront estates routinely fetch tens of millions of dollars. Market experts say the growing market share of residential deals in this range has been spurred, at least in part, by the development of homes built on speculation by builders such as Joe Farrell.
Mala Sander of the Corcoran Group said it makes more sense for developers to build something in that price range, since the buyer pool is bigger. “It’s the old adage. It’s easier to get a dollar from a million people than a million dollars from 10 people,” she said.
Stock volatility hits home
Amid turmoil in the global economy, there have been signs that the Hamptons residential market may be cooling — at least for the time being. And the impact of the United Kingdom’s decision to exit the European Union remains to be seen, though on the plus side for the housing market, the Federal Reserve is expected to delay raising interest rates.
Market pros say that the region’s mid-priced homes can be more sensitive to stock market moves than other tiers. The rebound in share prices is believed to have accounted for the strengthening middle market in 2014 and 2015, and the faltering of the segment in early 2016 coincided with increasingly volatile stocks.
In the first quarter of 2016, the median sales price for a home in the Hamptons tumbled 10.2 percent from the previous quarter, falling to $895,000. It was down by 2.8 percent year-over-year. And there was also a decline in the total number of closings — the number of single-family homes sold fell to 421 in the first quarter of 2016, down from 518 in the same quarter a year earlier.
The stock market’s gyrations also make the region’s middle market particularly vulnerable because those buyers often use Wall Street bonuses or stock market gains to purchase second homes, according to Cody Vichinsky, co-founder of Bespoke Real Estate.
Indeed, a recent report by compensation consultant Johnson Associates indicated that 2016 Wall Street bonuses were likely to lag behind those distributed in 2015. Nearly 70 percent of large global banks are currently trading below book value, the report stated.
Although prices were stable in the luxury market during the 12 months ending in March 2016, with the median luxury home price holding steady at $5.5 million, the pace of sales has slowed, leading to price cuts.
Of the 700 properties currently listed on StreetEasy at $5 million or above, 9 percent had cut their prices by at least 5 percent over the previous 60 days.
And at the very high end of the market, there have been some notable reductions. Related Companies CEO Jeff Blau cut the asking price of his six-bedroom, six-bathroom Bridgehampton mansion to $27 million, down from $32 million. He also switched brokers, swapping Terry Cohen of Saunders & Associates for Corcoran’s Susan Breitenbach, the top-ranking broker in our list of the Hamptons’ most successful agents based on listings volume.
Yet realtors say there is still strong buyer interest in Hamptons properties that are perceived to be a bargain — such as those priced around $1 million.
For example, Sander said she has a listing for $825,000 on 15 Harris Lane in North Sea, which is a community within the Township of Southampton. Homes in this rural hamlet have traditionally been more moderately priced than in other parts of the Hamptons, because of its location north of the highway, although there are plans afoot to build higher-priced abodes there.
Sander added that when she listed a home north of the highway in Southampton’s Water Mill hamlet, for around $995,000 in early 2016, the property received seven bids in two weeks.
“There was that much interest,” she said. “When they’re priced correctly, we’re almost always seeing multiple bids.”