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.”