Bull Bear Report Jun 29 2011

Hamptons Cool Down as Profits Fall on Wall Street

By kyle stock

In yet another sign of storm clouds over Wall Street, the Hamptons aren't so hot this summer.

As the epicenter of Wall Street R&R approaches its peak season, home sales in the area are sluggish and buyers are skittish.

Paul Brennan, Hamptons regional manager of Prudential Douglas Elliman Real Estate, said prospective buyers have been spooked by new finance regulations and the debt crisis in Europe, among other things.

"Everybody is a little tepid at the moment, because of all the up and down on Wall Street," he said. "They're starting to get that fear factor again."

The cluster of towns on the east end of Long Island, N.Y. has long been a vacation hub for Manhattan financiers. Its fortunes often rise and fall in fairly close sync with those of Wall Street.

The year did not start well, as the first quarter median sale price slipped to $622,500 and the number of sales fell to 379, both 22% declines over the first three months of 2010, according to a report by Prudential Douglas Elliman and Miller Samuel Inc.

Second quarter numbers won't be available until mid-July, but Hamptons brokers aren't expecting any huge gains, given worries about layoffs at New York investment banks.

There was a flare of hope in the spring -- a brief thaw – as three prized properties sold for around $20 million each. But the market cooled quickly in the following weeks, agents said.

Traffic at the East Hampton Airport, which caters almost exclusively to private planes, corporate jets and charters, was down 28% in the first five months of the year, according to data from the town that owns the facility.

The trickle of takeoffs and landings this year is even slower than the severely depressed volume the airport saw in 2009.

"It's been really surprising," said airport manager Jim Brundige. "We thought it was going to rebound this year."

Diane Saatchi, a senior vice president at Hamptons brokerage Saunders, said buyers have been biding their time and negotiating aggressively. About half of Saatchi's prospects work on Wall Street.

"In the old days, it was: 'My wife fell in love, so I spent an extra $10 million,'" Saatchi said. "Now, nobody wants to overspend; nobody wants to look like a chump."

Meanwhile, the rental market is flooded with supply.

"I am inundated with e-mails from homeowners saying 'still available, still available,'" Saatchi said. "They are in panic mode, but they aren't lowering the prices."

Prudential Douglas Elliman has signed about 600 summer leases, according to Brennan, more than last year. Though Brennan said demand for rental homes has waned since the spring when the most prized properties were booked for the summer for $100,000 to $160,000.

Jennifer Brew, a licenses salesperson with Brown Harris Stevens, is still rushing getting frantic calls from Wall Street workers looking for a July or August rental.

"People are going to vacation regardless," Brew said. "Maybe they won't flaunt it as much, but everybody still needs a break."

Related: Etiquette for Casual Business Outings

Write to Kyle Stock

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