Hamptons market hotter than ever

Real Estate Weekly, April 28, 2004 by Elaine Misonzhnik

Brokers say the Hamptons are hotter than ever. Apparently defying such things as recession and political instability, the famous summer retreat has managed to keep both its prices mad its availability rate at a healthy level.

It's hard to pinpoint exactly why the area is so popular. Some say it all has to do with equity--people who don't want to put their money in the stock market see the Hamptons as a safe alternative. Others offer its proximity to New York as explanation. But perhaps one of the most important reasons the Hamptons are in such high demand is the area's image as the place where movie stars and CEO's go to have a day off.

"It's the finest summer resort in the country--we have the best beaches, the best restaurants, the best golf courses, the best sailing and fishing," says Peter Turino, a managing director with Brown Harris Stevens' Hamptons office. "The Hamptons are always popular."

Carolyn Schlam, president of Dynamic Worldwide Properties, a rental company, says, "The Hamptons offer the best of many worlds--it's a country atmosphere, it's by the ocean, but it's also very sophisticated--there are restaurants, art galleries, cultural festivals. It's hard to think of another place that's so sophisticated and is in such a pristine environment.

"And, of course, some people come to the Hamptons to see the celebrities, to mingle. It has a special cache."

Not that rubbing shoulders with Steven Spielberg comes cheap--you'll need at least $15,000 to rent a modest little cottage for the summer and upward of $2 million if you dream of owning an oceanfront property.

"[Even] at the low end [of the sales market], it's unlikely you'll find anything under $400,000," says Andrea Ackerman, managing partner with Brown Harris Stevens Hamptons. "The market is extremely active right now. I can't say that it's picking up because a peak means that the market will go down eventually and that's not what happens here. Things never go downhill, values just continue to increase."

Pamela Liebman, CEO of the Corcoran Group, says the highest priced house on the market right now belongs to Edward S. Gordon's widow. The property, listed at $70 million, comes with its own golf course.

"The average price of a property in the Hamptons today is over $1 million, which is considerably higher than two years ago, when it was $800,000," she says. "We are really seeing a lot of money going into the place. The lower interest rates, the resurgence of Wall Street bonuses and the general feeling that real estate is a good investment have all been helpful. To try and find a house between $1 and $2 million is very hard, it's extremely competitive."

According to Ackerman and Turino, members of the middle class would be more likely to find something affordable in Shelter Island or North Fork, while houses with views of the Atlantic Ocean usually go to Wall Street brokers and CEOs of major companies.

"Rentals in the Hamptons start at about $20,000 for the season, that's the entry level, so almost everyone here is upper middle class," says Schlam. "Sometimes couples get together and rent for a special occasion, like a honeymoon or an anniversary, but it's still a fairly expensive area."

"The most expansive properties are in the South and East Hampton, on the oceanfront," says Turino. "That's where the prices are at about $20 million. But on the bay, you have properties that vary in price anywhere from $2 to $10 million."

According to Schlam, it's those inconspicuous, reasonably priced houses that are driving the market right now.

"The houses in the $1 million to $1.5 million range are just being scooped up," she says. "This would be a fairly substantial house with a swimming pool, but not anything close to the ocean or anything extravagant. Just a nice house with a pool."

She also points out that many middle-class people make a good long-term investment that way--they can buy a house in the Hamptons and then make a profit renting it out, as some of her clients have already done.

"What we are seeing is that many people start out renting or being a guest of someone who rents and then fall in love with the area. We are now working with several people who rented from us last summer and are now buying vacation homes," she says. "And we actually offer a special service for them because they can then let their houses to us to rent. Hamptons homes are a great investment."

"What some people do is they buy a house, rent it for a couple of years and, when they have a little money, use it for themselves," Liebman agrees. "Buying now is a much better option than waiting. In addition, the Hamptons are not just about the summer anymore, they are active all year round and that justifies paying a little more money."

According to Turino, Hamptons remain in demand because the area is not completely at the mercy of the real estate industry.

"We have measures in place to protect our open space through the county preservation fund," he explains. "Whenever a property sells here, the new buyer pays a 2% charge that's automatically deposited in the fund. That money is then used to purchase open space."