NEW YORK (Reuters) - In a market closely tied to the fortunes of Wall Street, affluent New Yorkers snapped up luxury houses in the Hamptons this summer at rates not seen since before the financial crisis of two years ago.
Sales of homes in the Hamptons, a string of seaside towns on New York’s Long Island frequented by New York City’s elite, got a boost because participants have accepted the market’s “new normal,” and experts said that would yield more deals into next year.
“The reason you saw more activity this year than last year was that sellers capitulated and buyers weren’t looking to buy things for $1,” said Jonathan Miller, president and chief executive of Miller Samuel, a real estate consulting firm.
Sellers suffered from the abrupt 20 percent drop in Hamptons real estate prices in the months after the Lehman Brothers bankruptcy in September 2008, he said.
While prices have partly recovered from that drop, they are steady now and not rising much, Miller told Reuters. But that has led to more transactions.
Local real estate brokers noticed a marked uptick this summer in sales of moderately priced homes, which in the Hamptons means between $500,000 and $5 million, and at the high end of the spectrum, properties priced for more than $10 million.
The Dow Jones Industrial Average fell nearly 54 percent from its all-time high of 14,164.53 in October 2007 until March 2009, when it began a sharp ascent. By Friday it had rebounded 62 percent, hitting 10,600.
The worst U.S. recession in decades also hurt home sales, but the economy resumed growing in mid-2009.
The stock market has been volatile this summer, but that failed to spook prospective buyers, given that Wall Street has shed far fewer jobs in the wake of the crisis than first expected.
“There’s not a lot of fear among our buyers right now,” said Pamela Liebman, president and chief executive of realtor Corcoran Group.
One possible drag on the Hamptons’ comeback is that the market is becoming increasingly limited to people who can pay cash for multimillion-dollar homes, Liebman said.
EYE-POPPING PRICE TAGS
Despite the purported reality check, some Hamptons homes on the market still carry eye-popping price tags.
For example, advertising mogul Jerry Della Femina lowered the price on his East Hampton oceanfront home this summer to $35 million from the original $40 million earlier this year.
Still, the entire Hamptons market has seen 19 deals completed this year worth more than $10 million, outpacing 14 transactions of that size in all of 2009, Corcoran Group said.
Another potential boon to Hamptons real estate in the coming year is the rise in renters making offers on the summer homes they’ve tried out this summer.
“The rental market for seasonal rentals is almost a testing ground for eventual home ownership,” Miller said.
Liebman said that at the end of the summer, more renters, who had been sitting on the sidelines, were turning into buyers. He said renters are locking in their summer houses for next year earlier and at higher rates.
Real estate experts are encouraged by how the Hamptons market is recovering, but warn that it would not take much to frighten prospective buyers all over again.
“I think next year will be a good year -- there’s plenty of money out here. It’s just a matter of people feeling that the tide has begun to turn,” said Paul Brennan, a broker with Prudential Douglas Elliman in Bridgehampton, New York.
Another big variable will be how much money Wall Street firms put in their employees’ stockings this holiday season.
“If Wall Street has very bad bonuses or huge layoffs, that’s the biggest thing that will stall the market,” Corcoran’s Liebman said.
Reporting by Phil Wahba; Editing by Daniel Trotta and Philip Barbara
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