For the Hamptons, a New Peak For Prices in an Ocean of Cash
Saturday, June 2, 2007
Ron Baron, founder of the investment company bearing his name, didn't hesitate to pay $103 million for a 40-acre parcel in East Hampton, N.Y. It was the record for a residential property in the United States and just a little less than double the annual compensation of some of his neighbors.
House prices in the beach retreat that draws such folks as director Steven Spielberg and billionaire investor Thomas H. Lee rose 14 percent during the first quarter, even as the national median fell. The Hamptons, former potato farms where seagull cries now mix with the sounds of well-tuned Ferraris, are boosted by salaries on Wall Street, 40 minutes away by helicopter, said Diane Saatchi, a broker at Corcoran Group in East Hampton.
"People have made an incredible amount of money on Wall Street over the last few years," said Saatchi, who started selling real estate in the Hamptons 19 years ago. "For them, spending millions on a summer home to be near their friends isn't a big deal."
Wealthy New Yorkers trade their Manhattan apartments for summertime houses in the dozen hamlets of East Hampton and Southampton to maintain their social standing, said George Simpson, president of Suffolk Research Service, a real estate records company based in Southampton.
"The housing market all over the United States is down, but not here, because this is where all the rich people want to be seen in the summertime," Simpson said.
The Hamptons began attracting crowds of Manhattan socialites and executives in the 1960s. Their demand pushed up property values of century-old estates built for wealthy industrialists such as Harry Payne Whitney and cottages where artists such as Jackson Pollock had summered.
Incomes for Wall Street traders and investment bankers are surging as companies pay more to fight the lure of hedge funds, private pools of capital that give managers a cut of profits on the money they invest. Last year, the five biggest Wall Street firms paid a record $36 billion in bonuses. Lloyd Blankfein, chairman of Goldman Sachs Group, who summers at Southampton, earned $54 million in 2006.
The median price for East Hampton, where actress Renee Zellweger and billionaire financier Carl C. Icahn own vacation homes, rose to $970,000 in the first quarter from $850,000 a year ago, Simpson said. The total sales volume rose to $300 million from $216 million.
While prices are increasing, transactions have lagged behind. East Hampton, which includes the villages of Montauk, Amagansett and Wainscott, had 160 sales in the first quarter, down from 165 a year earlier and a record 221 homes in 2005.
In Southampton, where fund managers George Soros and Stanley Druckenmiller own homes, the median price was $795,000 in the first quarter, 6.7 percent higher than a year ago. The total sales volume fell to $545 million from $572 million, and the number of transactions declined to 337 from 391.
"There are some staggering numbers at the high end, but the market for houses in the $2 million to $3 million range is just chugging along," said Paul Brennan, Hamptons regional manager of Prudential Douglas Elliman Real Estate. "Properties are selling, but I wouldn't call it hot."