Nobody"s Buying Hamptons Mega-Mansions Because "Small Is The New Big"

Any realtor worth their salt will tell you, when it comes to the home-buying habits of wealthy hedgies and bankers, gaudy McMansions and sprawling estates are so last season.

Or, as they say in Greenwich: “Small is the new big."

Owners of large homes in tony Hamptons neighborhoods hoping to cash in on a frothy housing market before the inevitable rise in mortgage rates will be disappointed to learn that the trend of buyers favoring lower-priced homes continued in the third quarter, according to the latest Douglas Elliman Real-Estate Report. This left the high end of the market in a double-bind as supplies of new homes hit the market while sales tapered off...

Purchasers agreed to pay more than the asking price in 10 percent of deals for properties under $3.3 million -- this quarter’s definition of “non-luxury” homes, making up the bottom 90 percent of the market, according to a report Thursday by appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate. It was the biggest share of transactions with bidding wars since the firms began tracking the data in the second quarter of 2016.

 

In their zeal for lower-end deals, buyers snapped up condos as well. Those units -- with a median sale price of $567,500 -- were available for just 97 days on average before going under contract, the fastest clip in six years of record-keeping. On the high-end, buyers showed less interest in acquiring luxury homes than sellers did in listing them. Inventory in that top 10 percent of the market jumped 22 percent, the biggest pile-up in two years.

 

“The market is looking towards those smaller, more manageable homes,” said Carl Benincasa, a regional vice president at Douglas Elliman who oversees sales in the Hamptons. “That’s certainly been a trend we’ve been observing.”

Bloomberg, which obtained an advance copy of the report, noted that the Hamptons housing market often parallels performance in the financial industry, seeing as many buyers of luxury homes out east are wealthy finance types.

With markets at record highs, the Hamptons housing market is doing reasonably well - but buyers’ unwillingness to snap up the most expensive homes in a way mirrors the trepidation surrounding stretched stock valuations and record low volatility.

With stocks at record highs, people are in a buying mood in the Hamptons. The beachside towns on Eastern Long Island, whose fortunes are closely linked to the performance of the financial industry, had 517 total sales in the three months through September -- or 12 percent more than the 10-year quarterly average, Miller Samuel and Douglas Elliman said. Even with all that buying, inventory declined only in the non-luxury category, with listings dropping 10 percent from a year earlier to 1,143.

 

Deals for less than $500,000 fell 12 percent to 57 -- because there weren’t many such properties available, Town & Country Real Estate said in its report on Hamptons. But sales of homes priced between $500,000 and $999,000 jumped 22 percent to 131, and those between $1 million and $1.99 million climbed 12 percent to 76, the brokerage said.

One realtor noted that inventory is thinnest in the under-$1 million category, which has forced some buyers to the next rung of the market.

“When you look at the inventory under a million, that’s the largest shortage, so buyers stepped up to the next level of the market,” said Ernest Cervi, a senior vice president at Corcoran Group, which released its own report Thursday.

One couple recounted their struggle finding a new home in the Hamptons for under $1 million after selling their old home for $1.4 million.

For Brian DeSesa, it was much easier to sell his under-$2 million home than it was to buy one in that price tier. Sensing the market demand for lower-cost properties, he and his wife listed their three-bedroom Sag Harbor Village house in June at $1.45 million. It went into contract in July, to a buyer offering $1.35 million but willing to pay all cash and close within 14 days, said Jessica von Hagn, the Brown Harris Stevens broker who marketed the property.

 

Then came the hard part: finding a new house in the area for less than $1 million. The couple bid on at least three such properties, offering the asking price each time and getting outbid within hours, said DeSesa, 36, a land-use attorney with the Adam Miller Group in

 

Bridgehampton. On the next try, they offered the $795,000 asking price on a ranch-style home -- and then, in a second round of bidding, offered $860,000, which won them the deal.

 

“It’s pure competition,” von Hagn said. “At the $1 million mark, you’re competing with year-rounders trying to live out there, you’re competing with builders who are going to tear it down, and you’re competing with flippers.”

To be sure, there were still some ultra-luxury deals in the quarter, including two for more than $20 million, the same as a year earlier, Bloomberg reported. Purchases between $5 million and $9.99 million plummeted 56 percent to just 11. Sales were up 30 percent in Bridgehampton, with six deals over $10 million, but plunged 29 percent in the Sag Harbor area, where none of the 17 transactions were for more than $5 million.

Of course, as we noted last quarter, “smaller” in the Hamptons is purely relative, because apparently there’s nothing more modest among today’s Hamptons set than trading a 13,000 square-foot home for an 8,000 square-foot home.
 

Sellers Ask $150M For 14-Acre Beachside Plot As Hamptons Property Market Crashes

Real-estate prices in the Hamptons – the preferred North American summer retreat for wealthy finance types – have long been viewed as a barometer of the general mood on Wall Street. And with US stocks continuing their ascent to fresh record highs, despite Brainard’s admission that "asset valuations do look a bit stretched" and signs that the rally is being propelled by a concentration of megacap stocks, luxury real-estate agents out east are clearly praying for a blockbuster season after last year"s disaster.

Indeed, even as luxury apartment buildings along New York City’s billionaires row struggle with unsustainably high vacancy rates, stoking speculation of a bubble in the ultra-high end of the city’s real-estate market, the owners of a roughly 14-acre beachfront property with multiple houses and two putting greens in Southampton have the temerity to list the parcel for $150 million, making it the most expensive home for sale in the Hamptons right now.

However, the chances of finding a buyer willing to stomach the sticker price despite the generous size of the property - which was initially purchased as four separate parcels of land – are slim, because, as we reported earlier this year, despite the frothy US equity market, the Hamptons real-estate market is in full-on crash mode, with average prices down 29.7% YoY in 4Q16 and volumes down 14.5%.

Meanwhile, the "luxury" market in the Hamptons, which apparently includes homes with an average price tag of ~$7 million, is faring even worse with prices down 42.6% YoY and volumes down 14.5%.

As Jonathan Miller of Douglas Elliman told the WSJ early this year, he doesn"t expect the carnage in the Hamptons to slow anytime soon as he says there is still "“too much overpriced inventory - and it is rising.”
Here are some more details on the Southampton property, courtesy of WSJ:

On Meadow Lane in Southampton, the property is an assemblage of four parcels and includes several houses, according to listing agent Harald Grant of Sotheby’s International Realty. He declined to name the sellers or specify why they are selling, but said they purchased the parcels over the past few years with the intention of demolishing the existing homes to build a new family compound.

The combined properties offer about 700 feet of direct frontage on the ocean, Mr. Grant said. One of them, on 3.5 acres, includes a roughly 12,000-square-foot house, built in the 1990s, with eight bedrooms and an indoor pool.

Another parcel, on 3 acres, has two shingle-style houses: one measuring about 2,000 square feet with an outdoor swimming pool, and a roughly 3,000-square-foot home with a tennis court.

A third, 5-acre parcel has two putting greens built by a prior owner for practicing golf, plus two “golf cottages” overlooking the ocean.

A fourth parcel is a roughly 2.5-acre vacant lot with frontage on Shinnecock Bay, ensuring the property has views of both the ocean and the bay, Mr. Grant said.

According to WSJ, the sellers have been unwilling to reveal their identities. But whomever buys the property (probably at a steep discount to the sticker price once they’ve finished negotiating) “will almost certainly demolish the homes and start over.”

“"As we find in most instances at this price point, people want to hire their own architects and designers and build their dream home,’ Mr. Grant said. ‘You’re not going to spend this kind of money and live in someone else’s house.’"

Based on public records, the current sellers bought the properties from entertainment mogul Robert F.X. Sillerman in various transactions in recent years, paying about $114 million in total. Mr. Sillerman’s dance-festival conglomerate, formerly known as SFX Entertainment, filed for bankruptcy in 2016. Beachfront property in the Hamptons is among the most expensive real estate in the country, according to WSJ. Mr. Grant noted that another one of his oceanfront Southampton listings, “La Dune” on Gin Lane, is asking $145 million. While that property is only about 4 acres, its two homes are move-in ready.

With the number of millionaires and billionaires living in the US growing at an unprecedented pace - at least on paper - we"re curious to see what the final selling price will be. After all, with that much beachside property bundled together, the final buyer has an opportunity to build a home that could actually make them feel like they"re part of the ocean. And that"s an experience that can"t be quantified in terms of dollars or even, if the buyer ends up being some Chinese oligarch, bitcoin.