Deeds and Don’ts Hamptons
Get the Inside Story on East End Real Estate
The Hamptons Cottages & Gardens 2008 Idea House.
THE STATE OF
HC&G’s founding publisher and former owner, Richard Ekstract, and intrepid “Deeds and Don’ts” reporter Scoop Drummond reflect on the Hamptons housing market—and the shape of things to come.
When we launched HC&G nearly a decade ago, a favorite topic at cocktail and dinner parties was real estate. Why? For the previous 25 years, Hamptons real estate (with minor hiccups) kept going up. Just about everyone who dabbled in real estate—or dreamed of dabbling in it—wanted credible insights. That’s how this column came to be. Today, after a rough couple of years, the crystal ball doesn’t seem as clear as it once was. Is a rosier future within sight? Only time, it seems, will tell.
The Hamptons Cottages & Gardens 2007 Idea House.
To the casual observer, Hamptons real estate appears to be in recovery mode. Sales volume has increased, though higher prices have yet to follow suit. No doubt it’s been a hellish combat, recovering from the economic maelstrom that felled an otherwise impervious Hamptons real estate market from late fall 2007 to now. What’s different this time from other down markets is that the low end of the spectrum—houses selling for less than $1 million—has fared much better than the high end, where prices touch the stratosphere.
Still, these contradictions didn’t stop either The New York Times or The Wall Street Journal from proclaiming earlier this year that it is time to buy again. Also chiming in was the New York Post, declaring not only that the recovery was in full swing, but that the market “was hot,” as though every potential buyer luxuriating in newly minted money madness was lunging to make a move. The paper went so far as to cite John Paulson’s $41.3 million buy, which actually occurred in 2009, to depict a “current” trend. Apparently the Post will say anything to sell papers.
Real estate is indeed in better shape than the darkest days of 2008 and 2009, but it’s hardly giddy or resurgent. The East End market is moving along nicely enough without making waves. The rental market, on the other hand, is brisk with activity, but lease rates, like sales figures, have not surged to new highs.
What’s perplexing is that the market remains lackluster when prognostications of a rosy future are upon us: With the Dow a lot healthier lately and Wall Street players flush with bonuses and deal-making money again, the Hamptons has not reacted as it usually does when downtown capital returns to the stuff of dreams.
Richard Ekstract, who’s no slouch when it comes to timely investing and understanding market trends, predicts that the worst is over, claiming that inflation is looming and “hard assets, like second homes in highly desirable areas like the Hamptons, are a great inflation hedge.”
There’s something almost sinister about what’s not happening. There are positive trends on Wall Street, which affects New York area real estate, so why haven’t these encouraging events translated into real estate closings? It’s the players who’ve changed. The new buyers are 10 to 20 years younger than their predecessors from the 1970s to the mid-2000s, before the world of hedge-fund manipulators overtook investment banking as the moving force that drove Hamptons real estate.
The new crowd doesn’t use the Hamptons as a year-round escape. They have their palatial New York apartments, where they can gaze at their art collections, their ski lodges in Aspen and various other Xanadus; the need for a seaside getaway during the off season is for ordinary millionaires and not the recently ascendant. The fact that the Hamptons are quiet and even serene after the season doesn’t seem to matter. They like the grunt and grind of the summer crowds.
Also, the new buying set is not yet as firmly established as the older generation of Goldman Sachs nabobs and other Wall Street pros who initially made the Hamptons into a playground for the rich. Hedge-fund money comes and goes. Deals resulting in big fees on Wall Street are running high, bonuses are big and incomes are stratospheric. All the preaching and prancing from government for reforms are more bluster than code of belief, as though the financial markets are one big Madoff-style Ponzi scheme.
With the formula right for great gobs of cash to start rolling down Route 27 again, why hasn’t it done so? A very simple reason: The players responsible for the jigsaw puzzle of derivatives that nearly toppled an entire world of financial markets are at it again. Deep down they know that their newly mined fortunes can disappear in an instant if they continue to stoke potential conflagrations. It’s far better to keep a close eye on one’s load of gold hidden under the mattress than to sink it into the aging potato fields of the Hamptons.
Let me offer a few personal examples of my Hamptons real estate dealings as a case study. In 1978, I purchased three oceanfront acres in Sagaponack. The price was $375,000. I put down $75,000 and took a three-year-purchase money mortgage for the balance. When I paid it off, I brought an architect to the site for his advice on building a house. The area consisted largely of fishing shacks. “Do you really want to have the only nice house among these shacks?” he asked. He talked me out of building there. Instead, I sold the acreage for $750,000 (a pretty nifty profit), added a few bucks and bought a big house on Georgica Road in East Hampton. Today, that oceanfront parcel would likely sell for $12 million. The house on Georgica Road sold some years ago for $9.5 million and is probably in the $12 million range today. In those days, we used to say, “Nobody ever went broke owning Hamptons real estate.”
Next, I moved from Georgica Road to a two-acre oceanfront home on Lily Pond Lane in East Hampton. The 10,000-square-foot home, built around 1925, had good bones, but the house needed rewiring and all-new plumbing. It had nine bedrooms and six servants’ rooms. The price? $1.5 million. That was the highest price ever paid for an oceanfront house anywhere in the Hamptons at that time! I enlisted noted architect Robert A.M. Stern to rehab the home, lowering the bedroom count to five and reducing the servants’ rooms to a nice-sized two-room apartment. We added a pool. Total cost after renovation: $2.5 million. A few years later, I decided the house required too much maintenance and sold it for $6 million. Once again, the highest price ever paid for an oceanfront home! Today, that home would probably sell for upwards of $50 million.
Richard Ekstract, who founded HC&G in 2002 partly to satisfy the Hamptons’ obsession with real estate, knows a thing or two about houses. For several years during his tenure, the magazine built, photographed and published “Idea Houses,” essentially three-dimensional forums for designers, architects and builders to show off their talents. Consider these: Ekstract currently lives in this Idea House (above and pool image above), built in 2005 in Bridgehampton; the 2006 Idea House, in Water Mill, was built by Rich Ghirardi of Sand Dollar Development and design-directed by Jennifer Mabley and Austin Handler of Mabley Handler, who decorated the living room (below); also built by Rich Ghirardi, the 2007 Idea House, located on the former Warner LeRoy estate in Amagansett, was design-directed by Brady Design; built by Peter Sabbeth of Modern Green Home, the 2008 Idea House featured a “green” theme and was design-directed by Kyle Timothy Blood.
Warren Buffett has been quoted as saying, “All things considered, the third best investment I ever made was the purchase of my home.” In my view, despite opinions to the contrary, prices for second homes in the Hamptons, for the most part, bottomed out last year. There has been precious little in the way of spec building in the Hamptons during the past few years, and the supply of land south of the highway is severely limited. The stock market, which has always influenced demand, is up significantly, and big bonuses have returned to Wall Street. Consider this quote from the April 11, 2011, issue of Fortune: “Forget stocks, don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing. It’s time to buy again.”
Conclusion? There’s no place like the Hamptons on the East Coast. Successful people are spending money again; they want to hang out with their friends. A recent report on curbed.com even tells of Hamptons sellers actually raising their asking prices. Know what? I’m one of them!
On Point | The 55-acre Tyndal Point compound in North Haven (above and below) features three houses, two carriage houses and 3,000 feet of shoreline.
2011 MARKET REPORT:
The latest news on the Hamptons homes market, from jaw-dropping rentals to farmstand follies
By Heather Buchanan
WHETHER YOU’VE always wanted a Birkin bag or one of the last large pristine waterfront lots in the Hamptons, “half off” can be the magic words. Robert Rust, who inherited the 55-acre Tyndal Point in North Haven and had it listed at just under $45 million (down from a 2007 ask of $80 million), was minutes away from signing a subdivision plan when a fortuitous lunch in Palm Beach sealed the deal with a buyer. Gary DePersia, senior vice president of Corcoran, brokered the sale, calling it a “match made in heaven.” Billionaire real estate developer Jeff Greene had often looked at the property, which includes three houses and two carriage houses, from his 145-foot yacht and bought it as a family compound. With 3,000 feet of shoreline, there’s just no need for a pool, although Greene plans to add a tennis court.
Talk about a slide! George R. Simpson, president of Suffolk Research Service, Inc., reports all three of the market indicators—median price, unit sales and dollar sales—showed a downward trend in the first quarter of 2011 against the first quarter of 2010. The median price for single-family homes on the East End fell from $720,000 to $620,000. In a tale of two towns, Southampton fared better, fueled by high-end sales in the estate section; it saw a decline in dollar sales of 1.2 percent, whereas East Hampton was down an astonishing 53.9 percent. DePersia notes a flurry of upper-market activity, including oceanfront home sales and builders buying land, which will be reflected in the 2011 second-quarter market figures.
YACHT-ZEE! | Five-bedroom Southampton Village compound, with pool and tennis court, includes a 78-foot luxury motor yacht and crew for 28 days. July–Labor Day, $350,000; call Tim Davis at Corcoran, 631-283-7300, x211.
Rick Hoffman, regional senior vice president of Corcoran, relates that the first quarter of 2010 reflected a release of pent-up demand, and that 2011 is normalizing. Rentals however, are up 150 percent from last year. “We are actually looking for more new high-end inventory to bring on,” he says. “We’ve seen up to a million dollars for a seasonal rental, and there’s interest from several people.”
Town & Country Real Estate’s CEO, Judi Desiderio, describes the new sales reality. “While activity levels have been steadily improving as of this past winter, the negotiations are generally agonizing,” she says. “Sellers remember when their property was worth more, and buyers are all pointing toward national housing reports showing evidence of a double dip. In fact, they are both mistaken. Sellers: This is not 2005. Buyers: We are clearly off the bottom and in a recovery, even if the rest of the nation is not.”
LAST STAND | The saga is over: Pike’s Farm Stand, on Sagg Main Street in Sagaponack, stays.
7.6 ACRES IN SAGAPONACK, SOH: $167,200
“Divide, baby, divide” has long been the mantra for available land on the East End. Yet a piece of Sagaponack farmland, farmers included, remains intact. The Peconic Land Trust acquired the 7.6-acre Hopping land just south of the highway for $6 million in December 2010 and finalized the sale to Jim and Jennifer Pike of Pike’s Farm Stand, who have farmed the land for 20 years, for $167,200 this spring. The agreement restricts future sales to other farmers, with caps on sales prices. John V. Halsey, president of the Peconic Land Trust, notes, “This sets a hopeful new model for future land deals that will benefit farmers, as well as landowners looking to reduce estate taxes.”
RELOCATING? | Frank Lloyd Wright’s Bachman Wilson house might be the new kid on the block in the Houses at Sagaponack. $5 million; listed with Amelia Doggwiler, 631-204-2426, and Ingrid Brownyard, 631-725-5576, of Brown Harris Stevens.
THE WRIGHT STUFF
A vintage 1954 Frank Lloyd Wright house restored by Tarantino Architects may be moved from New Jersey to join its newer modern brethren at the Houses at Sagaponac. Listed with Brown Harris Stevens for $5 million, the relocated home would include a pool and pool house to match the original design, plus “green” geothermal and solar energy systems.
Ted Conklin, owner of the beloved American Hotel on Main Street in Sag Harbor, just unloaded two historic village homes, a 1700s sea captain’s manse listed at $5.2 million and an 1820s Federal listed at $1.6 million, both of which were with Corcoran’s Mala Sander. The properties, intact with period details, make a unique harbor-view family compound.
HISTORIC HOMES | Sold in Sag Harbor village: fully restored captain’s manse and the adjoining Sleight House.