Hamptons Home Prices Plunge as Wall Street Upheaval Cools Sales

By Kathleen M. Howley

Oct. 30 (Bloomberg) -- Home prices in the Hamptons, the summer resort of Wall Street bankers and Hollywood celebrities, plunged a record 19 percent in the third quarter from a year earlier as stocks tumbled and the financial industry shed jobs.

The median price for a home on the eastern tip of New York's Long Island fell to $830,000 from $1.03 million, the biggest drop in at least five years, according to a report today by New York based appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate.

Prices in the summer retreat of director Steven Spielberg and billionaire investor Thomas H. Lee reached an all-time high with a $1.1 million median in the second quarter of 2007, before losses in U.S. subprime mortgages spawned the credit crisis. Upheaval in global financial markets has dashed the confidence of wealthy buyers, even those who spurn mortgages and pay cash for waterfront mansions, said Jonathan Miller, president of Miller Samuel.

``The Hamptons market is driven by Wall Street,'' Miller said in an interview. ``There's so much financial turmoil right now that even the most affluent people are putting plans on hold.''

The number of home sales fell 29 percent to 257 during the quarter from 361 a year earlier, and the inventory of properties on the market rose to 1,561 from 1,422, Miller said. The difference between the listing price and selling price was 11 percent, he said. A year ago, it was 7 percent.

Slump

The slump in prices and sales is likely to be outdone in the current period, Miller said. The Dow Jones Industrial Average fell 778 points on Sept. 29, two days before the end of the third quarter, in what was then the biggest drop on record. The following week was worse. The Dow plummeted 1,874 points, its worst weekly decline on a point and percentage basis.

``When the stock market crashed everybody put the brakes on,'' said Judi Desiderio, owner of Town & Country Real Estate in East Hampton. ``It's just emotion. It's not even logical anymore.''

More than third of the deals that were scheduled to close in the last week of September and the first week of October were put on hold, she said. While most of the transactions were rescheduled and eventually closed, about one in seven of them were called off, she said.

``It doesn't matter if you are buying a piece of jewelry or a car or a vacation home -- people go into survival mode,'' Desiderio said.

North Fork Rises

The weakening economy may have boosted demand for homes in the North Fork area, where the median home price is about a third less than the Hamptons, Miller said. The eastern tip of Long Island is shaped like two tines of a fork, with the Hamptons on the South Fork and the North Fork above it.

The area that includes Shelter Island, which sits between the two forks and is reachable only by ferry, saw a 10 percent gain as buyers snapped up properties at a median price of $575,000. Sales rose to 98, a 49 percent increase from a year earlier.

Whether North or South Fork, prices in that area of Long Island dwarf those paid by most homebuyers in the U.S. The median price of a new house in September was $191,600, according to the National Association of Realtors.

To contact the reporter on this story: Kathleen M. Howley in Boston at kmhowley@bloomberg.net.