Houses go for a song in the Hamptons

By James Quinn, US Business Editor

Published: 11:45AM BST 17 Aug 2009

This three-bedroom ranch is number 30, Morris Park Lane, East Hampton, just
two miles from the Maidstone Club, one of North America’s most exclusive
country clubs and golf courses, of which First Lady Jackie Kennedy’s
grandfather Jack was one of the early members.

All this could be yours for the bargain price of $250,000, when it is
scheduled to go under the hammer on August 28 in a public auction at East
Hampton town hall. For this home – as HSBC which is owed $495,140.22 on the
property knows only too well – is one of a number in a state of financial
foreclosure in the Hamptons area.

Long known as the summer playground of New York’s rich and famous, the
Hamptons, which is made up of a number of exclusive townships most of which
comprise the word Hampton, is suffering from the downturn in the American
property market.

Where once houses were sold before they were even officially put up for sale,
today the property market is struggling.

Recent data shows that in Suffolk County, in which the Hamptons sit, there
were 154 new foreclosures in July, up 105pc from July 2008.

Whereas some parts of the US are beginning to see a bottoming in the housing
market, the Hamptons, because it is so reliant on Wall Street for its
success, has tended to be somewhat behind the curve. Initial problems were
detected in the wider US housing market as early as 2006, before the
sub-prime crash of 2007. But the knock-on effect – which led to severe
dislocation in the credit markets and a slump in equities – has taken some
time to hit an area which was previously isolated from outside problems.

Data from the Long Island Real Estate Report (LIRER) shows that the number of
Lis pendens – the legal notice which kick-starts the foreclosure process –
being filed is almost double what it was last year. In the week ending July
31, 21 such filings were made on properties with a total value of $9.66m,
compared to 11 filings on $5.5m of houses in the same week last year.

But, according to Bill Stanford, chief executive of property information group
Property Shark, these numbers may only be the tip of the iceberg.

Stanford argues that because of the financial nous of the majority of the
area’s residents, when a mortgage becomes too much to bear, they will move
for a quick sale, rather than face the ignominy of seeing their summer house
repossessed. “If you’re a banker, you’re more likely going to take immediate
action, and unload it at a discount just to get it away.”

His theory would appear to be true based on recent sales statistics. The
average price slumped from $1.36m last year to $745,552 this year, a 46pc
reduction.

Recent high-profile property ‘victims’ include hedge fund manager John
Paulson, who made $3.8bn by being one of the few to rightly bet that the
sub-prime property market would collapse. Paulson sold his 7,000sq ft, seven
bedroom, 1920’s cottage in Southampton for $9.99m in June of this year,
having put it on the market for $19.5m in April 2008.

Joe Gregory, Lehman Brother’s former chief operating officer, originally put
his Bridgehampton home on the market for $32.5m, but has since reduced the
price of the 2.5 acre property – which boasts 200ft of Atlantic ocean
frontage – to $27.9m.

His estate agent, Michael De Sario, of high-end broker Corcoran, is
optimistic, saying that he’s shown more people around the 9,500 sq ft house
in the past five weeks than he did in the previous five months.

De Sario, who has lived in the Hamptons for 20 years, argues that since
mid-May things have begun to look up. He insists that sales in Southampton
were up by 142pc in June compared to May, and up 100pc in East Hampton over
the same period. “It’s a bit like we were going at five miles an hour, and
now we’re going at 30 miles an hour,” he says.

But Ricky Sitomer, chief executive of charter flight specialists Blue Star
Jets, a part-time Hamptons resident himself, isn’t as optimistic.

Among its many routes offered, Blue Star offers the cash-rich and
time-deprived the chance to be whisked out to the end of Long Island for
between $3,000-3,500 one-way for a four-seat helicopter, compared to
approximately $50 for a round-trip on one of the famous Hampton Jitney
coaches.

“Traffic from New York down to the Hamptons is definitely off for the summer,”
he admits, “and the chopper isn’t particularly expensive for what it is.”

Although some services may be being hit, one popular phenomenon in the area –
that of house-sharing for the summer – is more popular than ever.

“It’s the reverse of what you might think. Rather than going away on a more
expensive holiday, people are willing to spend a couple of hundred dollars
going to the Hamptons,” says David Shapiro, who calls himself The Hamptons
Concierge. “They’re reallocating the way they spend money.”

Shapiro, who is renting out four houses this summer, is experiencing his
busiest year ever.

“It’s the same demographic,” says Shapiro, who appeals to a 20-40-year-old
crowd. “But they’re spending less on drinks. People I thought I would never
see budget are budgeting. The [night] clubs are all struggling.”

Down and out in the Hamptons? Maybe not. But this summer, one of America’s
wealthiest seaside playgrounds has had to take something of a reality check.