May 31, 2010 -- The federal homebuyer tax credit helped bolster sales across the country, but it doesn't explain the rebound in New York's tony Hamptons real estate market, where many would-be buyers have incomes too high to qualify for the credit.
Known as the summer getaway of choice for New York City's Masters of the Universe, this cluster of villages on the east end of Long Island is experiencing a resurgence in sales thanks at least in part to the return of Wall Street bonuses, bank profits and their domino effect on other businesses, local real estate brokers say.
"All businesses relate to Wall Street in some sense in New York," said Rick Hoffman, regional senior vice president at The Corcoran Group. "Good news out of New York (City) helped to stimulate our market."
Pat Petrillo, senior vice president associate broker at Sotheby's International Realty, said Hamptons homebuyers also include Europeans and private entrepreneurs, but there's no denying the Wall Street connection.
"Clearly, Wall Street is a big part of our market," she said. "All those people like to come out here, they have friends here, the lifestyle is great and it's beautiful."
To wit, Wall Street's "flash crash" earlier this month -- when the Dow Jones industrial average dove nearly 1,000 points in one day before recovering soon after -- led to a "hesitancy by some people to sign contracts" for about a week, said Andrew Saunders, president of Saunders & Associates.
But, he added, "we're certainly back on track since that event."
Multi-Million Dollar Hamptons Property Sales Rise
Brokers say the total number of Hamptons homes sold this year is roughly double what it was last year and that includes properties with eight-figure price tags.
So far in 2010, 14 Hamptons properties sold for at least $10 million each and more such deals are in the works right now, Hoffman said. In 2009, there were just 13 such sales for the whole year.
"This year is really shaping up to be incredible in the $10 million-plus market," he said.
But Saunders said he's seeing the most activity for properties selling below $5 million. He attributes that partly to bankers choosing to make more modest purchases than they would have in the past.
"There is significant populist rage out there against bankers," he said. "A lot of these bankers are under significant pressure not to engage in conspicuous consumption ... Clearly, many people have been instructed not to do anything that's going to make it into the papers."
Sotheby's Petrillo said buyers overall are being more thoughtful about their purchases, in sharp contrast to the buying frenzy that engulfed the region between 2005 and 2007, when it wasn't uncommon for a home to be subject to intense bidding wars after just one week on the market.
Hamptons buyers, she said, are now doing more research and checking comparable sales.
"It's a bit of a slower pace," Petrillo said. "People do have time to think about their investment."
Real Estate Rebound Doesn't Match Housing Boom Frenzy
That slower pace, of course, means that the rate of sales is also lower than it was during the housing market's peak years ago, which means lower commissions for brokers like Petrillo.
She says she doesn't mind.
"I'm making less money because I'm not quite the order taker I was, but I think I do prefer it," she said. "I like having the time to talk to sellers. I like having the time to talk to buyers."
She added that, during the height of the buying rush, it was hard to determine how to price a home responsibly.
"You had to factor in the X factor -- the X factor being, 'What if someone came out here and wanted to pay a crazy price?'" she said.
During the real estate doldrums of the financial crisis, the pendulum had swung the other way: Some buyers who did dare enter the market expected to be able to buy a home for half its asking price, said Saunders.
Today, he said, it's evened out.
While there are still deals to be had, he said, "real balance has returned to whole supply and demand equation."