Hamptons Sales Surge Fuels High-End Home Tear-DownsPrashant Gopal and Oshrat Carmiel
Josh Guberman paid $3.4 million in 2011 for a house that had lingered on the market in New York’s Hamptons for almost a year. He knew what it was missing.
Guberman tripled the size of the 3,400-square-foot (316-square-meter) property in Southampton, creating nine bedrooms, a wine cellar and zen garden, before putting it on the market again. In July, a buyer paid $8.8 million, $50,000 more than the asking price.
“There was a time when everyone thought the market was done,” said Guberman, a New York-based developer who exclusively built condominiums in Manhattan and Brooklyn before shifting some attention to Long Island’s East End three years ago. “I found opportunity.”
Hamptons real estate deals are surging, fueling a boom in knockdowns, expansions and quick resales in the beachfront towns favored by Wall Street financiers and celebrities. Home purchases in the three months through September jumped 32 percent from a year earlier to 534, the most for a third quarter since 2005, appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in a report today.
“Because of the scarcity of land in the Hamptons on which you can build there today, the land is worth more than the house,” said Mitchell Pally, chief executive officer of the Long Island Builders Institute, a regional trade group. “In most places, the bigger the house, the harder it is to sell. In the Hamptons the bigger the house, the easier it is to sell.”
In Suffolk County, home to the Hamptons, 188 residential properties priced at at least $750,000 changed hands within a year of the previous purchase, according to third-quarter data from RealtyTrac. That’s up from 22 such high-end flips at the same time in 2012, the Irvine, California-based firm said.
“This is the next step in the rebound,” Jonathan Miller, president of New York-based Miller Samuel, said in an interview. “The first is just seeing transactions. And then the next is finding opportunities in properties that need significant work.”
The jump in quick high-end resales shows “that people are confident in the market in terms of taking on risk,” he said.
Luxury homes in the Hamptons, the top 10 percent of deals by price, sold for a median of $4.45 million in the third quarter, up 14 percent from a year earlier, Miller Samuel and Douglas Elliman said. Prices for the top 4 percent of transactions, which includes ultraluxury estates, jumped 21 percent to a median of $10 million. In the broader Hamptons market, prices rose less than 1 percent, according to the firms.
Buyers are rushing to make deals before expected increases in mortgage rates, propping up the lower end of the market, according to Miller. Record stock prices are spurring confidence in high-end purchases, he said.
Hamptons home prices have gained 14 percent from their bottom in the first quarter of 2009, when sales stalled during the credit crisis and listed properties piled up to the point that selling them all would have taken almost three years, Miller Samuel data show.
The supply of homes on the market has climbed in each of the last three quarters, indicating increased competition among sellers. Third-quarter listed inventory was 1,656 homes, compared with 1,302 a year earlier, according to Miller Samuel and Douglas Elliman data.
Builders are putting up homes in anticipation of bonus season early next year, Pally said.
“The market out there is mainly new homes and resale of newer homes, because that’s what people in that market want to have,” Pally said. “They’re not looking for the old traditional homes. They looking more space, amenities and technological advances. They’re looking for what neighbors have and that’s what their neighbors have.”
Guberman, the developer who expanded the house in Southampton, also bought three other properties on the East End, beginning in 2010. He intended to knock them down or do gut renovations, adding new wings and the kinds of luxury amenities that would enable him to sell the homes for multiples of his purchase price.
He added 7,500 square feet to the home on Southampton’s Pheasant Close East before putting it on the market for $8.75 million, according to the listing by Guberman’s broker, Susan Breitenbach of Corcoran Group. His changes included adding a movie theater, tennis court and steam room.
“There’s a great market in that $8 million to $14 million range, and it’s a market for a buyer that’s very, very discerning,” said Guberman, CEO of Manhattan-based Core Development Group LLC, who also runs a separate firm in the Hamptons that bears his name.
He’s seeking $9.95 million for another property, a newly built, 14,000-square-foot estate on Day Lily Lane in Bridgehampton that includes a 3,100-square-foot pool house beside a 20-by-50-foot (6-by-15-meter) saltwater pool. He bought the property, a former farmhouse that neighbors model Christie Brinkley’s home, for $2.6 million in July 2011.
Even amid surging prices, Guberman said he still sees opportunities for gains. He is bidding on or about to sign contracts for at least six other properties in the Hamptons, he said.
Rich Perello tore down a $4.25 million house on 3 acres (1.2 hectares) in Bridgehampton to make room for two 8,000-square-foot houses with pools and tennis courts that he plans to sell for about $8 million each. The 2,500-square-foot house he leveled was built in 1804 and was “unlivable,” he said.
The purchase price “was all land value,” said Perello, a Southampton-based developer, who’s using flooring and beams from the house he demolished in the new homes. “The fact that there was a house on it actually decreases the property value because you have to pay to knock it down.”
Building permits in East Hampton are up 36 percent this year through September, in large part because smaller homes are being replaced by bigger ones, said Thomas Preiato, the town’s chief building inspector.
“Knockdowns and rebuilds and resells are going like hot cakes,” Preiato said. “This has always happened out there, but not to this extent. It’s just crazy. People are buying, knocking down and rebuilding or buying and doing face-lifts.”
Elias Ramirez, president of Southampton Floors Inc., said he’s as busy as he was during the boom, with sales up by a third this year. He increased his crew by five to 15 people in the past year.
“It seems that people held onto their money since 2006,” Ramirez said. “Now everybody is saying there’s enough waiting, and they went at it.”