Median home prices in the Hamptons, the preferred beach destination for New York's rich, plummeted 28 percent in the past year, according to data compiled by Town & Country, Bloomberg News reported. The median price was $698,461.
Once considered to be immune to the recession, due to the tens of millions of dollars that New York's elite and global nomads pumped into the area just 90 miles east of Manhattan, the Hamptons now represent the second shoe to drop in the region's beleaguered housing sector -- a sector whose prices have been devastated by the financial crisis and recession.
The other was prime residential real estate in New York City's main borough -- Manhattan -- where co-op prices have plunged 15 to 25 percent in the past 12 months.
Hamptons leases fall, too
What's more, Bloomberg News reports that summer leases are also fetching lower prices. New York's young professionals often seek out the Hamptons for summer stays, signing three-month leases (June-July-August), frequently in "houseshare" arrangements. However, massive lay-offs on Wall Street have reduced the supply of high-end professionals capable of leasing summer homes that go for upwards of $80,000 for the season.
Salvatore "Seve" Morano of Bronxville, NY, is one example of the reduced demand in the Hamptons. Morano had rented beach houses in trendy East Hampton for the past 5 years, often paying about $5,000 to $7,000 per month for a house-share with five or six roommates. But a very low bonus in December 2008 and other cutbacks at the Manhattan architecture and design firm where he works have put him in a lower price category, summer resort-wise.
"This year, the numbers just didn't add up for a $20,000 summer expense," Morano told DailyFinance. "It would have meant cutbacks in other areas, so we decided to rent a cottage for just one month on the South Jersey Shore for considerably less."
Housing Sector Analysis: Some Americans may find it a challenge to sympathize with New York professionals who plunk down twenty grand for a summer rental or drop a cool two mil or more on a second home purchase, but the important point for investors is what the lack of demand in Hamptons real estate represents. It's indicative of a pervasive recession that's affected every quartile of society. Much of the pseudo-wealth created by the leveraging bubble is draining from the system, and this will continue to act as a drag on U.S. GDP for several more quarters, at least.
And you can bet they'll be selling fewer $25-a-plate fried oysters this summer in the Hamptons, as well.