The Hamptons Half-Price Sale

Bridgehampton, N.Y. - Prices for opulent weekend homes are slashed, but still fail to attract bidders

By LUCETTE LAGNADO - Wall Street Journal

At first glance it's a gated mansion worthy of a Gilded Age: more than 14,000 square feet with eight bedrooms, 9½ bathrooms, five fireplaces, a pool, a pond, a tennis court and ocean views all nestled amid fields perfect for lavish summer parties.

Built on spec, this property was offered for sale in 2006 for $24.95 million. Today? Try $12.95 million -- and even that lower price hasn't yet lured a buyer. The mansion is now being sold at auction as part of a bankruptcy plan by the developer's firm. The manse stands unfinished, forlorn and uninhabited.

"Tragic," says Andrew Saunders, owner of real-estate agency Saunders & Associates, who adds the house would have sold in 2006 if it had been finished or priced less aggressively. "It was not overpriced. He got caught in economic times," counters A. Mitchell Greene, an attorney for the developer.

Welcome to the new Hamptons, where the boom's sunny days and Champagne nights have given way to foreclosure notices and sales at discounts of 25% to 30% and more. Some buyers are making offers of 50 cents on the dollar, and less. Brokers speak of the "Lehman houses" -- homes that used to belong to employees of the fallen Wall Street firm -- or "Madoff homes" -- those owned by clients of the Manhattan financier implicated in a Ponzi scheme. Summer rentals are languishing. "For rent" signs have begun to appear in the windows of some boutiques on Southhampton and East Hampton's tony shopping streets.

The price of this Bridgehampton, N.Y., mansion has been almost halved, to $12.95 million.
While Mr. Saunders remains a staunch optimist -- he opened his agency in Bridgehampton five months ago -- he is in the distinct minority. For many longtime residents, this is more than a recession. "Jay Gatsby is dead," says Dede Gotthelf, owner of the Southampton Inn, referring to F. Scott Fitzgerald's protagonist from another opulent time, also on New York's Long Island, that came to a sudden end. Ms. Gotthelf, many of whose guests spent $400 to $500 a night last summer, had the worst fourth quarter in her 11 years with the hotel, although she says business picked up recently.

Wealth Report: Falling Real-Estate Prices and Hamptons 4.0
A ghostly silence has settled on RVS Fine Arts, the Southampton gallery. Owner Roberta Von Schlossberg says in flush years she could easily sell large paintings in a price range of $5,000 and $25,000. Starting in mid-September as the financial crisis hit, she recalls, Jobs Lane became so quiet "you could roll a bowling ball down the sidewalk. Sales have greatly diminished." In Sag Harbor, Elisca Jeansonne, who owns the Gallery Merz, says business "has flatlined." At the entrance of her gallery stands a large painting of goldfish in a bag by Kevin Berlin. Priced at $35,000, it's on sale for $25,000.

Other famous resort towns are suffering. In Aspen, Colo., sales of single-family homes above $1 million fell 44% in the fourth quarter from a year earlier, according to Morris & Fyrwald Sotheby's International Realty. In the Hamptons, over the past eight years, property values soared to dizzying heights. Once a mecca for artists drawn by the light and natural beauty, the picturesque villages drew wealthy individuals from New York, Los Angeles and Europe. "There were properties that were overvalued more than in your wildest imagination, they were being built and sold for double the price in a couple of years," says Paul Brennan, regional manager for Prudential Douglas Elliman Real Estate. Then last summer, he says, sales stopped. Now, "it is blacker than anyone thought it was going to be." In Southampton, the number of fourth-quarter sales plunged 45%, according to The Real Estate Report Inc.

At Prudential's Bridgehampton office, Broker Lynda Ireland spends much of her time now dealing with offers from individuals she calls "investors." "They are putting $1 million to $1.5 million offers on homes that are $3 million to $4 million," the 25-year Hamptons resident says.

Ms. Ireland herself has been unable to sell a four-bedroom Southampton house she purchased unfinished from a builder in 2006 and put work into it. In 2007, Ms. Ireland put the home on the market for $925,000. The property languished. About four months ago, she rejected an offer of $680,000, sure she could get more. Now, faced with two mortgages and a plummeting market, Ms. Ireland emailed thousands of colleagues and potential customers. "Owner Is Ready to Make a Deal Before They Lose the House," the email read. The note gave a new price: $595,000, which "is still negotiable." She's now entertaining bids at $550,000 -- 41% below her original asking price.

Real-estate broker Enzo Morabito also remembers the good times, when he'd host Champagne parties at the Hamptons' annual polo tournament. He owned as many as three polo horses of his own. Now, Mr. Morabito is running full-page ads in the Southampton Press headlined: "Extraordinary Times Call for Extraordinary Measures." His plan: Hire an auctioneer to sell unwanted properties. He sold his last horse, a pony, last spring.

As for rentals, houses that rented for $350,000 in the summer of 2008 have to be reduced to the $250,000 range to find any takers this year, Prudential's Mr. Brennan says. "People have money. Nobody is spending it," he says, adding hopefully: "They have not canceled summer."

Meanwhile, locals are grappling with ways to survive the downturn. Steven Gaines, author and chronicler of the Hamptons high-life, says he's eating at home most nights. Broker Nelya Veselaya's strategy: get out of town for a while. She flew to Buenos Aires in December for 2½ weeks and danced the tango every night. "Honestly, I was getting really depressed," she says, "So I decided to go away and dance and be happy."