With the tally of unsold luxury homes in the Hamptons increasing in the second quarter, even the rich are feeling the bite of the recession.
According to a survey from appraiser Miller Samuel Inc. and Prudential Douglas Elliman Real Estate, the median sales price for a high-end Hamptons home fell to about $4 million, a 9.4 percent decline from last year's price listings.
Jonathan J. Miller, president and CEO of Miller Samuel, said the recession and rise in unemployment has treated the tony Hamptons real estate market very harshly. In fact, the area's real estate inventory has swelled by 46 percent, according to the survey.
"The real estate business is all about transactions," Miller said. "Activity levels are off by 43.3 percent from the same period last year. As a result of the lower level of activity, you're seeing prices decline and the inventory rise."
The survey found that while the housing inventory has increased tremendously, home owners are continuing to set selling prices higher than the present economic situation can uphold.
In the Hamptons/North Fork area, the median sales prices dropped 16.8 percent from $817,500 in the prior year quarter to $680,000. The average sales price fell 11.3 percent from $1.448 million to $1.284 million. The number of sales decreased 43.3 percent to 307 from 541 units in the prior year quarter. It has bounced back, however, more than 50 percent from 201 units in the last quarter.
The inventory swelled 23.6 percent to 2,286 homes from 1,849 homes a year ago. The homes have spent an average of 156 days on the market compared to 140 days a year ago.
In the luxury home market (the top 10 percent of all sales), the median sales price dropped 9.4 percent to $3,996,500 from this time last year. During the second quarter, 14 units sold at or above $5 million compared to the 23 units last year. This number is still a huge increase from the 7 units sold during the prior quarter.
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Unemployment needs to level off and begin to fall for the housing market to turn around, according to Miller. Additionally, credit needs to ease, he said.
"Essentially, lenders have pulled back from the market," Miller told CNBC. "Even though they are issuing mortgages, the terms are far more stringent and this has damaged markets around the country."
The New York state Labor Department reported that NYC's unemployment rate grew to 9.5 percent in June.
Miller said the recovery will begin first at the lower end of the market with the higher end listings following behind.
"Higher end pricing markets are more vulnerable," Miller said.
It will be another four years until the 584 high-end homes on the market in the Hamptons are sold if the present sale trends continue, according to estimates in a report by Bloomberg News. The report further said that the average luxury home seller has slashed prices an average of 20 percent in the second quarter compared to 5.6 percent this time last year.
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