The 'sweet spot' of Wall Street's playground is shrinking
Sales of homes in Wall Street's playground that cost between $1 million and $5 million fell 24% year-over-year in the third quarter, according to a report by Douglas Elliman Real Estate.
Jonathan Miller, CEO of the real-estate appraisal firm Miller Samuel, said this price range is the "sweet spot" of the market, according to The Real Deal. The cluster did not have the largest share of sales, however, with most buyers still choosing homes that cost $1 million or less.
Miller said this slowdown can probably be linked to the punishing year that hedge funds are having. The Hamptons, near the easternmost end of Long Island, is a popular vacation-home choice for finance professionals who work in New York City.
Hedge fund returns have been weak for some time, criticized for their relatively high fees and lackluster performance. Last quarter, investors pulled out the most cash from hedge funds since the first quarter of 2009, bringing total redemptions in the past year to $87 billion, according to an eVestment report released on Wednesday.
Because Douglas Elliman's report is one quarter's data, it's impossible to draw any definitive conclusions on a trend. But this could be an early effect of Wall Street's falling profits, bonuses, and headcounts this year.
The so-called Hamptons sweet spot was the only segment of the market where prices fell year-over-year in Q3. They jumped 29% on the luxury end - vacation homes costing more than $5 million.
That's in clear contrast to Manhattan, where the luxury end of the market has cooled. Across Manhattan, prospective homebuyers pushed back against expensive prices, prompting sellers to offer more concessions, like one month rent-free.
The median sales price of a luxury house in the Hamptons rose 17% from the same period last year, to $6.2 million, according to Douglas Elliman.