In the Hamptons, New York City's financial elites are scooping up gleaming new mansions as fast as builders can construct them.
New home permits are being issued at their quickest pace since before the housing bust that began in 2007. Last year, developers got approval to construct about 555 homes across the Hamptons -- the most since 2005, and more than three times as many as in the doldrums of 2009, census figures show.
The average cost of construction, not including the purchase of land, was more than $1 million last year, up 33 percent from a year before, census figures show.
In the first three months of this year, builders have taken out 112 new-home permits in the Hamptons, down from the 124 issued a year earlier, but almost double the 57 handed out in the first quarter of 2013.
Another sign of the building boom: the traffic tie-ups largely caused by a glut of construction vehicles on County Road 39, a main Hamptons thoroughfare. "They call it the 'trade parade,' " said Assemb. Fred Thiele Jr. (I-Sag Harbor). "This is probably the most building activity that we've seen since before the recession, going back to 2006 or 2007."
By contrast, Long Island as a whole remains far below its peak of home construction.
Across the Island builders took out 2,005 permits last year. That's less than one-third of the most recent high, in 2005, census figures show.
The discrepancy shows that Long Island's housing market is getting a boost from big gains at the top, even as the rest of the economy continues to lag.
"If there ever was a recession on the East End, it's over, because as the financial services market and other high-paying areas of employment prosper -- especially in New York City -- it has led to a continued increase in the luxury home market," said Mitchell Pally, chief executive of the Long Island Builders Institute, a trade group.
"Unfortunately, the rest of the Long Island market is not tied to the New York City employment market," he said. "It's tied to the Long Island employment market, and high-paying jobs are much scarcer on Long Island."
The power of Wall Street
Indeed, brokers and home builders say the surging financial markets are fueling purchases of Hamptons getaways. The Wall Street bonus pool grew 3 percent last year, to $28.5 billion, according to a report by New York State Comptroller Thomas DiNapoli.
"This place is tied to the city like never before," said Mary Giaquinto, chairwoman of development company Plum Builders in East Hampton.
On the South Fork developers are scrambling to build everything from sprawling mansions with tennis courts, pools and rolling lawns, to cozier -- but still well-appointed -- condominiums, previously an all-but-unheard-of phenomenon in the Hamptons. With spacious tracts of land scarce in the most exclusive areas south of Montauk Highway and east of the Shinnecock Canal, home builders are venturing into areas where extravagant homes were once a rare sight.
"North of the highway is really booming," said Bridgehampton-based builder Joe Farrell, who recently sold a 2-acre property in northern Bridgehampton for $8 million. "These are prices we've never seen before."
Even some luxurious homes are being knocked down in favor of newer mansions.
Last year, Farrell paid $8 million to buy a 2-acre property south of the highway in Bridgehampton from Countess LuAnn de Lesseps of the reality TV show "The Real Housewives of New York City." Farrell promptly tore down the countess' 13-year-old, four-bedroom home. In its place he is constructing an 8,600-square-foot, nine-bedroom mansion, listed for sale at $20 million.
"It was a pretty nice house with a tennis court and a pool," Farrell said of the shingled house once owned by the countess, "but it was kind of dated, and we found more value in tearing it down."
Lavish new homes are helping to boost Hamptons property values to levels not seen since before the housing bust. Hamptons homes sold for a median $920,500 in the first three months of 2015 and $975,000 in the previous quarter -- below the peak of $1.1 million in the spring of 2007, but up 32 percent from the low point in the fall of 2010, according to the appraisal firm Miller Samuel and the brokerage Douglas Elliman.
A few properties have fetched mind-boggling prices.
"Everybody loves to know about the $147 million home on Further Lane," said Judi Desiderio, chief executive of Hamptons brokerage Town & Country Real Estate, referring to hedge-fund manager Barry Rosenstein's purchase of an 18-acre East Hampton estate last year, the most expensive home sale in the nation's history. "But there's one guy on the planet who did that."
In the communities east of the canal, from Southampton to Montauk and Shelter Island, one-third of home sales recorded in the first three months of 2015 fell between $500,000 and $1 million, and another 28 percent ranged from $1 million to $2 million, according to a report by brokerage the Corcoran Group.
It remains to be seen whether this year's sales will match the eye-popping prices of the past two years. The Federal Reserve is expected to raise key interest rates late this year or early next year; unfavorable currency exchange rates could hold back European buyers; and some brokers wonder whether Wall Street's rise can continue at the same pace.
"Overall, it will probably be a good year," said Christopher Burnside, an associate broker with Brown Harris Stevens and a home builder, noting that some land parcels have gained 25 percent in value in the last year alone. "I'm pretty optimistic for 2015."
But, he said, "I would suspect that if the market does keep going up, it will be at a slower rate."
A more affordable option
Builders are starting to follow some buyers in search of less expensive properties in communities west of the Shinnecock Canal. In Westhampton and Remsenburg the median price of sales recorded in the first three months of this year was $885,000, and in East Quogue and Hampton Bays it was $420,000, Corcoran reported. By contrast, the median price in the village of East Hampton was $3.15 million.
Westhampton Beach, in particular, has an appealing downtown and a performing arts center that have attracted young families -- particularly those seeking a shorter trip from the city, Desiderio said. Some buyers, she said, "don't want to make the schlep, they view coming out to East Hampton as painful."
In response to the demand, builders took out permits to construct 27 new homes in Westhampton Beach last year -- up from just four in 2011, and the most in at least 20 years, census figures show.
Buyers also are looking beyond the single-family homes that make up the majority of the Hamptons housing market. The Town of Southampton issued permits for 50 new condominiums last year, in addition to 224 single-family homes.
The most attention-getting multifamily project on the East End has been Watchcase, Sag Harbor, which has more than 60 high-end condominiums and town houses in and around the former Bulova factory building, listed for $710,000 to $10.2 million. Since it opened last year, 70 percent of units have been sold.
But lower-profile developments, such as Bishops Pond in the Village of Southampton, also have found buyers. All but two of the 69 units have been sold since the community opened in 2013, said Steven Dubb, a principal with Jericho-based Beechwood Organization. The builder raised prices six times, Dubb said, with units fetching from $837,000 to nearly $2.5 million, and empty-nesters making up the majority of buyers, he said. Now Beechwood is building 10 more town houses on the property.
The builders encountered plenty of naysayers before the units hit the market, Dubb said. "People thought of the Hamptons as the land of single-family mansions," he said. "We felt there were people who wanted to be in the Hamptons but didn't want to deal with a house, a mansion -- didn't want to deal with the maintenance, the snow removal. It turned out that we were right."
A boom for everyone
The construction boom has added jobs and much-needed tax revenue, and it actually has helped local communities preserve land, Assemb. Thiele said. That's because a 2 percent tax on East End home sales -- the first $250,000 is exempt -- goes into the region's land preservation fund. The 17-year-old fund surpassed the $1 billion mark in February, Thiele said.
Even so, some local residents have expressed unease about the stupendous scale of the new homes, and about their own ability to remain in the East End as housing costs rise, Thiele said. "The desire for people to have bigger and bigger houses, there's some concern that that's going to change the historic character of the village centers," he said. "We still have to be vigilant in trying to protect those things that make the East End such a mecca for second homes and for tourism."
Builders say affluent buyers prefer the new homes' soaring ceilings, open floor plans, expansive windows and full basements with screening rooms and gyms. Not to mention energy-efficient features and built-in, high-tech entertainment and security systems.
"You just can't get that with a used house," said Burnside. "People want new, they want green, they want design. They don't want to deal with headaches, they don't have time to buy a house and fix it up."