Jan 21, 2011
Want to buy Billy Joel's Sagaponack home? Last month the piano man dropped the price on his oceanfront house on Long Island's East End again, this time from $19.9 million to $18.5 million. It started out at $22.5 million when he first listed the property in 2009.
And Joel is not alone. Across the U.S., prices last year continued to decline even in the richest neighborhoods. Sagaponack, a village with a population of only 582 (it swells during the summer), saw home values drop 14.5 percent from 2009 to 2010-yet it once again earned the No. 1 position on Businessweek.com's ranking of the Most Expensive Small Towns in the U.S. It held on to the top spot because, despite the dip, median home values were $3,406,640, the highest in the nation, according to real estate website Zillow.com.Working with the website, Businessweek.com identified the 50 most expensive small towns (populations less than 10,000) nationwide where median home values are the highest. We evaluated data on 4,624 cities and census-designated places from November 2010, the most recent available. Some expensive communities, such as Bel Air, Calif., were not included as they are neighborhoods rather than cities or census-designated places. Of the 50 most expensive places-many of which are second-home markets-nearly half are in Long Island's Nassau and Suffolk counties and about one-quarter are in California. None of the towns in the ranking had a median home value of less than $1 million.
Biggest Price Declines
Values dropped in 33 of the 50 most expensive small towns. The biggest decline, 15.7 percent, came in Woodside, Calif., home to such tech billionaires as Oracle's (ORCL) Larry Ellison and Apple's (AAPL) Steve Jobs. Values in the second-most expensive town, Jupiter Island, Fla., were down 11.3 percent from a year ago, to just over $2.8 million, and in No. 4, Los Altos Hills, Calif., they were down 13.6 percent, to a bit more than $2.1 million.
In eight of these towns (five of which are among the top 10 most expensive), values were more than 10 percent below levels of a year ago. Nationwide, home values were down 5.1 percent, Zillow.com's data indicate.
Only 17 places experienced increases in home values. The winner was Kings Point, N.Y., a wealthy suburb of New York City on Long Island's Gold Coast, where prices rose 13.5 percent.
In the Hamptons, "prices have not yet rebounded," says Michael Schultz, vice-president in Corcoran's East Hampton office. With prices down, he expects activity to pick up in the first quarter this year.
Fewer High-End Sales
Home to wealthy Wall Streeters, corporate executives, and celebrities, the Hamptons saw both unit sales and prices down year-on-year after rising in early 2010. The third-quarter drop in the median sale price in the Hamptons-North Fork market was due to a shift away from high-end sales-only 11 homes sold at or above $5 million in the third quarter, down from 20 sales a year earlier, according to a report by Miller Samuel, a New York real estate appraisal services firm.
"Across the board, everyone brought their homes down 15 percent to 20 percent. Sellers are becoming more realistic" and buyers are more conservative, says Harald Grant, senior vice-president in Sotheby's International Realty's Southampton office.After a strong first half in 2010, unit sales in Sagaponack and nearby Bridgehampton were down 18 percent year-on-year in third quarter, and the median sale price was down 53 percent, according to a report from real estate brokerage Corcoran. Despite this short-term softness, "Sagaponack is a strong market because it has cachet," Grant says.
A Premium to Rub Elbows
What makes small towns such as Sagaponack attractive is their proximity not just to natural beauty and first-class golf courses but also to other wealthy people. That's why the most expensive small towns often cluster around major financial centers. A survey of U.S. metropolitan statistical areas by consultancy Capgemini shows that New York City had 667,200 high-net-worth individuals, or people with investable assets of $1 million or more, in 2009-far more than any other metro in the country. Other wealthy areas include the Los Angeles metro area (235,800), Chicago (198,100), Washington, D.C. (152,400), and San Francisco (138,300).
Of the 50 most expensive small towns, 22 are in New York-namely, Long Island-and 13 are in California. Others were in Colorado, Florida, Massachusetts, Maryland, New Jersey, Washington. Making the ranking for the first time was even one town in Tennessee. Belle Meade (a very rich town in Tennessee).
Some well-known markets are less active. "Our really high-end market is almost frozen," and buyers do not seem to want to buy above the $6 million level, says Paul Grover, a partner in Robert Paul Properties, a Cape Cod brokerage. With Wall Street turning around, he anticipates that demand will pick up, "but we'll see it in New York first."
That note of hope is one that many real estate brokers and home sellers across the U.S. share. In expensive small towns like Sagaponack, however, even the battered prices might strike many Americans as wealth beyond the dreams of avarice. It's hard for someone who lives in a house valued in the mid-six figures-or less-to empathize with sellers asking prices in the seven- or even eight-figure range. But no owner likes to take a haircut when selling his home. Just ask Billy Joel.
Here's America's Five Most Expensive Small Towns:
No. 5: Water Mill, N.Y.
Median Home Value: $2,111,688
Price change '09-'10: -10%
Population: 2,137
2010 Rank: 6
Water Mill, about 90 miles from Manhattan, offers riding stables, golf courses, and some of the finest sailing and fishing waters in the Northeast. The town has been home to actor Richard Gere, fashion designer Adrienne Vittadini, publishing heiress Anne Hearst, and real estate investor Andrew Borrok.
No. 4: Los Altos Hills, Calif.
Median Home Value: $2,161,255
Price change '09-'10: -13.6%
Population: 7,981
2010 Rank: 4
The elite town of Los Altos Hills, a wealthy Silicon Valley community 35 miles south of San Francisco and 17 miles north of downtown San Jose, encompasses 8.4 square miles. It has 65 miles of trails and off-road paths for walking, running, bicycling, or even horseback riding. Residents have included Google co-founder Sergey Brin, Yahoo! co-founder Jerry Yang, Hewlett-Packard co-founder David Packard, and venture capitalist Kelly Porter. Median household income is $218,922, estimates the U.S. Census Bureau.
No. 3: Kings Point, N.Y.
Median Home Value: $2,379,905
Price change '09-'10: +13.5%
Population: 5,132
2010 Rank: NA
This Long Island village, home of the U.S. Merchant Marine Academy, is reputed to be the inspiration for West Egg in F. Scott Fitzgerald's The Great Gatsby (Kings Point even has a road named Gatsby Lane). The area has two main parks: Steppingstone Park, which offers mooring for more than 300 boats, and the 175-acre Kings Point Park. Kings Point was home to Chrysler founder Walter Chrysler, retailer Henri Bendel, and comedian Alan King, according to longislandexchange.com.
No. 2: Jupiter Island, Fla.
Median Home Value: $2,810,434
Price change '09-'10: -11.3%
Population: 875
2010 Rank: 2
The town of Jupiter Island, which developers in the 1920s originally envisioned building into a Hollywood-like center for production companies and movie stars, is well-known as one of the wealthiest places in the country. The U.S. Census Bureau estimates per capita income to be $235,758. It has a permanent population of 584, with a seasonal population of approximately 1,775, according to the town website. Jupiter Island has been a second home for many old wealthy American families such as the Doubledays, Fords, Heinzes, and Mellons, and residents have included golfers Greg Norman, Nick Price, and Tiger Woods, President George H.W. Bush, actor Burt Reynolds, and baseball star Mike Schmidt, according to Corcoran.
No. 1: Sagaponack, N.Y.
Median Home Value: $3,406,640
Price change '09-'10: -14.5%
Population: 582
2010 Rank: 1
Southampton's ritzy village of Sagaponack maintains its rank as the country's most expensive small town in 2011. The village, which covers eight square miles, has been home to musician Billy Joel, Apollo Management Chief Operating Officer Henry Silverman, and former Kinray Chief Executive Officer Stewart Rahr. It is also the site of Fair Field, the 63-acre oceanfront estate of Renco Group Chief Executive Officer Ira Rennert, who owned military Humvee maker AM General. At 6,000 square feet and with a 164-seat theater, three swimming pools, and a two-lane bowling alley, Fair Field is one of the largest private houses in the country.
