Secret indicator shows Wall Street richest getting richer
A handful of small towns are showing the rest of the world just how rich the superrich really are. And according to one market strategist, they also serve as a signal that the superrich are about to get even richer.
The average home sales price in New York’s Hamptons is now $1.76 million, 3% higher than last year, according to data compiled by Douglas Elliman and Miller Samuel.
For much of the year, the Hamptons are quiet a collection of small villages of just a few thousand people on the southern shore of eastern Long Island. However, in the summer months, its streets are flooded with luxury cars as it transforms into a playground for New York’s moneyed elite. And the summer rental market there could be showing signs that the gap between the very rich and extremely rich is widening.
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“In the past years, there was always one house for rent for a million dollars for the summer,” says Nick Colas, director of research at BNY ConvergEx. “This year, there are multiples of that.”
Meanwhile, rents on the average summer rental in the Hamptons are standing still, Colas adds, although that average is about $45,000 for just the time between Memorial Day and Labor Day. The median household income in the United States is $53,046, according to the U.S. Census Bureau.
Colas sees the growing number of $1 million-plus summer rentals as an indication that Wall Street’s richest are getting an income boost.
During the financial crisis, many were forced to take deferred compensation packages. Instead of getting paid huge cash bonuses, bank executives were paid in their company’s shares that vested over the course of about half a decade.
That may have been a great move for them as bank stocks have rallied in that time. In the last five years, the KBW Bank Index (^BKX) is up over 60%.
“They’re going to get the benefit of five years of accrual from a very low base when the deferrals started,” said Colas.
But some caution on reading too much into the uptick in million-dollar rentals.
"We read and hear about those super high end listings, but do they ever rent?" said appraiser and real estate data expert Jonathan Miller, CEO of Miller Samuels. "It’s more about owners being more bold. In fact, my take on the Hamptons market is that rental activity has cooled a bit because the sales market is so strong, making these listings bigger outliers."
"Deferred comp for Wall Street has been a factor for a number of years already," Miller added. "It’s nothing new."
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