NEW YORK (Reuters) - Just months after he was ousted from Lehman Brothers, Joseph Gregory put his mansion in tony Bridgehampton on the market for $32.5 million.

Downtown East Hampton in an undated image. REUTERS/NY State/Handout

The former president of the sinking investment bank could not have picked a worse time.

The Hamptons, a summer vacation playground for New York’s financial and celebrity elite, are being hit hard as Wall Street power houses like Lehman and Bear Stearns succumb to the financial crisis.

According to a report by Douglas Elliman, real estate prices fell 11.1 percent in the third quarter in the Hamptons, an exclusive section on the eastern tip of Long Island, less than 100 miles from New York City.

According to Gregory’s real estate agent, he and his wife are selling because they spent little time there after purchasing and upgrading the posh property two years ago.

But the Gregorys are not the only Wall Streeters opting out of the Hamptons as the financial markets crumble.

The financial sector has announced 220,506 job cuts so far this year, the most of any industry, according to a recent report by global outplacement consultancy Challenger, Gray & Christmas.

In November alone, there were 91,356 job cuts announced, the report showed. Citigroup has said it plans to eliminate a whopping 52,000 jobs, while Bank of America has said it will cut 35,000, with some of the job losses expected to be in New York.

Wall Streeters who have not lost their job face bonuses that will sharply pale in comparison to previous years. That bonus is the bulk of their compensation.

“There is a palpable fear I sense right now from people who realize they may be in over their heads with a mortgage or are anxious about selling their homes,” said Diane Saatchi, senior vice president at Corcoran Group Real Estate in East Hampton.

“While they have not pressed the panic button, more homes should be up for sale in the months ahead,” said Saatchi, who estimates that 25 to 30 percent of homeowners and potential buyers are from the financial sector.

The average sales price in the Hamptons was $1,537,512 in the third quarter of 2008, down 11.1 percent from the previous quarter and down 23.3 percent from the third quarter of 2007, according to Prudential Douglas Elliman’s latest quarterly report.

The number of sales tumbled to 257, 27 percent fewer than the previous quarter and 28.8 percent below the third quarter of 2007, the report showed.

“The region certainly looks vulnerable and there is a lot of concern because of its close ties to Wall Street,” said Jonathan Miller, of appraisal firm Miller Samuel in New York, who prepared the report.

Throughout the United States, the housing market is suffering its worst downturn since the Great Depression. A huge supply of unsold homes, tighter lending standards and record foreclosures have slashed home prices.

While high-end homes have weathered earlier housing market downturns, close ties with struggling Wall Street have hit the Hamptons this time.

One person looking to sell is Michael Hampton, a retired advertising executive. He put his luxurious home with panoramic ocean views on the market for $5.995 million a year ago.

Instead of the bidding war he expected over a property nestled among the rich and famous in Montauk, the easternmost town, he has received not a single offer.

“It is as if somebody held up the stop sign,” said Hampton, who bought the property to renovate and sell it for a profit.

“While I have no urgency to unload the property, it is frustrating that I cannot start another project because there is only so much in the piggy bank,” he said.

Sitting tight is the advice many real estate agents are giving their clients.

“With some economists and politicians reporting this is the bottom and others predicting there is a long and deep global recession ahead, when there is a choice, inaction seems a wise decision,” said Corcoran Group’s Saatchi.

Peter Turino, president of the Hamptons offices of luxury real estate agent Brown Harris Stevens, said that in the long term the Hamptons should strongly rebound.

“The ramifications of the global financial crisis have not been completed understood or qualified yet and it will take time to understand just what it will do to us out here,” Turino said.

But, as in the wider real estate market, potential home buyers in the Hamptons have no incentive to buy right now, when home prices widely expected to keep tumbling well into next year.

Eric Ellenbogen, co-founder of media company Boomerang Media TV, put his $5.695 million second home in East Hampton up for sale six months ago.

“There have been many lookers, but no offers,” he said.

The number of lookers has diminished in a more pronounced way in the last several weeks due to uncertainty about the overall housing market, financial markets and the availability of financing, he said.

But, he said, patience is a virtue.

“I am not a forced seller as so many home owners are right now, so I plan on riding this out and if I do not get an offer I can always turn my house into a summer rental,” he said.

Despite more available houses, summer rental prices, which can range broadly from $12,000 to $1 million for the season, seem to be holding steady, according to Corcoran Group’s Saatchi.

But this is not a good sign for sales, which typically rebound in the spring but may not this year because would-be buyers may have decided to rent instead.

“This upcoming summer season will be all about renting,” Saatchi said.