For nearly two and a half years, “although it seems like 200 years,” accountant Edward Meagher, his wife, Judy, and their basset hound, Beaver, have been eagerly combing the Hamptons for their vacation paradise.

They started with the idea that the “absolutely maximum purchase price was $850,000” for what they hoped would be a relatively new home in a desirable location near the water. That dream has long since proved to be a myth, even though they’ve raised the ante three times – first to $1 million, then $1.2 million, and currently $1.5 million.

“We’re still looking, but I’m beginning to think it’s never going to happen,” Mr. Meagher lamented. “Anything we see now that’s around $1 million is like a nothing house, practically distressed merchandise. It usually needs a lot of work and is never in a decent area.”

One of the Hamptons’ star real estate brokers, Diane Saatchi, reckons the Meaghers would likely have a much better shot at fulfilling their dream by switching their search from the Hamptons to Oz.

“If anyone wants to buy a new home in the Hamptons for $1.5 million, I tell them I have nothing to show them,” observes Ms. Saatchi, senior vice president of real estate biggie Corcoran Group. “You need to spend between $2.5 million and $4.5 million for a new home,” she says. Neither, she adds, do you get much for $1 million in the Hamptons these days, “maybe a fixer-upper, but certainly nothing desirable.”

She also hastens to point out that “there are no deals in Hampton real estate; the only deals are in financing. It’s getting to the point,” she quips, “where you have to win the lottery to be able to buy a home in the Hamptons.”

Ms. Saatchi characterizes Hamptons pricing as follows: low-end, less than $1 million; middle-range, $1 million to $5 million, and high-end, more than $5 million.

I heard talk from some homeowners in the Hamptons that an increasing number of houses were on the block, given their mushrooming price increases in recent years, but Ms. Saatchi insists it isn’t so. “Inventories are really tight, the sale market is robust, prices are still going up, and there are no termites in sight,” she said.

Indicative of the strong market, at least as she sees it, were a couple of recent experiences she had with clients, both of whom were looking for homes in Easthampton. One, a commercial real estate executive, wanted to spend about $1.5 million on a house. Instead, he wound up buying a piece of vacant land for $1.5 million. “He’ll end up spending about $2.5 million and have the house he wants,” Ms. Saatchi observed. Another client, a manufacturing executive, agreed to spend $1 million in Easthampton for a home he liked. He did get the home he liked, but the price was $1.9 million.

“I think buyers are discovering that, because of low interest rates, they can afford more than they think,” Ms. Saatchi said. As a result, she believes many shoppers with, say, a $1 million budget are raising their purchase price to $1.4 million to $1.5 million.

Ms. Saatchi figures the intelligent shopper looking for a house in the Hamptons should recognize that he can have the house he wants or he can have the price he wants, but he can’t have both.

What about the contention of many Hamptons home shoppers that the market is extremely overpriced? Ms. Saatchi agrees. “There are an awful lot of overvalued houses, and I’d guess 20% of our inventory is overpriced,” she said. “But nevertheless, it’s inventory that sells.”

Ms. Saatchi figures the average sale price for a Hamptons home this year – which she estimates will rise about 25% in 2005 after a 35% gain 2004 – is just more than $1 million, while the median sales price is about $800,000.

Given the lofty home prices in the Hamptons, jumbo mortgages (loans of more than $350,00) that sport about a 6% rate are the general rule. But with interest rates on the rise, an obvious question is, at what point do they take their toll on the Hamptons? Ms. Saatchi figures the Hamptons real estate market is home free until about 8%, which she doubts is on the horizon anytime in the near future.

Her parting advice to anyone looking for a home in the Hamptons: “Just buy a couple of lottery tickets and pray.”