The tide went out on the ritzy Hampton’s housing market in the first quarter with both sales activity and prices dropping steeply from year-earlier levels, according to three reports released Thursday.

The number of homes sold during the initial three months of the year fell 22% from the same period a year ago to 309, according to Prudential Douglas Elliman and appraisal firm Miller Samuel Inc. A separate report by the Corcoran Group reported a similar 23% drop to 360 homes sold. The dips follow a surge of activity in the final quarter of 2010, both reports said. Each noted that some of those deals would have closed in the first three months of 2011 if buyers hadn’t been afraid that the Bush-era tax cuts would expire at the end of December. At the last minute, the tax cuts were extended for two years.

“The large drop in sales activity was primarily attributable to the rush to close by the end of 2010,” said Jonathan Miller, chief executive of Miller Samuel. “Everyone expected the tax cut to expire.”

The number of sales in the first quarter was down 23% from the previous quarter, according to Miller Samuel’s report. Meanwhile, both the median sales price and the average sales price dropped, by 23% to $900,000 and by 22% to $1.9 million, respectively. Brown Harris Stevens reported a similar decline in average price, 21%, to $1.4 million during the first quarter.

Even sales of the Hamptons’ most prized houses—those valued at upwards of $5 million slowed during the first quarter. There were just 15 sales for more than $5 million each, a little more than half of the 28 sales that were logged in the same quarter a year ago, said Mr. Miller, who began tracking this segment of the Hamptons market after the collapse of Lehman Brothers in the fall of 2008. During the fourth quarter of last year, 38 houses sold for more than $5 million each.

The market share of homes sold for more than $1 million also shrank to the second-lowest level in seven years, Mr. Miller said. Sales of $1 million-plus homes represented 19.8% of all sales during the quarter, versus 39.7% the same time a year ago. This segment of the market hit an all-time low in the fourth quarter of 2008, when $1 million-plus homes made up just 17.6% of all sales in the Hamptons.

“Everyone took a breather earlier this year,” said Paul Brennan, Hamptons regional manager at Prudential Douglas Elliman, adding that the bad weather may have also played a part in dampening sales. “Everyone was sluggish.”

But that has recently changed, said Mr. Brennan, adding that he is starting to get emails and phone calls again. He personally has three $20 million deals in Sagaponeck and Southhampton, one of which recently closed.

“There will be a burst of activity during the second quarter,” said Mr. Miller, noting that Wall Street compensation, a big driver for the Hamptons sales market, is up 5%. Inventory is also at modest levels, another good sign that the market is stable. During the first quarter, inventory rose a mere 3% to 1,689 homes.

Cia Comnas, executive managing director of Brown Harris Stevens of the Hamptons, also predicts improvement in activity. “There has been a nice pickup in activity in the high end. Everything is looking good, and we expect those transactions to be reflected in the second-quarter numbers,” she said. “Properties that are well priced are attracting multiple buyers. There are bidding wars.”