Hamptons summer rental season not hot

TRD New York /
Jan.January 28, 2009 11:08 AM

Usually, frigid winter days — like today — are when smart New Yorkers secure their Hamptons rentals for the summer.

Not so this year. Though it’s early in the season, brokers say the number of Hamptons rental transactions so far is way down in the wake of this fall’s financial crisis.

Michael Daly, principal broker at True North Realty Associates in North Haven on Long Island’s East End, estimated that the number of rental transactions may be down by as much as 80 to 90 percent from last year at this time. Since about 10 percent of homes are rented by this time of year, that could translate to more than 1,000 fewer transactions, since there were roughly 13,000 East End homes on the market last year, according to figures from Town & Country Real Estate.

Daly, who is the author of the Hamptons Real Estate Blog, said he’d done three rentals by this time last year, but hasn’t done any so far.

“Rentals are way down and there’s very little activity,” Daly said.

Still, another factor could be that renters are simply slower to make decisions this year, said Rick Hoffman, the Corcoran Group’s regional senior vice president for the East End.

“I think that we’re looking at a later market,” said Hoffman. The uncertainty in the financial markets and the job market “is causing people to be more hesitant in making commitments early on,” he said.

The bellwether will be President’s weekend in February, said Judi Desiderio, the CEO of Town & Country Real Estate. After that week, when kids are out of school, about 50 percent of the year’s Hamptons rentals generally have been booked, she said.

Asking rents also are down, brokers reported.

James Young, a principal broker at the real estate brokerage Rosehip Partners, said he’s noticed that sellers who are renting their homes on the company’s Web site, www.hamptonsrentals.com, have begun dropping their asking rents by 10 to 15 percent. The site, founded in July, allows sellers to post and modify their own listings. Today there are 500 listings on his site.

“People are lowering their prices in our system,” Young said. “We are starting to see people knocking off 10 percent.”

Even if homeowners aren’t officially lowering their asking rents, actual rents are often more negotiable, Daly said.

“I’m hearing about more flexibility in their prices,” he said.

Brokers attributed the weak rental market to layoffs on Wall Street and general economic malaise.

“Even people with a lot of money are not wanting to part with it,” Daly said. “They’re concerned about what other financial calamities might happen.”

Another reason for the rental slowdown is that many renters seem to be more interested in bargain-hunting than serious shopping. Young said he recently showed a summer rental in Amagansett to a group of Wall Streeters who mentioned that “their intention was to offer significantly less than the asking price.” Young tried to dissuade them but they persisted, and the owner rejected the offer, causing the deal to fall through. Another broker at his firm had a similar experience, he said.

Renters are “looking, but they’re not pulling the trigger,” Young said, adding that while many owners seem willing to negotiate, most haven’t yet significantly reduced their prices. “Homeowners aren’t motivated to drop their pants, as it were, but that might change.”

There are also more rentals available this year, brokers said, thanks to cash-strapped owners and unsold spec homes that are being rented by their builders.

The inventory of available rental listings on the East End has jumped about 10 percent from around 13,000 last year to roughly 15,000, Desiderio said. That figure is troubling because “we don’t anticipate 10 percent more demand,” she said.

While lower prices and more choices are good news for sun-worshipping New Yorkers, a weak rental season could have severe consequences for the Hamptons real estate market.

“It’s the rental market here which has been the saving grace for a lot of homeowners,” Daly said. “In the past, if they couldn’t sell, they were typically able to rent.”

For those teetering on the brink of foreclosure, lower rents — or not being able to rent out their properties at all — could be the last straw.

“If this is a very weak rental season, we could see more defaults,” Daly said.

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