On a recent rainy Friday morning, Richard Gere and his wife, Carey Lowell, ate breakfast at the Candy Kitchen, the no-frills diner in Bridgehampton. Also dining there, on Friday afternoon, was actress Tara Reid, one of the stars of the film American Pie, with five young men in tow. Russell Simmons, a part-time East Hampton resident was spotted in Sag Harbor driving a silver New Beetle, trying to find a parking spot in the tiny village like everyone else.
It’s summer, and the celebrities are back in the Hamptons. But aside from the stars renting or buying there, there has been little luster to real estate in the Hamptons this season, as the rental market was slow to begin and has been further crippled by rainy weather over the course of several weekends.
As of mid-June, brokers were still holding out hope that rentals, down 15 to 20 percent by some estimates from last year, would rebound.
Others are seeing a fundamental shift in the way houses in the Hamptons are rented, however, with renters showing up later in the season and renting for shorter periods of time. Gone is the frenzy of the 1990s summer rental market, when weekenders traditionally secured the best properties by President’s Day in February, and, in the latter part of the decade during the dot-com boom, when renters often raced to signed leases as early as the autumn before.
“We’ve still got a lot of people coming out, and there is a lot of last minute stuff this year,” said Ray Smith, a marketing director in Prudential Long Island Realty’s Southampton Office, and a broker in the Hamptons for the last 24 years. “I’d almost rather it be a normal season and get it over with.”
Starting last year, the first summer following Sept. 11, a significant number of renters held off signing leases until six to eight weeks after the start of the season, which traditionally begins on Memorial Day.
As a result, some brokers say the verdict won’t be in until after the July 4th weekend.
“Last year, bookings were very late in the season,” said Diane Saatchi, president of Dayton-Halstead Real Estate, which has several offices on the East End. “The bulk of the rental season was between Memorial Day and July 4th. But by July 4th of last year, we actually did better than the year before.”
Saatchi said that bargain-hunters may be waiting longer to secure better deals. So far this year, rental prices are down 10 to 15 percent compared to last year, according to Smith. “People think if they go late, they’ll get better deals,” Saatchi said, though that’s not always the case as some homeowners find it too much trouble to rent as the season progresses.
Gone too, perhaps, is the cherished Hamptons custom of the seasonal rental from Memorial Day to Labor Day, the three-month idyll in which the stay-at-home mother and children spend the entire summer by the sea, while the husband commutes out from Manhattan on the weekend. Now, brokers say they are seeing the growth of one-week, two-week and one-month rentals, and “submarkets” of people who rent at different times, like empty-nesters who don’t have children in school and want to rent during August and September.
“The rental market is getting totally changed around,” said Smith. “Most people aren’t renting the whole summer- they are doing a month, or two months.”
Those with enough money to do so might even spend “a month in the Hamptons and a month in Martha’s Vineyard,” he said. “We’re starting to see all these submarkets pop up.”
One brand-new venture, Hampton Retreats in Southampton, was started up earlier this year as an agency and 24-hour concierge to cater to those short-term renters- an “untapped market,” according to Brad Zackson, a Manhattan developer who founded the firm (see story on P15).
The trend towards shorter rentals can mean a major headache to brokers, who typically receive 10 percent of the total rental contract. That sum is then split equally between the broker and the broker’s office, so that a $5,000 one-week rental would mean only $250 for a broker, an especially small sum if the broker has had to show the renter many properties.
Rental commission is a loss leader for the real estate office owner as well, with rentals at Saatchi’s company accounting for only seven percent of office income but taking 80 percent of work time. However, rentals serve as a promotional tool, and the hope is that landlords will return when they want to buy or sell a property, Saatchi said.
Since homes are being rented for less this year, it further cuts into brokers’ commissions, Smith said. The downward trend follows many years in which there was a 10 percent price increase every year.
The homeowners who were successful renting this year “were the ones that adjusted,” Smith said. “The guy who rented last year for $150,000, and asked $165,000 this year, but rented for $145,000, made the deal. Overpriced rentals had a hard time this year. Even people that eventually did change and bring the price down, should have changed earlier.”
Fueling the trend too, has been rampant development in the Hamptons over the last decade, leading to a far greater housing inventory than in years past. Also, with mortgage levels at record lows, many long-time renters have become buyers, and the sales market is going strong.
“Economically, with interest rates being so low, it makes sense to buy rather than rent,” said Saatchi. “A lot of tried and true renters became buyers.”
While Saatchi said the high-end market – $3.5 million and above – has been sluggish until recent weeks, everything up to $3 million that is not overpriced is doing well, according to Smith.
More modest “well-priced village homes” away from the water in Southampton are particularly hot, Smith said.
“Why spend $40,000 for a summer rental if you can finance at four or five percent?” said Smith.
While some renters may be buying and there is surely more rental supply than demand this season, the creme de la creme properties, said Smith, are, as always, hard to come by. Some homeowners just don’t want to rent their homes, period.
“At the very high end, it’s always been limited,” said Smith. “You get what’s offered and that’s about it.”
“I had an offer of $450,000 to rent a beachfront property for two months this summer, which the owner was about to sell,” he said. “But it stayed empty until he sold it. He didn’t want people in the house.”
Still, there are high-end properties out there. A look at Hamptons Real Estate Online, hreo.com, which aggregates listings for all brokers, showed nine houses over $400,000 that still haven’t rented.
Saatchi said that while rentals may be down, there isn’t anything noticeably different in the Hamptons this year.
“All the top places are busy. Traffic is on par,” she said. “What’s happened is that our economy made some really rich people just a little less rich.”