While it is clearly too early to do a full autopsy on the Hamptons rental market, brokers say this season will likely go down as one of the toughest — and strangest — in recent memory.
Though beachgoers just started making their way out to the Hamptons in force last month, it’s already clear that the Great Recession has led to double-digit price declines in the Hamptons rental market, compared to last year.
According to Dottie Herman, the CEO of Prudential Douglas Elliman, “Everyone wants a discount.”
Jonathan Miller, the president of Miller Samuel, estimates that rental prices are off 20 percent this season. And Joe Kazickas, partner at Hamptonsrentals.com, called the severity of the rental price declines “unprecedented,” with most deals 20 to 30 percent below the 2008 asking price.
“A house that got $50,000 last year for the summer, when it didn’t rent in February or March [this year], was reduced to $40,000, then eventually rented for $30,000,” Kazickas said.
Rick Hoffman, Corcoran’s regional senior vice president for the East End, said he is seeing rental prices down 10 to 14 percent. A typical $100,000 rental would instead rent for $88,000 this year, he said.
Lawrence Rich, a vice president at Elliman in the city, saw the declining market from the homeowner perspective on the East End. He rented his East Hampton home for 20 percent less than he did last year (that was a record year for him on the rental price).
“Knowing the condition of the market, I accepted it,” Rich said. “This summer, even the richest people are trying to get the best deal on a rental.”
The declines vary by location, but the hotter areas are holding up better than less-coveted towns, said Marc Schwaber, president and CEO of Preferred Empire Mortgage, Elliman’s mortgage company.
While Southampton and Bridgehampton rental prices are down about 25 percent, “barbeque towns” like Quogue are off about 40 percent, Schwaber estimated.
Short-term rentals on rise
The season has also given rise to a spurt of short-term rentals, a shift that reflects conservatism among many vacationers, for whom the economy has dealt a financial and psychic blow.
In the past, Hamptons houses were rented for the entire Memorial Day to Labor Day stretch, or for at least a month-long period. This year, however, things are different.
“One- or two-week rentals are an entirely new phenomenon that seems to have displaced a Memorial Day to Labor Day-type of tenant,” Kazickas said.
At Hamptonsrentals.com, 30 to 40 percent of rental inquiries this season were for short-term rentals, Kazickas estimated. Because the company is new, there are no figures from last year to compare them to. Still, that percentage is clearly high when compared to data from the previous year from other brokerages.
Corcoran’s short-term rentals, for example, are up 5 to 10 percent from 2008, Hoffman said.
Just as on the Jersey Shore (see story below), the summer in the Hamptons got off to an incredibly late start. While the renting season traditionally begins at the end of January or in February, vacationers opted to hold out for deals this year. That’s because many renters were fearful of spending money back in February amid the sour financial climate.
“Nothing happened before April,” said Peter Turino, principal broker and president of Brown Harris Stevens of the Hamptons. During a 25-year career, “I’ve never seen it that delayed before,” he said.
“People waited until the last minute to see how much they could spend … and if prices would be lower,” Turino added.
At Corcoran, rental transactions in January and February were “easily” down 50 percent from 2008, said Hoffman. But May saw a surge in rental activity that took many brokers by surprise. “It was people catching up. Everybody came out of the woodwork in May and bombarded us with inquiries,” Hoffman noted.
He said he saw more rentals in May than in previous years because of the delayed demand. The same was true at Elliman: After a nail-biting winter with virtually no activity, Elliman’s rentals were about 15 percent higher this May and June compared to the same months in 2008, said Paul Brennan, the firm’s regional manager for the Hamptons.
In a bid to entice renters, the firm cut special deals this season, such as throwing in an extra month for the same price, Brennan said.
Jonathan Miller backed brokers’ claims that activity rose in May and last month. He also attributed the rise to the lag in lease signings.
But while individual brokers may have seen that translate into more rentals for the last two months than during those months last year, Miller said on the whole, that wasn’t the case.
“Activity bumped up in May and June, but it was still below the same period last year,” he said.
More supply, more discounts
While market analysts do not publish reports on inventory levels for the rental market, most agreed that rental inventory in the Hamptons has significantly swelled this season.
That’s because with the slow pace of sales, many homeowners have opted to rent their homes to generate badly needed income, brokers said.
According to Turino, there was more rental inventory on the market this year than last year, but the number of rental transactions is down because of fewer customers.
As of June, Brown Harris Stevens had rented 70 percent of its inventory, versus 80 percent a year ago, Turino estimated.
Judi Desiderio, the CEO of Town and Country Real Estate, noted that she has seen an uptick in rentals at her company, but much of that is because her company has added brokers this year.
She noted that as of the middle of last month, her agents were still writing dozens of new leases every week, which she called “unheard of.” She noted that normally at this time of year, brokers are helping renters and homeowners iron out kinks like problematic pool heaters.
Desiderio also said that about 20 percent of the roughly 15,000 summer rentals in Town & Country’s database for both the North and South Forks are not yet rented. She said they had reached that threshold by April last year. The database does not include all rental listings in the Hamptons, but she claimed it is the most comprehensive on the East End.
Forgetting about the Joneses
The rental slowdown is, of course, coinciding with a more toned-down vibe in the area.
“That keeping-up-with-the-Joneses mentality, it’s not feeling so much like that this summer,” Hoffman said.
Miller theorizes that the new mindset has something to do with why rental inventory has shot up in the area. “On the high end of the market, especially for Wall Street types, it’s really not in good form to put your $20 million property on the market. If you’re a Wall Street person, perhaps you rent, and wait and see,” he said, adding, “They don’t want to attract attention. It will be splashed all over the news.”
But that’s not to say the mood is entirely restrained. Several brokers noted the $900,000 rental of the Sagaponack home belonging to the ex-wife of New Jersey governor Jon Corzine this season — which reportedly broke a record.
“People are still spending money, just not as quickly,” Hoffman said. “I walked into the most expensive restaurant on Main Street, and it was packed.”
Herman added, “People are excited to be out there because it’s been a year of hell.”