Still no ‘overspending’ in Hamptons, but…

<i>Renters coming out earlier and owners seen as less flexible on pricing</i>

The interior of 25 Rawson Road in Sag Harbor. The home is listed for rent with Sotheby’s International Realty for $350,000 for the season.
Every year, Hamptons broker Jane Gill gets a call from the same Wall Street trader, looking for a summer rental with a fenced-in yard, an acre of property and a garage for his Ferrari. He always calls at the last minute, usually around Memorial Day, hoping to get a good deal: a $200,000 property for about $75,000.

“He works with every broker,” said Gill, a vice president at Saunders & Associates in Bridgehampton. “Last year, I showed him a few things, and then I lost contact with him. I assume he found something.”

He may not find it so easy this year, however. Brokers say that while last year many renters waited until the eleventh hour, they have been receiving calls from interested renters over the last month, and some of the most exclusive properties have already been picked up.

In addition, while brokers are advising owners to keep their asking prices at about the same discounted levels as last year — which some say were down an average of 20 to 30 percent from 2008 — there will likely be less room for negotiation this summer.

“Last year, everything was down and everyone was down, and people were making ridiculously [low] offers,” Gill said. “This year, most of my customers are already circling around the properties that they’re considering — in February. That’s a good sign.”

While über-high-end, south-of-the-highway properties that rent for $350,000 to $450,000 for the season held their value better last summer than many other homes, there were some properties on the lower end that wound up renting with price cuts of as much as 40 percent.

Not this summer, brokers say.

“I know people who pulled their houses off the market last year because they were sick of these Wall Street guys coming out here wanting property for 50 cents on the dollar,” said Tara Newman, also a vice president at Saunders. “Maybe there was a house that went for 50 percent off, but I’m not aware of it. What I do know is [that this year] a lot of homeowners said, ‘No more of these people with the 50 percent off.'”

In fact, she said one Sag Harbor rental has already been snapped up for $175,000 from July through Labor Day — the priciest rental deal in Sag Harbor so far this year.

Marie Zazzi, a broker for Sotheby’s International Realty in East Hampton, said her office has already done 14 rentals in the six figures — though some are not for the full season.

Zazzi currently has a listing for an 8,600-square-foot house at 25 Rawson Road in Sag Harbor with seven bedrooms, a pool, a gym and two fireplaces, set on three acres on the edge of Peconic Bay. The price, she said, is $350,000 for the season.

The idea that the rental season is starting out stronger than last year was seconded by Gary DePersia, a senior vice president at the Corcoran Group in East Hampton.

“It’s too early to tell where prices will be this year, but it appears renters are paying up from last year’s levels, with less regard for getting a steal,” said DePersia, who has the listing for a home on Cobb Road in Water Mill South with an asking price of $300,000 for one month (it’s available for July or August).

Renters are house hunting earlier than they were last year — when many didn’t start looking until April or later in some cases. DePersia said he knows of one property that was shown four times in late January by four different brokers.

But while he said the most coveted and expensive homes always get early attention from renters, this year some of the mid-priced rentals are as well.

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“Last year, renters came out later, like March or April, thinking they could spend less because owners would be desperate,” he said. “This year, they’re not as overconfident about finding great deals.”

There were also fewer renters last year than there were in 2008, and those who did rent were skittish about spending too much. Indeed, many also took shorter-term rentals for a month or a few weeks, rather than the whole summer.

DePersia said he did fewer full-season rentals last year than he’s done in the 15 years he’s been renting in the Hamptons.

“Last year, I saw a lot of people looking for value, renting in places they wouldn’t have before. Even if they had the money, they didn’t feel as confident about the economic climate,” DePersia said.

It’s too early to say what this year will bring, but so far, indications are that renters are still not willing to “overspend,” but they are willing to spend more than they did last season, DePersia said.

Brokers say, however, they expect the same trend as last year, with more Hamptons homeowners putting their properties on the market to generate income in a down economy.

John Healey, senior vice president with Town & Country Real Estate in Bridgehampton, said at least one of his customers, who has rented the same place year after year, had to come up a bit from last year’s price. Healey declined to disclose the price, but said it was the same amount that the renter paid in 2008 prior to the Lehman Brothers collapse — right before the financial crisis kicked into high gear. Rents then were down about 15 percent from the 2007 peak.

“I know that a lot of prospective tenants are looking for a deal again, and I don’t think they’re getting the same deals,” Healey said. “Landlords are saying, ‘Look, I’m not renting for what I rented last year.'”

He said that properties south of the highway are even less likely to carry last year’s discounts.

Still, he said, it would be “foolish” for any homeowner to raise their price too much.

“If they think the economy is back in shape for rentals, they’re wrong. It will be a slow process to get back to where we were,” Healey said.

The market is far from the heady heights it hit in 2007. During the peak, people were renting in October for the following summer. If they had a good house in 2005 or 2006, they would sign a new lease right after they received their security deposit back from the prior summer.

“We’re not seeing any reckless money like we did a couple of years ago, where they’d say, ‘Yeah, I’ll take it. Okay, how much was it?'” said Simon Harrison, a broker in Sag Harbor.