An oversupply of summer rentals in the Hamptons has slashed prices by 20% or more as Wall Street’s wealthy and tech workers cut their summer spending.
There are now about 5,700 seasonal rentals available this summer on New York’s South Fork Peninsula, which includes most of the Hamptons, according to Judy Desiderio, CEO of Town & Country Real Estate in East Hampton. She said this is double the number of homes that would normally be available for the summer before the Covid pandemic alters vacation habits.
“There’s so much stock out there,” she said, “on every level.”
The rent glut in one of America’s richest beach communities is starting to drive down prices. Realtors say many homeowners have begun lowering their rental prices by 10% to 20%, and rates will likely drop further as homeowners race to fill their rents before Memorial Day begins.
“We choked on the show,” said Enzo Morabito, a Hamptons realtor with Douglas Elliman. “And it’s all over the Hamptons.”
Granted, the “bargains” are all relative in the Hamptons, where a typical 3-bedroom house rents between $60,000 and $100,000 for the summer, depending on location. Oceanfront homes can rent for over $1 million for a month.
However, the after-effects of the pandemic have resulted in a record number of available rentals, and Realtors say it could take a few more quarters for prices and demand to return to normal. In the spring of 2020, mobs of wealthy New Yorkers fled the city for the Hamptons and many of them bought homes. This led to a sales boom as volume and prices rose. The average sales price jumped more than 40% to more than $1.2 million.
Now, many new homeowners are trying to rent out their homes, either because they want to travel for part of the summer or because they want the income to help pay for the home expenses. The surge in supply has upended a market that has traditionally had a limited number of rents and consistently high prices.
“We had a balanced market before Covi
d,” said Desiderio. Demand has not gotten out of control and prices have held up for years. “
Many new homeowners have also decided to rent because they projected boom-time rent prices for 2020 and 2021, which are now unrealistic, Realtors say.
“I get clients who come to me who say, ‘I want to rent my house for $250,000,’” said Gary DePersia of the Corcoran Group. “I tell them it’s not realistic anymore. The market has changed.”
DePersia advises his rental clients to offer more flexible leases—perhaps for two weeks or a month instead of the entire summer—and lower prices.
The other big problem is low demand. Since the Hamptons are still so dependent on Manhattan’s economy—specifically finance and technology—they’re starting to feel the cool of the stock market downturn and the IPO and capital markets are shrinking. Wall Street bonuses have fallen 26% in the past, and several major Wall Street firms and banks, including Morgan Stanley, Citigroup, Bank of America and Lazard, have announced job cuts.
“The Hamptons are tied to Wall Street by an umbilical cord,” Desirou said. “When Wall Street does well, we do well. When they pull back, we back off.”
The only bright spot in the rental market, at least for landlords, is the ultimate in sky-high, especially oceanfront. Realtors say one oceanfront home in the Hamptons already rented for $2 million a month this summer, though the realtors declined to elaborate.
At least three more homes are up for rent at $2 million or more for the summer, they say.
DePersia owns a 12,000 square foot oceanfront rental in Bridgehampton that’s being offered for $600,000 for two weeks. The newly built home, which includes 10 bedrooms, more than a dozen bathrooms, multiple kitchens, a pool with ocean views, and a rooftop deck with a hot tub, has already attracted a number of potential renters.
“When you talk about ocean frontage, new construction, all the amenities for entertaining and families, there’s not much,” he said. “And the kind of people who would rent a place like that aren’t affected by the stock market or job cuts.”
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