An oversupply of summer rentals in the Hamptons is leading to price cuts of 20% or more as affluent Wall Streeters and tech workers cut back on their summer spending.
According to Judi Desiderio, CEO of Town & Country Real Estate in East Hampton, about 5,700 seasonal rentals are now available for this summer in New York’s South Fork Peninsula, including most of the Hamptons. That’s double the number of homes that would normally be available for a summer before the Covid pandemic changed holiday habits, she said.
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“There’s just too much inventory, at every level,” she said.
The glut of rental properties in one of America’s wealthiest beach communities is starting to drive price cuts. Realtors say many homeowners have started slashing prices on their rental properties by 10% to 20%, and prices are likely to fall further as homeowners race to fill their rental properties before Memorial Day begins.
“We’ve been choked with the offer,” said Enzo Morabito, a Hamptons realtor with Douglas Elliman. “And it’s all over the Hamptons.”
Granted, “bargains” are all relative in the Hamptons, where a typical 3-bedroom home rents for the summer for between $60,000 and $100,000, depending on location. Oceanfront homes can be rented for over $1 million per month.
Still, the aftereffects of the pandemic have led to a record number of available rental properties, and realtors say it could take a few more summers for prices and demand to normalize. In the spring of 2020, crowds of wealthy New Yorkers fled the city for the Hamptons and many bought homes. This led to a sales explosion in which volume and prices increased enormously. The median sales price increased by more than 40% to more than $1.2 million.
Now many of those 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 costs of their home. The increase in supply has turned upside down a market that traditionally had a limited number of rental properties and consistently high prices.
“Before Covi, we had a balanced market
d,” Desiderio said. “Demand hadn’t gotten out of control and prices held steady for years.”
Many of the new homeowners also decided to rent because they expected the high rents of 2020 and 2021, which are now unrealistic, realtors say.
“I get clients who come to me and say, ‘I want to rent my house for $250,000,'” says Gary DePersia of the Corcoran Group. “I tell them it’s not realistic anymore. The market has changed.”
DePersia advises its rental clients to offer more flexible leases – perhaps for two weeks or a month instead of all summer – and to charge lower prices.
The other big problem is falling demand. As the Hamptons continues to rely heavily on Manhattan’s economy – and finance and technology in particular – it is beginning to feel the chill of a falling stock market and shrinking IPOs and capital markets. Wall Street bonuses fell 26% last and several major Wall Street firms and banks, including Morgan Stanley, Citigroup, Bank of America and Lazard, have announced job cuts.
“The Hamptons is connected to Wall Street by an umbilical cord,” Desiderio said. “If Wall Street does well, we do well. If they pull out, we pull out.”
The only bright spot in the rental market, at least for owners, is at the top end, especially on the oceanfront. Realtors say an oceanfront home in the Hamptons has already rented for $2 million a month this summer, though the realtors declined to give details.
At least three other homes are being put up for rent for $2 million or more for the summer, they say.
DePersia has a 12,000 square foot oceanfront rental in Bridgehampton that is being offered for $600,000 for two weeks. The newly built home, with 10 bedrooms, more than a dozen bathrooms, multiple kitchens, a pool overlooking the ocean and a rooftop terrace with a hot tub, has already attracted a number of potential renters.
“When you talk about the ocean, new construction, all the amenities for entertainment and families, there just aren’t that many,” he said. “And the kind of people who would rent a place like that aren’t as affected by the stock market or job cuts.”