An oversupply of summer rentals in the Hamptons is slashing prices by 20% or more, as affluent Wall Streeters and tech workers cut back on their summer spending.
There are now about 5,700 seasonal rentals available for this summer on the South Fork Peninsula in New York, which covers most of the Hamptons, according to Judy Desiderio, CEO of Town & Country Real Estate in East Hampton. He said this is double the number of homes that were typically available in the summer before the Covid pandemic to reflect a change in holiday habits.
“There’s too much inventory at every level,” she said.
A glut of rentals has started slashing prices in one of America’s richest beach communities. Brokers say many landlords have started slashing their rental prices by 10% to 20%, and prices are likely to drop further as homeowners pay their rents before the start of Memorial Day. Rushing to fill up.
“We are being choked by supply,” said Enzo Morabito, a Hamptons broker 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 between $60,000 and $100,000 for the summer, depending on location. Homes on the ocean can rent for over $1 million a month.
Yet the after-effects of the pandemic have led to a record number of rentals available, and brokers say it may take a few more summers for prices and demand to normalize. In the spring of 2020, wealthy New Yorkers left the city for the Hamptons and many bought homes. This led to a sales boom where volumes and prices soared. The average sale price increased more than 40% to more than $1.2 million.
Now, many of those new homeowners are looking to rent out their homes, either because they want to travel for a while or because they want the income to help pay for household expenses. . The increase in supply has transformed a market that traditionally had a limited number of rentals and consistently high prices.
“We had a balanced market before Covey
d,” Desiderio said. “Demand wasn’t out of control and prices held up for years.”
Brokers say many new landlords also decided to rent as they expected the boom-time rental prices of 2020 and 2021, which are unrealistic now.
Gary DePersia of the Corcoran Group said, “I have clients come to me saying, ‘I want to rent my house for $250,000.’ “I tell them it’s not realistic anymore. The market has changed.”
DePersia is advising his rental customers to offer more flexible leases — perhaps for two weeks or a month instead of the entire summer — and to drive down prices.
Another big problem is lack of demand. Since the Hamptons is still heavily dependent on the Manhattan 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 past 26% and several large Wall Street firms and banks, including Morgan Stanley, Citigroup, Bank of America and Lazard, have announced job cuts.
Desiderio said, “Hampton is tied to Wall Street by an umbilical cord.” “When Wall Street is doing well, we’re doing well. When they pull back, we pull back.”
The one bright spot in the rental market, at least for owners, is at the very high end, especially on the oceanfront. Brokers say an oceanfront home in the Hamptons has already rented for $2 million a month this summer, though the brokers declined to provide details.
They say at least three other homes are being offered to rent for the summer for $2 million or more.
DePersia has a 12,000-square-foot oceanfront rental in Bridgehampton that is being offered for two weeks for $600,000. The newly built home, with 10 bedrooms, more than a dozen bathrooms, multiple kitchens, a pool overlooking the ocean and a roof deck with a hot tub, has already attracted many potential renters.
“When you talk about the oceanfront, the new construction, the entertainment and all the amenities for families, there just isn’t enough,” he said. “And the people who rent this kind of space aren’t affected by the stock market or job cuts.”