Slow season yields shorter rental terms

In February, real estate brokers were saying they were not surprised that the summer rental market was getting off to a little bit of a late start, considering the stumbling economy. But they repeated the mantra that there are always people who want to rent, and they would come, if a few weeks late.

In March, brokers said the recession probably had people a little wary of dropping thousands of dollars on a summer escape when they still didn’t know for sure whether they would even have jobs to escape from come summer. But the renters would come when it got to be April, they said. When first breaks of warm weather goosed city denizens into thinking about summer, the hordes would begin to stream east.

In April, brokers said they were frustrated by the stalemate between landlords who wouldn’t lower their asking prices and potential tenants who seemed set on paying half of what they paid last year. Maybe things would reach the tipping point, they said, when the season was upon us. Brokers said renters may not be spending as freely as in the past, but they would want their time at the beach and would find a way when the calendar started getting short.

Now, with May over, and more than a week into the official summer season, the experts are saying—lo and behold—they were right all along.

The rental market was slow out of the gate as people fretted over the economy. Then the lustful scent of bargains piqued interest—helped along by a healthy dose of media coverage of every half-off deal that went down east of Patchogue—and sent would-be renters scrambling to be portaged from property to property, dropping quarters-on-the-dollar offers that were spurned like an undercooked halibut.

And then the sun shone.

Like clockwork, the first weekend of May brought summer-like weather (the dreaded 90 degree temperature-range showing on some eager city forecasts). Those were fleeting days, but they were enough to ignite the spark.

“That first hot weekend in the city, all of a sudden everybody said ‘Damn, it’s summer’ and they came out by the busload,” said Judi Desiderio, president of Town and Country Realty. “Agents have been running around like crazy ever since then. In the last four to six weeks or so, we did almost a hundred rentals just at this office, and there are still deals coming through. We’re writing leases every single day.”

Indeed, the tepid start and the continued, if somewhat dampened, worry over the economy has meant two things for the rental market: It’s been a mad scramble to find accommodations for the “season,” and the “season” has been significantly shortened for most.

Brokers across the East End said that while the actual number of rentals being inked spiked in May—far surpassing the numbers for the same month in years past, when February and March were typically the busiest months, trends have developed that are likely to keep the ultimate value of the rental season substantially depressed. This may mean smaller crowds on Hamptons beaches and streets this year.

“I would say from a total number of transactions, we’re actually probably going to be close to where we were at last year,” said Charles Manger, Eastern Long Island director of sales for Brown Harris Stevens. “But where you’re going to see the difference is in the dollar volume.”

Several brokers at real estate companies large and small said that the summer rental season of 2009 will be defined like none other: by the partial-season rental. For a variety of reasons, demand for the traditional summer rental from Memorial Day to Labor Day has been relinquished in favor of a two-month, one-month or even two-week rental by those who may have rented for longer in the past.

Jay Flagg, managing broker at Prudential Douglas Elliman, said that thanks to the hectic May, his office has already booked more rental agreements in 2009 than it did in 2008, which was widely regarded as a strong rental season. But, like Mr. Manger, he said that the trend toward partial-season rentals means that far less money is actually changing hands in the transactions.

“It’s all been in May,” he said. “It took the weather to change, and then they got desperate. It backfired on the people who had been holding out—everyone was stumbling over one another. In the end, we’ll be up in terms of rentals, but the volume will be down in terms of dollars.”

Southampton Village broker James McLauchlen said he expects overall dollar totals to be off 40 percent or more when it all shakes out in the end. And dollars represent the bottom line. “Others may look at it differently,” he said. “But the fact is, it’s not been a good rental season.”

The partial-season rentals seem to be in the form that the stubbornness seen in the rest of the East End real estate market has taken on—like the residential sales market that has basically ground to a halt as prospective buyers seek vast discounts and homeowners, seemingly sure that the economy and the market will recover in the near future, refuse to lower their prices.

On the commercial real estate side, the rental market has reached an impasse on pricing. But rather than naturally meeting at a new middle-ground, landlords seem to be standing fast on the price, but have accepted a shorter rental. And the tenants have settled on finding their savings by sacrificing time spent “escaping.”

In the end, the landlords of prime properties are probably winning the stand-off, as the sacrifices may be carried more on the part of the renters.

“It doesn’t mean they’re not getting their house rented for the full summer if they want to,” Mr. Flagg said. “It just may mean they have two or three tenants over the summer. It’s been a trend over the last couple of years.”

There has been some discounting of prices on the part of landlords who were eager to ensure a rental earlier in the season, brokers said, although rarely by more than 20 percent. And as the traffic over patios and pool houses picked up in the last few weekends, many landlords steadily dialed back any discounts they had been offering.

Ms. Desiderio said the frenetic pace of rentals in the last month has even borne a new, ugly fruit not before seen in the Hamptons: the bounce.

“Some people came out early and got a great deal with a landlord in April,” she said. “But then, come May, someone was willing to pay more, or take the whole season instead of just July or August, and landlord bumped them out. I’d never seen that happen before, and it happened at least a handful of times in our East Hampton office alone.”