Hamptons Seasonal Renters Are Here To Stay Amid The Pandemic

During the outset of the COVID-19 crisis in New York, the Hamptons rental market went into a frenzy, and the effects of that initial rush are still being felt.

As 2020 rentals were snatched up — sometimes for more than the asking price — and the inventory diminished, some prospective renters turned into buyers instead, leading to a surge in signed contracts for home sales. This unprecedented rental season has continued to evolve, and now summer renters are extending their stays through autumn and newcomers are looking to secure year-round rentals.

“People were coming like the world was ending,” said Brown Harris Stevens agent Cristina Matos. “Now everybody’s calmer, more educated.”

Rental prices shot up about 20 to 25 percent on average, she said last month, with some renters offering more money than the asking price for a lease, just to grab the house before someone else could. In some cases, renters got as far as signing a lease, but by the time it was returned to the landlord to execute the contract, someone else had made a higher offer.

“It’s been a roller coaster, but very beneficial for the Hamptons and the local economy, no question about it,” Ms. Matos said.

Ernie Cervi, Corcoran’s regional senior vice president for the East End, said late last month that he has been working in real estate here for 20-some-odd years and can’t remember the demand for rentals being as intense.

While he noted that there is no single repository of rental inventory and bookings across the Hamptons, he could say that Corcoran’s rental activity on the South Fork was up 194 percent as of June 20. “That should give you an idea of how booked it is,” he said.

Rather than just the traditional summer rental or a year-round rental, agents are fielding all sorts of requests that were far from common before.

“Rental periods are changing as we speak,” Mr. Cervi said. “So we’ve retrofitted our system so the agents can now search for just September, October, November, winter, extended season. Because there are a whole new set of criteria that clients are asking for, which they haven’t in the past.”

In late July, there were still people looking for August rentals, he reported, adding, “There’s not a whole lot to look at for August.”

He praised agents for being clever: They have gone to builders with brand new homes and had the homes staged so they could be rented.

“And they’ve been calling past clients to see if they are willing to rent,” he added. “So they’re trying to create the inventory for the demand.”

In March and April, the COVID crisis was just emerging in New York State, and people slowly began to realize it wasn’t going to go away quickly. During that time when people were hoarding toilet paper and hand sanitizer, there was also a run on South Fork rentals with immediate occupancy.

“A lot of people that had leases in place for Memorial Day to Labor Day just came out early,” Mr. Cervi said. They talked to the landlords and, if the houses were unoccupied at the time, they struck a deal to move in.

“There were a lot of people out here in March, which doesn’t ever happen,” Mr. Cervi observed. “You notice just by the grocery store that there were too many people because they weren’t ready for it. And now they’ve adjusted, and it’s fine. But initially, it was a big push.”

In a few cases Mr. Cervi was aware of, tenants moved in just for the preseason and then decided they did not want to move out when Memorial Day came. But some of those houses had leases in place with other tenants starting Memorial Day.

“There wasn’t a lot of that, but it did happen,” he said.

Ms. Matos said homeowners whose houses were on the market for sale in March agreed to rent the houses out because it was quick, good money, and nobody anticipated that anyone would invest in a purchase during a pandemic.

Thinking no one would be looking to buy, they also let tenants strike out the showing clause in rental contracts. Tenants, naturally, did not want prospective buyers coming in and out of the house during a pandemic. This was not an issue, initially, because in-person real estate showings were prohibited from late March until Long Island entered phase two of reopening on June 10.

Though the state allowed showings to resume, homeowners who did not have a showing clause in leases were out of luck. But Ms. Matos said this, ultimately, worked to their advantage. Not only did they make extra money by renting, their homes increased in value in the months that they could not show it.

“The truth of the matter is nobody is going to spend $2 million or $3 million sight-unseen,” she said. “Some people are doing sight-unseen — a very small percentage — but there is a fever to buy right now. So I also see a lot of homeowners rushing to put their houses on the market to sell.”

Demand for two-week stays — the minimum rental period in most South Fork municipalities — dried up. But there had been two-week rentals booked for the summer well before the crisis hit.

“Some of them wanted to cancel because of the regulations that you had to isolate for two weeks,” Mr. Cervi said. “So, it’s hard to get a two-week rental and be inside for two weeks.”

However, cancellations did not become a big issue, according to Mr. Cervi. “In many cases, the landlords were happy to cancel because they weren’t going anywhere this year,” he said. “These things weren’t planned, so it was a very amicable settlement when there was an issue with the rental given the pandemic, and it was very nice to see it happen that way.”

As summer winds down, many renters plan to stay put in the Hamptons, and newcomers are still inquiring.

“Some people are thinking for just the fall, and others have decided that they want to be here and put their children in school,” Mr. Cervi said.

He has found that most new prospective year-round renters are coming from New York City, and even those who will put their kids back into Manhattan schools want to have the option to come out to the Hamptons. “It’s just really a big mix of different situations,” he said.

There are not that many international renters, Mr. Cervi reported, but he said that has been the case for the past five years. At one point, many renters were coming from Russia, Germany and England, he said. “Those people still come here, but not as many.”

He’d not sure why it is that international renters have come less frequently in recent years but suggested that it could have to do with the value of the U.S. dollar. “This year, we know why they didn’t come,” he added.

In a typical rental cycle, those who are renting a house for the summer start thinking close to Labor Day whether they would like to book it again for the following summer, Mr. Cervi said. Most of the really nice houses go quickly, so some people secure their rentals in advance, he explained.

“But the bulk of our rental season starts happening right after the holidays, usually,” he said. “So I think that’s going to be different this year. I think we’re going to get a lot of the rental season done in the fall.”

Some who looked for a 2020 rental gave up and decided to buy instead, Mr. Cervi confirmed.

The $2 million price point seemed to be very popular, he said.

“At that price point, if they are going to do a rental, they’re going to spend upwards of … $100,000, maybe $125,000. That can really go towards down payment on a house at that price point,” Mr. Cervi said. “So I think that drove the shift, too.”

Ms. Matos had the same take: “Not only was the inventory very low, the prices were so high that I think people put two and two together, and they said, ‘It’s great to have a second home for my family outside the city, and instead of paying astronomical prices, I will put in a down payment.’”

Mr. Cervi also noted that interest rates for borrowers have plummeted. “Money is almost free right now,” he said.

Mortgage rates remain at historic lows after the Federal Reserve cut its benchmark interest rate to zero in March to stimulate the economy.

Ms. Matos said a driving factor in lease extensions and new leases for the fall is that more and more companies are letting their employees know that they will not be returning to their offices in 2020.

“Why go to the city if you don’t need to, if you don’t have kids, if you don’t have to go to the office?” she said.