Hamptons Summer Rental Market Slows Down After Two Hot Years

After two supercharged summers, driven by pandemic demand, it seems the East End’s seasonal rental market is coming back down to earth. Over the first two “COVID summers,” tenants were desperate for rentals and prices reflected their frenzy, with openings getting snapped up quickly. Not so this year.

“Part of the reason why this feels like such a bad rental year is because we came off two ridiculously incredible rental years where every single thing was rented,” said Judi Desiderio, the founder and CEO of Town & Country Real Estate. “So it’s like going on the Autobahn and all of a sudden you have to get off on the exit and go 20 miles an hour. Part of that is perception, but the reality is that the rental market collapsed this year.”

Desiderio attributed the change to a “perfect storm” of factors. For one, many previous tenants became buyers over the last two years, decreasing demand for rentals. Further, some of those buyers put their new acquisitions on the rental market, increasing supply. And with fewer pandemic restrictions, particularly on travel, would-be tenants may be looking elsewhere, impatient to travel abroad after being unable to over the past few years. The strong U.S. dollar and its recent parity with the euro makes international travel, particularly European travel, more attractive.

“If you’re a family pricing a vacation and you’re looking at the cost of going to the Hamptons versus the South of France or wherever else you might go, when the dollar gets strong, that pushes up the cost of their vacation here by 30 percent,” said Robert Lohman, an associate broker at Brown Harris Stevens. Lohman described this year as more like 2019.

Additionally, New York City, which many fled, has more going on now that pandemic restrictions have been lifted.

“The restaurants, the shows, all the things that make Manhattan the place to be, opened back up again,” Desiderio remarked. “If you’re a city dweller, that’s where you want to be.”

And in the background, there’s the financial uncertainty that has characterized the past few months. The threat of a looming recession, high inflation and stock market turbulence have made people more cautious about large expenditures. Would-be tenants may be sitting on their hands and deciding to pass, on an expensive rental.

“Even the wealthy are sitting on their hands right now, trying to figure out where this economy is going,” said Erin Sykes, an associate broker and chief economist at Nest Seekers International. “There’s still so much interest. … We still see demand. We just don’t see people making a lot of big decisions in general.”

All of this means more vacancies, more negotiation, and downward pressure on prices. Owners who had priced their home based on what they got last year may have had trouble getting a tenant for the summer.

“I’ve often felt that some of those houses that were desperate to be rented didn’t rent because they were overpriced to begin with,” Lohman said. “… Many people who thought they could build in another percent this year, like they have every other year, were in for a surprise.”

Many of these changes have benefited renters.

“We’re seeing more negotiability,” Sykes said. “We’re seeing people have the option for financing contingencies, inspecting contingencies, the whole nine. Basically, [tenants are] taking their time rather than feeling rushed to make a decision. I think that’s a sign of a much more balanced and healthier market than when it was completely one-sided toward the sellers, and buyers were just price-takers or had to engage in bidding wars. Obviously, that’s not sustainable, and I don’t think that’s a healthy market.”

Some things don’t change, though. Those seeking a rental seem to be looking for the same elements they have in previous years: proximity to friends and/or family, a village, the ocean and a home with the amenities they’re seeking. Tenants have been bit more choosy this year instead of simply seeking immediate availability.

“When the market tightens, the blue-chips matter,” Lohman said.

For tenants, this means good deals.

“Go ahead and negotiate, make offers,” Desiderio advised. “For the landlord, the first thing I would say is you now have competition you didn’t have for the last two years. And the competition is fierce. So primp up your house, new paint, new rugs. Make it look dazzling, appeal to all the senses and price it correctly.”

“Landlords have to listen to all offers in this market,” Lohman said, adding later that listing pictures are very important.

Sykes gave tenants the advice to treat prices more like “suggestions” and that searching outside of one’s price parameters may be worthwhile. She advised landlords of the importance of choosing the right brokerage and agent.

Despite more vacancies, it surely doesn’t seem like the East End is less busy. Many new buyers seem to have settled in for the long haul.

“Even though there are fewer renters out here this year, there’s more traffic,” Sykes noted. “I think that’s a function of people that purchased.”

Lohman attributed the cause to the return of one specific group.

“COVID stopped houseguests,” Lohman said. “Houseguests are back. All those bedrooms are full, all those driveways are full.”

Sykes also cited more activity in Hampton Bays, Westhampton Beach and Quogue, due to lower price points and closer proximity to New York City.

Looking to next summer, it seems safe to predict that prices will come down.

“I think that landlords will acknowledge — just like sellers will acknowledge — that COVID gave us this surge of buyers and tenants that was unsustainable long term,” Desiderio said. “There has to be a saturation point. There was a saturation point in buyers, and there was a saturation point in tenants. And now we’re going to come back to some normality.”

But not so far down.

“I don’t think we’ll ever see 2019 prices again, even if we do fall into official recession,” Sykes said. “Part of that is driven by the fact that real estate tends to be an inflation hedge, so if we are going to continue to battle inflation, it’s a more stable place to put your money in a fixed asset.”

“To me, it does not speak to the future demand of the Hamptons at all,” Sykes added, of her response to this year’s market.