Real Estate Pros Examine The Hamptons Rental Market in 2023

The unprecedented demand and prices achieved for Hamptons rentals during the pandemic have pulled back, but not every landlord has received the message that they can’t expect a repeat of 2021 prices in 2023.

Still, a panel of experienced Hamptons real estate professionals assembled by The Express News Group in January was optimistic that rental activity is shaping up to be strong this summer, even if potential renters are hesitant to act early.

Joseph Shaw, the executive editor of The Express News Group, moderated the discussion, “Renting in 2023,” the first part in The Pulse of the Market, a three-part series focused on South Fork real estate conditions and outlooks.

“There’s been a dynamic shift since the pandemic where there’s no sense of urgency anymore,” said panelist Jackie Dunphy, a salesperson with Corcoran. “ … I think people are hedging their bets again, like they did last year, whether they want to go to Europe or overseas or rent out here or do both.”

Shaw pointed out that it is difficult to compare the 2023 rental season to the last couple of years, as the pandemic has an enormous effect on the rental market.

Janet Hummel, a managing partner of Town & Country Real Estate said that in 2020 and 2021, “everything was rented.”

No matter the house, if it was available for rent, someone would rent it.

“People were like in panic mode to get out of the city. So people would just rent anything, sight unseen, and it was absolutely going crazy,” Hummel said.

Then in 2022, the rental season started off strong then fizzled out, she said. She attributed this to international travel becoming an option again.

“Everybody I know went to Italy last year for the month of August,” Hummel said.

Some of those who chose to travel were Hamptons homeowners who purchased during the pandemic, and they offered their homes for rent while they went abroad. This led to there being more rental inventory on the local market at the same time as fewer people were looking to rent in the Hamptons.

Some who had rented in 2020 or 2021 returned to the same rental homes but refused to pay COVID prices anymore. “So they renegotiated the prices down a bit,” Hummel said.

“Right now I have people who are putting their prices up for this coming season,” said Maz Crotty, an associate broker with Sotheby’s International Realty. “I’ve also got people who are putting their prices down more in line with what we had before the pandemic. So there’s a big range there.”

Crotty anticipates there being a lot more rental inventory in 2023 again, though she also expects that not as many people will be “running off to Europe.”

“They found it a little more expensive. They found going away a little more stressful,” she said. “So I think we’re going to have more people coming out here.”

Crotty noted it is hard to judge a rental season early though she said a number of people are returning to the houses they rented last year and are probably not going to buy homes.

“So yes, we could have a better summer but it’s really, really hard to judge it this early,” she said.

She urged clients “to recognize we do have more inventory, and we need to get their pricing right earlier to ensure that they’re getting as many eyeballs on their houses as is possible and not leaving it to the last minute to drop prices when there’s less people looking.”

Dunphy concurred. “Drop the prices now if you really want to rent because I don’t think we’re going to have that good of a rental market,” she said. “I think it’s going to pick up, but there are definitely going to be bargain hunters. People are really nervous about what’s coming down the pike in the economy. The bonuses are off this year. A lot of people use those to rent houses.”

Hummel said that this is the time to start looking because this is when “really good rentals” are available. And on the other side of the transaction, landlords want to get tenants signed now, early. “They’re not the ones nickel and diming you,” she explained. “They’re not ones giving you a hard time.”

Later in the season, prospective tenants offer “really low numbers,” she said.

Shaw wondered how the pandemic has affected the rental supply. “It just seems to me that in 2021, anybody who had any opportunity to rent was doing that,” he said. “I have to think that a lot of people who weren’t landlords became landlords in the last year or two and that has to have increased the supply.”

Matt Breitenbach, an associate broker with Compass, said the pandemic caused a demographic shift and a trend of the Hamptons transforming from a resort town to a country town, where families who used to live in the city now live on the East End year-round and put their children in local schools.

He said there is a “traffic jam” right now, of a wealthy community where sellers don’t really need to sell and renters don’t really need to rent. “But during the pandemic … there was so much opportunity. … You got something to sell? Sell it. You’ve got something to rent, here, you can rent this. Take it! There was just money falling from the sky.”

Buyers and renters are now looking for “compelling value again, just like before the pandemic,” Dunphy said, and homeowners looking to rent out their houses need to realize that the “crazy asking prices” are gone.

“They were gone for last year, summer season, and they’re definitely gone this season,” she said.

Hummel said there were many price reductions in rentals last year starting in March and April. “They had to come down,” she said. “The numbers were too crazy, and they still are not cheap, but they’re less than what they were.”

Though people may not want to buy because they are concerned about mortgage rates, they will still want to rent, she noted. “They’re still going to want to be out here.”

Breitenbach observed that more trades and rental deals need to come through to form a basis line on pricing. “I think everyone’s a little confused about where value is right now,” he said.

Hummel agreed it is difficult at this time to set home prices for both sales and rentals.

“People have this inflated number in their head for everything,” and they need to get used to the fact that they won’t get those numbers anymore, she explained. “You’re still going to get good money. I mean, the rentals were up over 50 percent during COVID. I mean, it was crazy. And they’ve come down a bit, maybe another 20 percent, but they haven’t come down way down.”

Renters had been coming out, looking at one or two houses, and renting one of them for full price, Hummel said. But now, they want to see 10 houses before they select one.

“I think they want to spend their money, and every time something happens in the world, they hold back,” she said. “You know, they all have money they want to spend but I think they’re just a little bit nervous with everything going on.”

Crotty said most people who purchase a property these days anticipate that they will do some traveling and rent the house out while they are away, whether it be for two weeks or a month.

Buyers who purchased a home during the pandemic, some of whom paid “exaggerated prices,” do not understand where they need to be on price when they offer their houses for rent, she said.

She agreed with Shaw’s assessment that there is more rental inventory on the market today than there was 10 years ago.

“Some of them are for shorter periods, which is more appealing to people these days,” Crotty said. “Ten years ago, people used to come out and stay for the whole summer. That doesn’t necessarily happen quite as much these days. So it gives people more opportunities, and I think we will also see people who sometimes rent for a couple of months, maybe only coming for a month this year because they want to save some money, maybe to purchase or maybe they just feel like they’ve spent too much money over the last three years.”

Dunphy identified a number of reasons why short-term rentals have increased in popularity.

“The dynamics of families have changed,” she said. “The traditional family is: The kids and the mom would come out for the whole summer, and the husband would come out on the weekends or long weekends. Nowadays kids are so active during the summer — they have their sports, they have their play dates in the city — and there’s a lot more going on in their lives now than they were historically. So that’s why I think we’re seeing shorter-term rentals. They’ll come out for a month or maybe three weeks because the kids are spread out everywhere to sleep-away camp or they want to go skiing or whatever in Europe.”

Breitenbach noted that certain events, like Hampton Classic Horse Show in Bridgehampton, spur short-term rentals.

“The only caveat with that is that [in] certain townships, it’s illegal to do that,” Dunphy said. “So, you know, owner beware and renter beware.”

She reported seeing an uptick in inquiries lately from international renters as well as from the West Coast.

“It’s definitely changed, and the most critical thing I have found is our internet and cable service,” Dunphy said. “You know, a lot of these renters are used to working from home now, and they want the top speed that they get in the city. And it’s very difficult to give them good service out here with that. That is the biggest complaint that I’ve found.”

Shaw asked if that’s a deal-breaker, and Dunphy confirmed that it has been for stock traders.

“It’s amazing to me that we don’t have fiber optic options and things in this region,” Shaw said.

In a chorus of agreement, the panelist added that poor cell service is also a drag on the area.

“I guess we still live in the country,” Dunphy quipped.

Shaw wondered what the ripple effects are on the market.

Breitenbach said the pandemic has forced businesses to evolve and modernize, like adopting UberEats for delivery service after being resistant to doing so for years. Advancements and new offerings like coworking spaces affect sales, rentals and the general health of the community, he said.

“It’s an exciting time despite all the headwinds of all the stuff that’s going on,” he said. “I think it’s one of the most exciting times I’ve seen in my lifetime because there’s a lot of people out here that love it, that got exposed to the Hamptons lifestyle in March and April.”

They take a walk on the beach and realize how cool it is, and they are staying and bringing innovations, he said.

“The Hamptons has been a little too resistant to it in the past,” he said. “I think it’s got to help grow this community. So if you want the health of the community, it has to be modernized.”

Breitenbach said that in his 15 years of experience, the rental market is alway there and pretty consistent — “It’s never way up or way down” — but in 2021 it was “bonkers.”

Dunphy said it used to be the case that year-round residents would rent out their houses for a period in summer and “then find a little shack down in Ditch Plains or something.” But she noted that now that shack costs millions of dollars. “What some families have done is they rent an RV for three weeks or a month and rent their house and go camping,” she said. “And I think that is just a lovely solution for the year-rounders who do want to rent their house out.”

Crotty said some homeowners chose to rent out their house only once every three years or so to cover the cost of a home improvement like an extra bathroom or finishing the basement. She said some year-rounders don’t realize how much work they need to put into renting out their home, especially considering how much stuff is kept at a year-round home.

“We’re not Airbnb. People don’t come in and expect to see all your things in your fridge and your cupboards,” Crotty said.

She added that houses can’t be rented without permits these days; “it’s not worth the liability.”

Dunphy anticipates there will not be many Memorial Day to Labor Day rentals this year but said July will be a very hot month and there will be many August rentals as well — provided that owners are reasonable about their prices.

“Every year we all say, ‘It can’t get any busier,’” Hummel said. “... and it gets busier and busier.”