27 East ~ April 14, 2009
There's a mansion for rent on Daniels Lane, right at the heart of what is arguably the most sought after summer vacation real estate in the country. The amenities include six bedrooms, sprawling grounds, pool, tennis court and a short walk to the ocean.
"It's considered to be a trophy property in a triple `A' location," said Scott Strough, a Bridgehampton real estate broker who is listing the mansion for rent for the month of August.
In years past, Mr. Strough said, the house has rented for between $300,000 and $400,000 for one month and its trophy status and prime locale meant it was typically one of the first rentals snatched up-usually by the end of the previous December.
Not this year. In a rental market that several agents have called the worst in memory, the Daniels Lane house, and the vast majority of others up for rent, are still not spoken for.
"This season is the latest start that I've experienced in 27 years," said Judi Desiderio, chief executive officer of Town and Country Real Estate. "There are leases being written by every office, but not as many as there should be for this time of year."
Once upon a time, say, in the 1980s, the summer rental season basically began on Presidents Day weekend. Cabin fever, the February thaw, and a three-day weekend made it the perfect time to spend a few days picking a summer retreat. As the fervor over Hamptons holidays built, that timeline was pushed earlier and earlier until the most desirable properties were the subject of bidding wars well before Christmas. Back then, anyone waiting until late February to ink a deal was facing a substantially reduced selection.
As the spring crocuses bloom this year, however, most East End brokers say the bulk of the rental offerings are still not in contract. Much like the gridlock that has slowed the business of actually selling houses, the rental market seems to be stuck in a sort of pricing standoff between those offering their houses for rent and those interested in renting.
"We're dealing with a mentality out of New York that's telling everyone that everything out here is 50 percent off," said Mary Slattery, a Corcoran Group vice president and associate broker in Southampton Village. "I am very, very busy with rental customers-taking people out every weekend, showing them houses, finding them exactly what they want. And then we get stalled on the offer and acceptance part. We're getting low offers and then they're frustrated when it's not accepted. They say, `What do you mean they don't want to rent?'"
There are between 10,000 and 11,000 properties up for rent for all or part of any given season on the East End, including the North Fork and Shelter Island, according to the databases of the bigger brokerages.
Many market watchers had feared that the stalemated sales market would mean an influx of rental offerings for the summer season as owners of languishing properties-particularly newly completed spec houses-sought to get some return on their substantial investments. Most brokers estimated that the supply side of the market has grown by between 7 and 15 percent this year, which is less than most had expected.
In a good year, about 80 percent of the properties on the market are rented, most of those well before the start of April. Thus far in 2009, some brokers estimated just 20 to 30 percent of listings have been booked for the summer season.
"There is precious little going on," said James R. McLauchlen Sr., owner of the eponymous Southampton Village real estate agency. "The rental market is in lockstep with the sales market. Things are sitting that in years past would have been snapped up whenever they were available."
The slow start in rental business is a break from conventional wisdom that dictates when the sales market is poor, the rental market booms. Uncertainty in financial markets and fears of unemployment have now splashed water on both fires, it would seem.
Be it deflated stock portfolios or simple frugality in murky financial waters, many of those who are on the hunt for a Hamptons summer rental are being a bit more thrifty with their summer spending.
Brokers reported that there has been a spike in the number of customers seeking rentals for just one month or a couple weeks instead of the traditional Memorial Day to Labor Day season. Others are simply scaling back the amount they're willing to spend on a rental, even if it means taking a smaller house or one in a less desirable location than they're used to. Some families have even paired up to share summer houses.
"There's a general shifting downwards across the market," said Stuart Epstein, owner of Devlin McNiff Real Estate in East Hampton. "Our returning customers are either shifting their sights in terms of what they want to see or they're negotiating for a lower price than they've paid in the past."
Or, they just wait. If the instinct that the closer the season gets, the more owners may be inclined to lower their prices rather than risking being tenantless for the summer is right, it might be worth the wait.
"If someone is thinking about coming out or is worried about the future right now, maybe it would be in their best interest to wait a little longer," Mr. McLauchlen said. "It's not like there is a swarm going on so they're not going to lose out."
But there may be light on the horizon. Most brokers noted an uptick in activity in the last few weeks.
The late start may, in the end, serve to spur the sort of competitive market real estate brokers are used to seeing in February and March.
"I think we're going to be inundated for the month of May," Tim Davis, a senior managing director at the Corcoran Group, added. "We're going to pack it all into a short period of time. We'll be fighting for keys, lining up to show houses, and securing rentals with wire transfers."
Ever optimistic, nearly every broker interviewed was certain that business would pick up as the weather warms and that the summer season would be a good one in the end.
"The pavement is going to heat up in Manhattan," Ms. Desiderio said. "New Yorkers aren't going to want to spend the summer in the city. They want to go to the beach."