The Hamptons Hit Uncharted Waters: $75,000-a-Month Fall Rentals

(Bloomberg) -- In the not-so-distant past, Labor Day signaled the end of the Hamptons summer season. “It was called tumbleweed Tuesday,” says Ritchey Howe, an agent in Southampton, N.Y., with Sotheby’s International Realty. “You could shoot a cannon down main street in Southampton and not hit anyone.”

This year is different.

As families confront a school season in which kids might be cooped up in the house for remote learning, and people with office jobs are still working from home, the Hamptons rental market is entering uncharted waters in the form of fall, winter, and even year-round rentals. “The rental market post-Labor Day has been extremely active, and prices are considerably higher than they were in the past,” says Pamela Liebman, president and chief executive officer of the Corcoran Group. 

But fall and winter rentals offer a new hurdle for landlords, renters, and brokers: How to price rentals in a market with no precedents?

“We’re putting up new rentals now for periods that didn’t really exist before,” says James Keogh, an agent for Douglas Elliman in East Hampton, N.Y., who says his office fielded nearly 100 inquiries for post-Labor Day rentals during the month of August. “A lot of times, the most beautiful houses can name their prices, so the high end is much more variable.”

Slowly, as more houses are renting, several trends are emerging that diverge from summer norms. 

Shifting Priorities

“I was in a beach house recently in a prime location—toes in the sand,” says Liebman. “But I would never take it, or have interest in it in the winter, because the interior leaves a lot to be desired.” In the summer, she says, the house commands a premium because “all you care about is, ‘Wow, I’m walking to my infinity pool and the beach.’” 

Suddenly, brokers are discovering that renters are “less concerned about waterfront or oceanfront,” Keogh says, and more interested in giant kitchens, indoor recreation areas, and whether a house “is a warm and inviting place,” Liebman says. “You want to make sure a house meets your needs.”

As a result, “people are willing to go north of the [Montauk] highway, whereas they might not have been willing to do that in the summer,” says Howe, especially “if the house offers more—a gym, or more space for work.”

Availability

Homeowners, in contrast to  renters, are not necessarily leaping at the opportunity to let their houses year-round. “There’s just not enough inventory,” says Martha Gundersen, a broker with Douglas Elliman in Bridgehampton, who says she’s been getting at least one inquiry every day for off-season rentals.

“Not everyone wants to rent their homes,” because renting during the winter could come “with a bit more risk than reward,” she says.

Some landlords may be reluctant because they enjoy spending time in their own homes. Others, Howe says, are hesitant to rent out during winter months. In contrast with a summer rental—often so lucrative that a month’s rent will compensate for any damage—in the winter, “you don’t get as much money, and the wear and tear on the house might not be worth it unless you get a certain sum.”

This makes sense. In the summer, renters are outside, in the pool, on the beach, or riding bikes, putting little to no stress on the house’s furniture and mechanical systems. In the winter, everyone’s inside, putting the house to the test. “From the owner’s standpoint, they’ll really only rent for a certain amount,” Howe says.

Another landlord concern is the fear—unfounded, brokers say, except for a few well-publicized exceptions— that their $100,000 a month tenants will simply refuse to leave when their leases are up and be protected by New York’s non-eviction orders. “I thought it would happen more than it has, but I’ve heard a couple of horror stories,” Liebman says. “New York’s tenant laws were not meant for this.”

The easiest way around it, brokers say, is careful vetting ahead of time. “Either rent to a tenant we know, or the landlord or agent bringing them in knows,” Howe says. “The fear is out there, but it really has not been the case.”

Despite all this, there are houses available for people willing to pay the price. “There was very good availability earlier,” Liebman says, “but it’s much more limited now. Certainly though, people will have a decent choice.”

Keogh says he expects inventory to rise after Labor Day, once summer renters leave and landlords can start showing houses again. “We may see more [houses] coming into play,” he says. “Sometimes, people want to see 20 houses, and we can only get them into two or three.”

How It’s priced

Some post-Labor Day renters are simply extending their leases into the fall, then potentially renegotiating when winter comes around. Others have signed new leases houses from September to May; still others have signed leases running from September to September, and a few are willing to go even further. “I have one client who’s extended her rental to May 2022,” Howe says.

Generally speaking, renters have to assume that they’ll pay up to 75% of August’s rent for September, “then it dips down for October and November,” says Liebman. “A house that rents for $100,000 a month in July, we’re seeing get $75,000.” 

Howe, in contrast, says that most of her renters are paying one-half to one-third of August rents in September, and then even less as the year goes on. Prices, she says, “run the gamut.”

A 12-bedroom house on Ocean Road in Bridgehampton, for instance, is on the market with Corcoran for $375,000 for the month of September; it’s also available as a year-round rental for $750,000. A second property listed with Corcoran, a six-bedroom home in Watermill that rents from August to Labor day for $200,000, will cost a comparatively modest $50,000 a month in September, October, November, and December.

Howe’s most expensive rental is a house next to the beach in Water Mill, offered for $350,000 for Sept. 10 through May 19. A more affordable option is a five-bedroom home north of Montauk Highway in Southampton that’s being offered for $30,000 from Sept. 10 to Sept. 30.

Keogh says he’s had an inquiry for “$500,000 for the month of September, and they’d extend to October if they find a place.” The family in question, which he says is from the Middle East but based in Manhattan, is still looking. “I offered my best five or six oceanfront rentals, but ultimately, there’s not much inventory,” he says.

“It’s still case-by-case,” Liebman says. “Some [landlords] try to get greedy, and the tenants aren’t biting. There’s enough selection that landlords need to be reasonable.” 

“The laws of supply and demand are kicking in,” she says. “The market will find its way. It always does.”

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