Rental Market Finally Picks Up
(05/06/2009) Brokers on the South Fork are reporting a surge in
 David E. Rattray
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summer rental activity over the past two weeks, although, with more inventory and more bargain-hunters, not nearly as many properties have been rented as at this time in years past.
Agents are reportedly working hard for their money, hauling potential renters around and haggling with landlords, many of whom refuse to budge on prices already discounted in anticipation of a rough rental season.
“In better or faster years we see an occupancy rate as high as 90 percent,” said Peter Turino, the president of Brown Harris Stevens of the Hamptons. “This year I think we’ll end up around 70 percent. In really good years almost all of them are gone, but there’s more inventory than ever before.”
More people are hoping to make a buck by renting their houses this year, and brokers have reported a flood of rentals on the market. The ultra-high end has been hit especially hard: What happened to those European renters who were seeking luxury houses in the Hamptons last summer, before the global recession hit?
“They’re gone,” said Judi Desiderio, a chief operating officer at Town and Country Real Estate in East Hampton. “And we’ve written less high-end leases. Most of our people come from Wall Street. It goes beyond Wall Street, but that’s 50 percent of our audience,” she said.
“For the first time it’s May and we still have oceanfront properties,” she said. “Normally at this time of year there’s maybe 20 percent left. I’d say this year you’re probably looking at a little over 50 percent” of rentals still on the market.
“I still think that people’s confidence level is low; they’re not sure, if they pay the $50,000, where they’re getting it from,” said Paul Brennan of Prudential Douglas Elliman, who described prices and occupancy as being down about 30 percent.
“There’s a lot of different scenarios going down; there is no typical rental scene,” he said. “It’s open-ended, yet there are people coming in dribs and drabs.”
After a quiet first quarter, Ms. Desiderio said, her agents were hit with walk-ins and scheduled appointments in the past few weeks. In years past, “everything would be wrapped up by now,” she said. “Right now all the seasonal rentals would be done, we would be working on one-month rentals.”
This year, agents have reported that many tenants are considering shorter rental periods. Others, who might have rented alone, are “doubling up with another couple,” Ms. Desiderio said.
“People are taking July or August instead of a full season, people are taking houses without pools,” said Jane Gill, a broker for Prudential Douglas Elliman. “A lot of people that used to spend $75,000 to $100,000 are now spending $40,000 or $50,000,” she said.
In a few cases, negotiations have gotten nasty, the veteran broker said. “It’s a behavior I’ve never witnessed before.”
Many renters are expecting good deals because of the bad economy, and, finally, after months of inactivity, “people are making offers,” she said.
But “the majority of them, the owners, are digging in their heels and they’re just saying no. There’s a ton of inventory, and owners have gotten so spoiled with what they’ve gotten in the past five, six, or seven years, they think, ‘Oh no, my house is definitely worth that.’ ”
Meanwhile, some renters are “waiting until the last possible minute. People are even saying, ‘I’ll come out after Memorial Day and I’ll get a really good deal.’ In some ways they may be right. But for the moment, owners are really holding on,” Ms. Gill said.
Ms. Desiderio cautioned that playing that sort of rental roulette was risky. “We’ve had a couple of deals bumped,” she said. “Tenants have to be careful if they make some lowball offer. They’d better get it sewn up in a day or else” the landlord might find someone else who is willing to pay.
She also said that, even in a bad economy, “most people would rather just use the house themselves than give it away.”
“People came out and they tried to offer 50 cents on the dollar,” she said, but were disappointed that landlords were unwilling to stoop that low.
If landlords do want to negotiate, Ms. Desiderio said, they should be careful about extras. “If you’ve got a pool heater that’s either oil or gas,” she cautioned, “the tenant could blow through $1,000 a week” if utilities are included.
More commonly, she said, landlords are willing to agree to extra time.
In Montauk, Lynden Restrepo, a partner at Atlantic Beach Realty Group, said that, while the office has “been very busy,” tenants “are waiting, and also trying to offer less.” Many of her regular clients called to adjust their prices before the season started, “which was very smart on their part,” she said.
Even so, she said, some deals have fallen through. “People are funny. We’ve had a few people who had actually committed” only to call the next day and announce that someone had lost their job and they would not be renting this year.
But with fewer speculative houses built and less real estate to go around in the hamlet, “thank God Montauk is not like East Hampton and Amagansett, we don’t have the inventory that you guys have, which is great,” she said. “We don’t have a ton more houses that got put on the market for rent, it still seems to be the same ones.”
“Rentals this year have been holding their own,” said John Keeshan of Keeshan Real Estate in Montauk, which he attributed in part to the hamlet’s growing popularity and down-to-earth character.
“If anything, people who otherwise might be considering purchasing at this time are opting to at least come out here and rent,” he said, although he added that sales still have a long way to go before they recover.
“I think our market has always been more affordable, always more realistic. Given that has always been the case [in Montauk], I think that’s part of the attraction and it’s where more people are coming,” he said.
In the world of rentals, everything is relative, something the folks at Rosehip Partners have realized. “Hamptons rentals.com is cranking,” said Lisa Levitin, a partner in the East Hampton-based firm that runs that Web site.
“I also notice that there are people coming out here for the first time thinking they can finally afford the Hamptons,” she said, bringing in a new wave of potential clients.