The home sales market in the Hamptons fell 42%, but many wealthy Americans and Europeans are still happy to rent
Justin Sparr was worried that, with the economy slipping into recession, he might have to make concessions to find a good tenant for his four-bedroom house with an outdoor hot tub and private dock in the Hamptons, the traditional summer playground for celebrities, tycoons, and elite families.
It turned out to be "easy breezy," he says. An Upper East Side couple with a baby took the house for Memorial Day to Labor Day and agreed to his asking rent of $40,000 (last year's tenants paid $27,000). "We got more money this year than any previous year," said Sparr, a Berkeley (Calif.) resident whose grandfather built the Southampton house in the 1970s.
Sparr this year was helped by his preseason renovations and a marketing campaign from a top real estate agent. But the rental market on the South Fork of Long Island, known for its gorgeous beaches and celebrity sightings, is strong, in part, because the for-sale market is weakening. Buyers—even those with multiple homes and multiple millions in the bank—are increasingly cautious about committing to another property. But they're happy to rent.
Larger Leased Inventory
The median home price in the Hamptons increased 0.7% in the first quarter, to $882,500, from the year before, according to a report by Manhattan-based real estate analyst Miller Samuels for brokerage Prudential Douglas Elliman. Home sales dropped 42%. The leased inventory seems to have increased this year, possibly because some sellers have taken their houses off the market and are renting them out instead, says Paula Hathaway, a broker associate with Prudential Douglas Elliman.
The rental season started out strong this year but hit a lull as concerns on Wall Street mounted in the wake of the Bear Stearns (BSC) bailout, Hathaway says. But the market rebounded quickly, she adds. Mala Sander, a senior vice-president with the Corcoran Group in Sag Harbor, echoes her observation: "It started out really strong like every other year. Then we did see a bit of a lull coming into the February-March time frame.… But then all of a sudden people began signing leases."
Sparr's house is closer to the bottom of the rental market. Oceanfront mansions rent for as much as $750,000 between Memorial Day and Labor Day. An 8,000-square-foot house with 300 feet of ocean frontage in the old-money enclave of Southampton rented for a full year in 2007 for $975,000, Hathaway says.
A Bargain for Europeans
Michael Kaufman, president of Hamptonsvacations.com, a Web site that markets his family's 12 East Hampton vacation homes, said the weak dollar has attracted a flurry of interest from outside the country, especially among Europeans who see the Hamptons as a bargain compared with Tuscany or the South of France. The family decided to keep its asking rents unchanged this year so that they stay affordable for Americans as well. The homes can be rented for as little as one week. In July and August, his homes rent for between $8,000 and $24,000 for a half month. "We factored in the economic news when we set the rates for the season," Kaufman says. "U.S. vacationers are not going to go abroad because it now costs a fortune."
But the wealthiest vacationers in the Hamptons don't worry about costs. They're most concerned with finding a beautiful house on or near the ocean—something that gets harder as the season approaches. "There are very few oceanfront rentals left," says Bill Williams, associate broker in the East Hampton office of Sotheby's International Realty.
The market isn't as tight on the lower end. Renters are making lowball offers. But landlords have been reluctant to offer deep discounts, according to Williams. "On one $50,000 seasonal rental, I had somebody offer $38,000 on it," Williams says. "They settled at $42,000."