Yesterday an article was published by The Real Deal about Hamptons rentals being overpriced, the 2022 rental market being down overall from last year, and utilized the high end of the market as an example of lofty pricing. The article was informative and did its job by opening up Pandora’s box of further questions for Hamptons real estate readers to think and ask more about.
Why this drop when the sales market is reportedly doing well? Followed by, but what’s really going on in the rest of the market (as the ultra-luxury sector can have a mind of its own), and then, what will happen to the Hamptons real estate market now?
First of all, let’s remember that a lot of these ultra-luxury properties have always been listed with the stance, “if we don’t get our number, we won’t rent.” It is easy to judge someone in a different position, but people are going to do what they feel is best for them based on their position and knowledge base. Let’s improve our knowledge so we know what we can do about it today.
Many Hamptons homeowners have the luxury to hold out for a price, sometimes it is part of a bigger strategy. People who have that kind of money typically do so because they know what they’re doing and even the best money managers can make mistakes sometimes. It is not an exact science.
What the data can tell us is invaluable to have the information we need to be able to make a decision, but ultimately, the choice of action is up to the person with the agency to decide. Landlords understand that if they do not adjust to market feedback, they will not transact and some are perfectly fine with that.
The problem is, what if you don’t get any feedback, which can happen in a secondary home market. Though Hamptonites can be famous for bad manners when places get overcrowded and uncomfortable; for the most part, the people here are very kind and polite, and more times than not, this politeness causes landlords (and sellers) to receive feedback a bit too late — when the reports have already come out and the cycle is over.
With Hamptons Market Data, we can find answers in real-time. To cover as many of the received questions as possible, we will more closely examine the comment we received, “the rental market is so weird right now.”
The rental market is weird right now, yes, which can be more specifically described as an unusual timing convergence.
People still want the Hamptons, but they no longer have to have it as they did last year and the year prior. It is a focused, measured demand now, similar to the sales market, and, at this specific moment in time, society is once again trying to make sense of a global catastrophe. Tenants are by definition less committed than prospective buyers so, though both markets are seeing a breath, the rental market is a bit more impacted.
The good news is that, though slower in terms of volume and growth, rental prices are still historically high and given foreseen continued overall rental inventory shortages compared to historical market norms, it is likely homes that exude value in terms of location, quality and design could very likely secure another round of historically high prices next summer, while their less desirable counterparts who fail to make the right adjustments to attract tenants sit empty.
To best tackle these pricing concerns, let’s pick a more identifiable central spot and price point as the example: Bridgehampton, south of the highway, between $250,000 to 350,000 for the full season – which breaks down to approximate equivalent monthly rates of about $50,000 to $80,000 for June; $80,000 to $125,000 for July; and $120,000 to $150,000 for August through Labor Day.
The majority of homes that were rented in this Bridgehampton South area and price point were rented in either September-October or January-early February. Anyone who listed in February or later was pretty late to the game and their prospects for 2022 were already drastically reduced simply due to the list date being late for this summer season.
However, there were enough rentals that came on the market south of the highway listed in February throughout the Hamptons in this price point, and also still on the market from fall 2021 in Bridgehampton South, that have rented since February, to give us insight into the fact that the market is not dead, it’s simply hungover. It has been quite the party over the last two summers.
The remaining available homes are listed at prices indicative of the 2021 summer rental market or more. There are only a handful of remaining available rentals in this price point and location that are priced within appropriate market ranges. We’ll come back to those in a moment.
The Bridgehampton South neighborhood tends toward preferring traditional estate-like homes, sleek moderns, and historic but renovated farmhouses.
Homes built in the 1990s to early 2000s in terms of exterior, and early 2000s interiors, are the most offensive to people in this real estate design cycle. This became obvious in early 2021 when homes throughout the Hamptons built in these periods were the large majority of the properties trading for any discount in the sales market, starting in the later fall of 2020.
When reviewing the remaining available rentals in this bracket that are priced appropriately in Bridgehampton South, guess which homes are still available.
Did you guess that they were all built in the 1990s to early ’00s? If you did, you are correct. Doesn’t matter if it is renovated inside or not. Data show the exterior alone is enough to put someone off in this neighborhood.
Choices are back and agents and landlords need to resume doing some creative work to move the less desirable rental properties now. For any landlords, or people thinking that they may want to sell in 2022, it will help to follow the trends in your specific market sector as 2022 progresses to ensure a successful setup for whatever comes around as important to be mindful of when listing for next season. The answer will vary depending upon how a home relates to its neighborhood and price point trends, as we have just seen in Bridgehampton South.
In the midst of all the dismal world news, we suspect that enough people who would have pulled the trigger on a rental this spring, are waiting to see what is going to happen and what position they, the United States, and the world will be in this summer.
With rental inventory being quite limited overall, 30 new people deciding they have to be in the Hamptons this summer would be noticed and have an impact on the marketplace. But we have learned well now that we can wake up tomorrow and the whole world could be different, which makes confident longer-term decision-making challenging.
Some people have already decided to skip this summer. A few reasons cited were they felt like they waited too long and there are no good options left; last summer cost so much more money than they were used to and it still hurts — they’re put off from doing it again “at these prices”; and lastly that skipping renting this summer allows them to have stronger buying power for the fall selling market. There is still potential to win back interest from the first two categories.
If any prospective tenants are reading, it’s a good time to circle back if you felt disappointed looking around in February and March. There is some new inventory and there have been price improvements. Check them out and remember, it never hurts to make a fair offer.
Putting aside the possibility of another completely unpredictable and earth-shattering event occurring for a moment, two things are most likely to happen in the next several weeks.
- We stay where we are, a few more rentals get taken, and that’s it. Or,
- People wake up in early May, realize the world may be rocky, but is still standing, their financial prospects are still intact, and oh my gosh, everyone is going out to the Hamptons in 2 weeks except me.
If the latter happens, it is more than likely that, since these potential tenants have been watching and waiting, and are already working to convince themselves to just skip this year, they will likely be hoping and expecting to “get a deal.”
It is unlikely that any last-minute rush for rentals, if it does occur, will cause any, or any significant, increase in pricing. It would likely just help remaining available landlords to achieve an asking price, or closer to an asking price. Unless it is an entirely new tenant pool that hasn’t been looking around already – unlikely based on high percentages of returning visitors to various listing websites.
There are things landlords can do and there is still time, depending on their specific location and price point, and what home product they have, that can improve their market position based on the insights we can gain from these data points – the answer isn’t always to lower the price, but right now, it could probably help most landlords, especially if they are still wrongly thinking that rental prices have continued to climb the same way sales pricing so far, still has.