June 26, 2022

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Beach house inventory is high, prices are low

Beach house inventory is high, prices are low

The rental market in the Hamptons is facing an unexpected chill this summer.

After two years of strong demand and rising prices, the supply of rents in the Hamptons is soaring, prompting a wave of last-minute price cuts. Average rental rates in the first quarter fell 26%, according to Jonathan Miller, Miller Samuel CEO. Realtors say some owners are slashing prices by 30% or more just to fill up their properties.

“There is a huge amount of inventory and people are not renting it,” said Enzo Morabito of Douglas Elleman. “This includes all sectors, from the lowest levels to the highest levels in the market.”

The weakness represents a dramatic and fast reversal of one of the country’s highest priced and most in-demand real estate markets. In 2020 and 2021, renters were scrambling to find summer rentals and pay record rates months before the season for fear of missing out. Now, brokers say hundreds of rentals are still available for the summer.

For one waterfront rental, Morabito said, he was asking for $70,000 a month, but the potential tenant offered only $45,000.

“We were hoping the tenant would split the teams, but it’s a different market now,” he said.

Living Room, 277 Surfside Dr. , Bridgehampton, NY.

Source: 277 Surfside LLC Bridgehampton 11932

Brokers say the weak demand is partly due to increased travel. Wealthy New Yorkers who have spent the past two summers secluded in the Hamptons plan to travel to Europe and other countries this summer as Covid recedes. However, Europeans and other international tenants have not returned to the Hamptons.

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The war in Ukraine, rising inflation, and a falling stock market may also affect the elite’s summer spending plans — especially since the Hamptons market is closely tied to the fortunes of Wall Street.

“There are a lot of questions up in the air, about the economy, both locally and nationally,” said Harald Grant of Sotheby’s International Realty. “It all affects the market.”

The Hamptons may also feel the reversal of recent price increases: Median rents for the month of May were up 46% from May 2019, before the pandemic. While the wealthy still have plenty of money to spend, they may be reluctant to rent prices higher, especially given the economic outlook.

“The assumption that rents will be sustainable at these high levels has been proven wrong,” Miller said.

Ball, 277 Surfside Doctor, Bridgehampton, New York.

Source: 277 Surfside LLC Bridgehampton 11932

Strong home sales in the Hamptons during the pandemic may now hurt rents.

Vacationers who used to rent in the Hamptons ended up buying in 2020 and 2021 for a permanent getaway. Average sales price topped $2.6 million in the first quarter of this year, up 25% from the same quarter last year, according to Samuel Miller and Douglas Elliman. More buyers means fewer renters.

“Buyers have distanced themselves from the rental market,” Morabito said. “Now, all of a sudden the people who bought it want to rent it and the tenants aren’t there. So you have this huge surplus.”

Some brokers say they’ve seen signs of picking up, as more last-minute renters start looking for deals.

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“We had a lull from February to April, but now it’s back again,” Corcoran’s Gary DePersia said. “The inventory that we had is going on.”

However, one of DePersia’s largest rentals is still on offer on the market. This ultra-modern 11,000 square foot beachfront property on Bridgehampton’s Surfside Drive includes nine bedrooms, a Gunite pool, spa, outdoor living room suite, pool house, gym and media room.

View from the rooftop, 277 Surfside Dr., Bridgehampton, NY.

Source: 277 Surfside LLC Bridgehampton 11932

The rooftop deck features sofas, a hot tub, and a pull-out pergola. Rental price: $300,000 a week or $1.25 million for August.

“It’s a great house,” DePersia said. “We actually rented it out for a week in June and got what we needed to get.”