Despite current real estate market conditions, summer rates on high end luxury rentals in locations like Malibu, the Hamptons and Aspen have increased significantly in recent months. While many renters are willing to shell out top dollar for luxury rentals, most are opting to rent for shorter periods of time than in prior years, leaving homeowners to piece together multiple deals for the summer season. See the following article from The Street for more on this.
Unless you want to trade Southampton serenity for a roommate named “The Situation” and exchange Malibu for a shack that smells like Malibu Rum, you might have to shell out for your summer rental this year.
As would-be vacationers begin marking the post-Memorial Day dates on their calendars, rental prices in the Hamptons and along the California coast are soaring beyond six-figures per month. Whether they can fetch that sum in a still-recovering economy depends largely on the locale.
In certain regions, property owners are riding a wave of confidence after the recession-fueled summer of 2009 pushed increased vacation rental bookings 31%, according to rental Web site HomeAway. Sag Harbor and Westhampton Beach in New York saw rental interest double last summer, while Venice and Hermosa beaches in California experienced a similar spike.
In the Hamptons, that confidence inspired Joanne Corzine, ex-wife of former Goldman Sachs(GS) Chief Executive and ex-New Jersey Governor Jon Corzine, to offer her 6,200-square-foot oceanfront estate with heated pool, guest house, tennis court and 6.5 acres of land in Sagaponack for $900,000 from Memorial Day to Labor Day. The owners of a more than 3,600-square-foot, five-bedroom gated property in Southampton with a stone fireplace and high-end kitchen are asking $165,000 for the summer, while a 5,000-square-foot bayside property in Water Mill with a pool fetches $200,000 for the same period.
Though potential Hamptons homebuyers are facing increased inventory and decreased prices — with Hamptons agency Town & Country reporting 2009 sales that were below 2007 levels and median home prices down almost $140,000 since that time — the rental market remains flush.
“Our market as of two to five years ago was totally inflated,” says Susan Breitenbach, senior vice president of the Corcoran Group real estate firm’s Bridgehampton, N.Y., office and co-listing agent for the Corzine property. “I don’t think we’ll ever see that ‘normal’ again but the New York people who have always summered out here decided that no matter what’s happening, they’re coming out here.”
But will those homes rent? Considering that Corzine got that price from billionaire Henry Silverman last summer and a Hamptons builder rented his 31,000-square-foot oceanfront mansion for two weeks at $425,000 last year amid a recession, such requests aren’t unreasonable. John P. Vitello, senior director of high-end real estate firm Brown Harris Stevens’ Hamptons office, says his firm already has rented a relatively modest 3,400-square-foot, five-bedroom home in Southampton for $55,000 in July.
“The Hamptons rental season has started off great this year,” he says. “We are seeing deals happen very close to the asking prices, the inventory is limited and luxury homes continue to be in demand.”
It’s a similar case in Malibu, where prices on the best rentals can range from $150,000 for the summer for a four-bedroom Malibu Colony home across the street from the ocean, with a screening room, tennis court and pool to $150,000 to $175,000 a month or a 12,000-square foot Pacific Coast Highway property on a bluff overlooking the water. Though the rental rates have remained aloft, demand has slackened somewhat.
“We’ve got a lot of big asking prices, but it’s not the same lease market as it was three or four years ago,” says Mike Gardner, an agent with Prudential Malibu Realty. “Back then, the lease demand was huge for the summer and if you didn’t have something secured for April or May, you were out of luck.”
Gardner says the market began changing with the recession, as business managers watched their clients’ money more closely and advised them to rent high-end homes for only a month or two. As a result, property owners are piecing together summer blocks that were once easy sales, with Gardner saying that three-month rentals went from 80% to 90% of the market early last decade to roughly 40% this year. Gardner recently leased a sprawling property with a pool, outdoor bar, fire pits, screening room, wine cellar, multi-car garage and multiple fireplaces for $77,000 a month, but says such deals are increasingly rare.
“That’s the dilemma we’re seeing now: A lot of one-month stuff where the offers are there, but the owners don’t know whether to take the money and run or hold out for the three-month deal,” Gardner says. “The actual number of people willing to take three months has shrunk dramatically, so I say take the money and hope your agent is working hard to fill up the other months.”
In the Hamptons and Malibu, people looking for rentals and leases are expecting more for their money — with amenities like chefs and housekeeping increasingly in demand. Though rental deals aren’t nearly as tempting as the near 40% discounts in the Hamptons last year, HomeAway found that 41% of vacation renters are seeking deals and still waiting until May or June to comb for sellers who were unable to rent or lease their properties. Instead of capitulating, many high-end homeowners are embracing month-to-month leases.
“Perhaps the most noteworthy summer lease recently is a $200,000-a-month property on Carbon Beach,” says Bruce Kent, a Malibu-based agent with Re/Max Beach Cities. “That even impresses me.”
This article has been republished from The Street. You can also view this article The Street, an investment news and analysis site.