Summer rentals as economic indicators
washingtonpost.com
During last winter's geopolitical and economic uncertainty, decisions were put off. When the matchup finally began in earnest, there were fewer renters and more available properties than usual. Some renters had the temerity to come back with lower counteroffers, and more than a few property owners who insisted on getting no less rent than they did last year ended up some weeks with no tenants at all.
It's not just Annisquam. From the Hamptons to Ogunquit, Maine, summer-rental vacancies are as high as 25 percent in some places this month, with lots of last-minute deals being cut at discounts as high as 50 percent.
"Dismal. That's the only word for it," said Jim Foley, who's been handling rentals on Cape Cod for 35 years.
The easy analysis would be to blame it all on a weak economy in the Northeast, where high tech and high finance have each taken it on the chin.
In the Hamptons, for example, Judi Desiderio, a partner in Cook Pony Farm Real Estate, reported that Wall Street investment brokers who would have thought nothing of dropping $50,000 for a summer-long rental are now time-sharing the same house with two or three other families.
And in New Hampshire's lakes region, declining financial circumstances led more than a few owners of million-dollar cabins to put them on the rental market for the first time.
"The market got flooded this year," said Steven Gray, owner of Curry Realtors in Alton Bay, N.H. "There's just a glut of expensive homes to rent."
My hunch is that this is more than a story about a temporary drop in demand or increase in supply that will disappear as the economy begins to pick up. It may be another small but telling example of why picking up economic speed continues to be so difficult. Two years after the onset of recession, there is still a lot of excess capacity and inflated pricing built into the system.
In Alton Bay, for example, the folks most likely to rent those newly available lakefront cottages also bought summer places during the boom -- or have brothers-in-law who did.
And those who didn't probably can't afford the rents. Until last year, rents for summer homes in this region jumped 5 to 20 percent a year for five or six years, ostensibly tracking the rise in household incomes and net worth. But we know now that was a mirage. Unless you believe that upper-income Americans suddenly decided to spend a greater proportion of their income on summer vacations, you have to assume that rents have further to fall before they catch up with economic reality. |
