Summer Rental Market Cools Off After Pandemic Boom
As inventory rebounds, property owners compete more to fill units
By Jon Kamp, WSJ
July 22, 2023 9:00 am ET
Andrew Davis bought a two-bedroom condo on Cape Cod last winter, fixed it up and listed it for rent in mid-June. After a pandemic-fueled boom made rental housing a scarce commodity in the Massachusetts vacation spot, something unusual happened: The property sat empty until July.
“It’s been a grind,” said Davis.
Stories like his are starting to pop up more on Cape Cod and at other coastal-vacation destinations, including on New York’s Long Island, according to real-estate agents and property-rental experts.
The Covid-19 pandemic caused people to look locally for vacation spots, but it also reduced inventory because people who often rented out their second homes in beach towns were using them instead, real-estate experts said. Now, as inventory rebounds, rental demand is spreading out across more listings, said Jamie Lane, chief economist at AirDNA, a short-term-rental analytics company.
Renters’ growing leverage means property owners are in some cases having to put in extra work to keep units filled.
“We’ve got to realize that 2020 through 2022 on Cape Cod were the years that we’re never going to see again,” said Ryan Castle, chief executive at the Cape Cod & Islands Association of Realtors. The prepandemic summers are a better baseline for the popular vacation spot, he said.
Jim Reese, chief operating officer at WeNeedaVacation, which lists rental properties on Cape Cod, Martha’s Vineyard and Nantucket, thinks demand has slipped from pandemic highs but remains above prepandemic levels. He recommends that homeowners take a cautious approach to pricing their listings now that renters have more options.
Pulling data from rental sites such as Airbnb, AirDNA in early July found occupancy rates through the next two months were largely lower across U.S. beachfront hot spots compared with the year-earlier period. The numbers suggest the shift is broad—on both coasts—and that rising inventory characterizes all kinds of rental markets around the U.S. in a rebound from pandemic lulls, according to AirDNA.
Some homeowners think demand has changed because people have less flexibility to work entirely remotely and vacationers once again are taking to the skies for more distant trips. But the rebound in housing inventory also can make the market look like it has more slack.
Lane, from AirDNA, said the occupancy shifts stem from rising supply. Demand on the cape appears to be slightly higher this summer, even as the occupancy rate for the past couple of months was recently about 62%, compared with nearly 68% for the same period a year ago, AirDNA found. Timing is also a factor: The company has seen a shift to more last-minute booking that should still help lift occupancy levels.
“In 2021 and 2022 when we had those record levels, we actually saw fewer people staying in short-term rentals than in 2019, purely as a function of supply,” Lane said. “There were just not enough rentals for people to be able to stay in.”
Christine Peterson, who lives in the Cape Cod town of Brewster, Mass., and manages rental properties with her husband, has seen prospective vacationers looking for shorter stays and deals, compared with earlier pandemic summers.
“Things have slowed down and gone more to 2016-2019,” she said, compared with more recent years. “Fewer inquiries, slower to come in.”
She also has rented out her own home each summer for the past 15 years while moving in with in-laws, and said she is fortunate to have many repeat customers, including some already securing spots for next year. At the same time, her home recently had its first-ever empty week.
Mile Daly, a real-estate agency in the Hamptons, on the East End of Long Island, said his inbox is flooded daily with messages from other agents about price cuts and rental properties that are still available. “Right now for rentals, it’s an inventory glut,” he said.
Davis, 61 years old, the Cape Cod property owner, lives in Napa, Calif., but also manages his parents’ rental house in the Cape Cod town of Orleans, Mass. Demand surged during the pandemic, he said, and he found he was renting out slots in the spring and fall shoulder seasons almost as fast as in the summer. That property continues to do well, but his newer condo, also in Orleans, is where he has seen the slack.
He still thinks the cape is a strong market but has taken some lumps this summer. He recently cut the price by about $400 a week and reduced the minimum stay to three days from a full week. He also got some extra marketing help from WeNeedaVacation.
“That’s been getting me a lot more traffic, but still tire-kickers who are going at the last minute,” he said, meaning late shoppers often looking for price cuts.
Write to Jon Kamp at Jon.Kamp@wsj.com
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