Despite market headwinds, recession jitters, New York’s residential real estate market looked to be on an upward swing in the first quarter of this year. Then the coronavirus struck, bringing the entire nation’s economy to a screeching halt; most of the real estate market with it. As the months passed, it became clear that what happened before in the market no longer matters. All that matters now is what’s happening next. So, what is happening next? We will try to determine as we do a deep dive into how the market has changed and what the future may bring. Buyers and sellers take note because this affects all of us as we enter the summer buying season.
What Has Changed?What Has Changed?
When the first COVID-19 cases confirmed in early March, the industry took note but mostly carried on as usual. But that didn’t last long as the pandemic grew in scale and intensity. On March 20th, they reached a crucial moment as Gov. Andrew Cuomo ordered all non-essential workplaces to close statewide. For real estate agents and brokers, this meant an end to in-person showings and meetings.
Despite the waves this initially caused, the industry quickly adapted and found new ways to carry on business. Online video conferencing and virtual home tours became the norm, laws passed to allow for online notarization, and virtual closings became an industry first. While most transactions that already started before the pandemic continued to move ahead, it was inevitable that we would see a significant slowdown in the market. Unable to do open houses or home tours, most sellers decided to pull their listings. Buyer interest also dropped off a cliff as many took a wait-and-see approach. For a while, there was real talk that we could be on the verge of another recession or market meltdown.
Fortunately, things started to calm down a bit after that. While accurate data on the pandemic’s full effects won’t become available for some time yet, it looks like the worst of the predictions proved to be overblown. Much has changed, though, and those market forecasts made now seem irrelevant at the start of the year.
So what is in store for us?So what is in store for us?
Thanks to us knowing more about the virus and the trajectory for New York’s reopening, we can now be much more confident about what’s ahead. Here are our market predictions for the summer season and beyond price points to buyers’ wish lists.
What Does the Future Hold?What Does the Future Hold?
It could be a slow summer.It could be a slow summer.
While a slow summer season looks obvious, there’s a little more to it than that. While the pool of buyers and listings has sunk considerably, there doesn’t appear to have been a significant loss of value in long-term prices. Property prices have declined for the past two and a half years and only started to stabilize beginning 2020. Different from previous downturns, in 2001 and 2008, when home values were at record highs. Rather than another Great Recession, we’re looking at a black swan event where a health emergency has turned into an economic crisis. Instead of being a cause of the crisis, the housing market is now a casualty.
Although in-person showings are now possible social-distancing measures are still in place, which will slow the recovery pace. Median prices are currently based on all the market listings, not the individual homes’ value. As more listings go back up, though, we should see a growth in the median price. That said, we won’t know the real effect the pandemic has had on prices for another 3-6 months. By then, the deals currently being negotiated will close and go on the public record.
I believe we are all students of the Pandemic, and the effects of on high-density real estate. Big Cities are here to stay, but how they evolve to protect the well-being of their residents will influcence long term demand.
Gea Elika / Principal Broker, ELIKA Real Estate
Recovery will gain traction over time.Recovery will gain traction over time.
If there’s one thing, people will have learned while under quarantine, their home situation may need a changeup. After almost three months of being cooked up in their apartment, they’ll have had plenty of time to figure out what they want and what they don’t want in a new home. Depending on how Phase Two progresses, we might see an increasing number of buyers return to the market. As more time passes and more people reassure that safety measures are in place for touring homes, the recovery level should increase.
Then you’ve got those who were supposed to move in March, April, or May and either could not or were too nervous given the uncertainty. With low mortgage rates and in-person showings now possible, likely, we’ll soon see many people pull the trigger. For many brokers, this is something that was becoming clear even before we entered Phase Two. Virtual showings may have failed to snag many contracts, but the sheer volume of those doing them shows just how much pent-up demand there is. Mortgage rates are also at historic lows, and as more listings come online, the market should start to balance out.
Things will pick up but not at all price points.Things will pick up but not at all price points.
While much of the market expected to recover some, the high-end luxury market will likely be slower to come back. Much of this market had already slowed by late 2019 due to a glut of properties. Furthermore, many buyers left the city in March and April to recover this sector even slower. Many of these buyers are not expected to come back until after Labor Day and likely longer.
However, were are seeing improvement inactivity for the mid-market in the under $2 million range. Low interest rates and the return of millennial buyers committed to making a long-term investment make this a promising sector in the months ahead. The key point is affordability. While most wealthy buyers may choose to remain in the suburbs, the vast majority of those who left when the pandemic began should now start trickling back. With non-essential services finally restarting, both blue-collar and junior white-collar workers will need a place to stay close to work. There may even be bidding wars for well-priced apartments as inventory tries to catch up with buyer demand.
Or perhaps luxury buyers will make a return?Or perhaps luxury buyers will make a return?
While it may happen that the luxury buyer pool will stay away from the city for some time, the exact opposite is also a possibility. New York City is long regarded as one of the safest places to invest. For those with the means to do so, that may be enough to sway some buyers. Black swan events like we see now also significantly impact the stock market rather than hard assets like real estate. The fact that every buyer should consider if they’re still on the fence. NYC has always been an alluring city for homebuyers and investors – A sentiment that is unlikely to change soon. There has never been a better time to buy with a potential buyer’s market in the works now.
Could I begin life again, knowing what I now know, and had money to invest, I would buy every foot of land on the island of Manhattan.
John Jacob Astor
We’ll still see virtual tours and other online tools used.We’ll still see virtual tours and other online tools used.
Virtual home tours have already been around for a while, but they exploded into use when the pandemic started. Unlikely to end, even with the return of physical visits. Social-distancing measures still need to be followed, and physical meetings avoided where they can. Buyers advised using these tools to weed out those properties that don’t fit their needs. The technology has advanced quite a bit in recent years, and with VR headsets, it’s now possible to get a real sense of scale when used right.
Other online tools are also likely to stick around long after things have returned to normal. Convenience being one reason. Co-op boards are starting to get comfortable conducting interviews online, and executive order 202.7, allowing for online notarization, will likely remain in place.
Buyer’s wish lists are likely to look a bit different.Buyer’s wish lists are likely to look a bit different.
As buyers start to reenter the market, they’ll likely do so with a different list of home needs. We hear a lot about the idea that many companies will allow many staff to continue working from home. Safer and saves money on office space as it becomes apparent that many jobs can be h. With that in mind, new buyers will be on the lookout for apartments with home office space. Other things that are likely to be higher up on a buyer’s wish list than before are private balconies/terraces, in-unit washers and dryers, and soundproofing. Notably, noise complaints in NYC have skyrocketed since the stay-home order went into effect.
As will amenity wish-listsAs will amenity wish-lists
Building amenities are a vital consideration for buyers when deciding on an apartment. However, social-distancing measures mean many of these spaces are now closed or limited by capacity. They are affecting the popularity of specific amenities like gyms, gardens, lounges, and roof decks. Buyers also now considering air filters, filters such as HEPA, and virtual amenities like live-stream classes for yoga, fitness, and meditation. Offerings like this are likely to stick around and grow in popularity over time. In contrast, those amenities that were once highly coveted may lose their demand for a while.
Expect a continued exodus to the Hamptons.Expect a continued exodus to the Hamptons.
When the pandemic first struck, it led to an exodus of wealthy New Yorkers to the ‘burbs and tri-state area—showing no sign of slowing down as the Hamptons summer rental season kicks off much earlier than usual. Agents in these markets have reported a tenfold increase in demand for summer homes. Leading too further rush by those who remained in the city, perhaps now worried they’ll miss out for the first time in years. As for what these buyers are looking for, some agents have reported a surge in demand for private pools and spare rooms to serve home offices.