Real Estate in New York City After Labor Day

Within a week after the Labor Day weekend, New York City’s residential real estate saw almost 190 million USD in sales, with condos, co-ops and condops selling at an average price of over 2 million USD. However, this year saw one of the lowest number of signed contracts since 2013, with only 10 luxury contracts signed at a price of 4 million USD or more. Additionally, no co-op contract was signed at 4 million USD or above.

In Manhattan, there was a 38% decrease year over year last month for condo contracts. Simultaneously, listings increased by 30%. In Brooklyn, residential properties that were modestly priced saw a surge in sales, especially condos and co-ops. The Hamptons are usually a hot spot for the summer. This year however, it is expected to be an all-year-round destination as many affluent New Yorkers have decided to remain away from the city and have extended their rental period.

Although New York City has announced that schools will reopen on the 21st of September. The reopening of the school system was expected to bring back New Yorkers to their primary residences.  However, about 40% of parents have decided to continue remote education for their children during the first couple of months of the school year. This is a huge number of people, considering that the New York City school system is one of the largest in the country. The parents who prefer remote education belong to wealthier families. As most of such families already left New York City during the earlier months of the pandemic to live in suburban second homes, the rental market will be majorly affected.

Another factor affecting residential real estate in the city is evictions. The Centers for Disease Control and Prevention (CDC) signed a declaration which stated that evicting tenants will be detrimental to public health control measures and would lead to the spread of COVID-19. Therefore, the CDC issued an order which bans residential evictions until December this year. To be eligible for this, tenants need to prove that they are unable to pay rent.

Landlords can, however, evict tenants on the basis of reasons other than non-payment. Because landlords have not been provided sufficient relief by the government during the pandemic, this order has faced criticism. In the meantime, the city has provided homeowners and landlords with a tax break until October, which includes overdue property taxes, sewer bills, as well as water bills.

The pandemic has caused a major financial blow to New York City’s residents, which has in turn had a domino effect on the residential real estate market. Although things were expected to look up after Labor Day weekend, there are several factors that will impact the future of residential properties in the city. However, the situation is gradually returning to normal, which offers hope that the residential real estate market will soon go back to how it was pre-pandemic.

Increase in Residential Property Sales in New York City

This year, the total number of residential transactions and residential sales volume decreased considerably, by about 50% year over year. This means that the sales volume dropped from 12.8 billion USD to about 6.4 billion USD by June of this year. This has been one of the lowest figures since 2011. Apart from Staten Island, there was a steep decline in total sales across all boroughs in New York City.

Across the city, the number of residential real estate transactions dropped by 43% year over year in all five boroughs. This meant a drop from 11,413 sales to only 6534 sales this year. Moreover, there was a 13% decrease year over year in the average sales price of a residential property in New York City, to about 975,800 USD in the second quarter of this year.

The real estate industry of New York City is one of the main factors contributing to the city’s economy, with 53% of the total annual tax revenue generated from this industry alone. Hence, declining sales and transactions are bound to have an adverse financial impact which the city may not be able to overcome in the foreseeable future, especially amidst the current COVID-19 pandemic.

The housing markets in affluent areas such as Manhattan have been badly affected, with a significant increase in vacancy rates and decline in rents as residents move to second homes in the suburbs. The Upper East Side has been described to be a ghost town during the pandemic, with an increase in rental moving trucks making the situation seem bleaker.

However, many real estate professionals have stated that the real estate market in New York City will soon return to what we know it to be. Although areas such as Manhattan are seeing high vacancies, other regions such as Staten Island, Queens, and Brooklyn have only seen a surge in rental rates. People living in these areas are not likely to move due to lower income, employment, family etc.

One explanation for the grave impact on New York City’s residential real estate market is that while other markets opened much sooner, New York City was slower to reopen. Hence, there was lower sales and transactional activity in comparison to other cities across the United States. People living in Manhattan have also started moving to Brooklyn which has made the housing market there much stronger.

Although wealthier families have moved to areas like the Hamptons, many are just relocating within New York City. Many residents have taken advantage of the drops in sales price and have bought better properties which they plan to sell once the situation returns to normal. Therefore, it can be said that although the market has definitely changed temporarily, it is highly unlikely that this change will become permanent.

 

Post- and Pre-COVID Situation in the NYC Real Estate Market

Before the COVID-19 pandemic struck New York City, the real estate market was considerably different than what it is now. In the United States, the New York City residential real estate market has been one of the hottest for several years, boasting some of the most expensive properties in the world. The market was also booming year-over-year. This is due to the high demand for residential real estate as more and more people wish to live in the city, which favors sellers in the city.

Over the past 5 years, prices of homes in New York City have appreciated by almost 30%, with an appreciation rate of slightly over 1% in the latest quarter. This translates into an appreciation rate of 4.41% per year. The median tipping point in New York is about 5.8 years, while the national tipping point is 2 years. This is because houses in New York City have higher prices, meaning that owners tend to stay in one house for much longer.

Last year, the median sales price increase by 5.7%, the number of pending sales increased by 3%, and there was a 1.1% decrease in closed deals. At the beginning of 2020, the city saw a surge in activity in the housing market, with a significant increase in sales. Experts predicted that this year will be one of the strongest for the residential real estate market.

Although the first quarter of 2020 was profitable for people selling residential properties, the spread of COVID-19 in March slowed down activities. Until the mid of March this year, pricing or transactions were not majorly affected but the end of the month resulted in a decline in home sales and new listings. Inventory was also impacted and saw a 10.4% decrease.

However, regardless of a decline in transactions, prices remained unaffected during the first few months of the pandemic. Positive pricing trends were observed, and the median sales price of houses was also relatively stable in comparison to the rest of the nation. April also saw a 5.48% year-over-year increase in median sales prices, and a 4% increase in median sales price was seen in May in comparison to the same time last year.

In June, one of the strongest trends in sales were observed, with the first week of the month being impressively active in terms of sales. In the second week, however, there was an 11%year-over-year decrease in median sales price, making it lower than the figure seen last year. Nonetheless, June had the highest weekly median sales price this year, which was only 2% lower than it was in 2019. Sales activity continued to thrive in July as well, with over 500 transactions seen for the first time in months.

A month later in August, over 15,000 apartments were vacant in Manhattan alone as more residents left the city amidst the pandemic. This borough saw a vacancy rate of over 5%, which has not been seen in the past 14 years. Brooklyn’s real estate market has been performing better, as people living in Manhattan are looking for houses in Brooklyn.

An Overview of New York City’s Real Estate Market in 2020

The COVID-19 pandemic has had an adverse effect on almost every sector and aspect of society, making 2020 one of the toughest economic years in history. While most industries have experienced a financial blow, the real estate sector has seen fluctuations in trends since the virus outbreak in the country. Recently, New York entered the fourth phase of reopening and a shift was observed.

In June, resale home sales remained low. A month later, these sales increase significantly, and July was marked as one of the strongest sales months since March. Across the four boroughs in New York City, over 2300 real estate deals were closed, which was about a 40% increase since June. However, sales still remained 33% lower than the numbers from July 2019.

Housing prices remained steady throughout the coronavirus pandemic. However, in June, the median sales price reached 718,000 USD which was the highest number seen in the New York City real estate market to date. On the other hand, the median sales price in July decreased by 13% year over year. This price, at 680,000 USD, was also the lowest median sales price since March this year.

Statewide, the median price in New York reached 300,000 USD which was much higher than the price last year. This increase was due to a lack of home listings as people decided not to sell because of uncertainty during the pandemic. The monthly home supply in the state decreased by almost 16% year over year.

While the national value of foreclosures is 1.2 homes per 10,000, data on New York City has revealed that only 0.1 homes are foreclosed per 10,000 homes. The city also sees 1.8% delinquent mortgages, which is a higher number than the national value of 1.1%. In July, the number of homes that were foreclosed was 200% higher than the number in June. However, this value still remained 90% lower than the same time in 2019.

Currently, there are over 700 properties in New York City which are foreclosed. The stage of foreclosure that these properties are in varies from default, action, or bank-owned. The number of homes available for sale in New York are almost 3000, with about 4000 houses recently sold in the city.

Out of all four boroughs, the real estate market in Manhattan was impacted the most as both sales as well as prices of houses were adversely affected. In Queens, the year over year median sales price increased the most while the sales activity in Brooklyn was the lowest. The Bronx also saw an increase in median sales price, with an 8% year over year rise. While sales strengthened across the city as shelter-in-place regulations were eased, they still remain 42% lower than they were in June last year.

Another factor affecting the residential real estate market is the high unemployment rates due to COVID-19. According to data collected by the Bureau of Labor Statistics, the unemployment rate in New York City increased to over 20% in May while the unemployment rate outside of New York City was about 13%. When people do not have jobs, they are unable to pay rent.

Consequently, people cannot afford to live in the city and many New Yorkers have started to move after their leases expire in the summer. As a result, the real estate market has become saturated with vacant rental homes. In July alone, Manhattan saw a 65% increase in rental inventory in comparison to the same time last year. As of July, rental prices in Manhattan have dropped by over 3%, which is one of the largest year over year decrease since the Great Recession.

As the demand for rental houses continues to decrease, it can be expected that rents will also be reduced considerably, making it a buyer’s market. Nonetheless, the rental market in New York City is still strong as the factors that cause high rental rates are still present.

New York City: A Buyer’s Market?

New York City is known to be one of the most expensive housing markets in the entire world. However, the COVID-19 outbreak in the United States has resulted in fluctuations in the residential real estate market in New York City. A significant number of renters in Manhattan and the more affluent areas in Brooklyn have left the city. As a result, the number of vacancies has increased, and rents are continuously decreasing.

However, sale price changes are seeing a more gradual change as owners are unable to break leases the way in which renters are able to. Nonetheless, things have started to return back to normal as lock down and shelter-in-place regulations have been lifted. Showings have been permitted to resume which has caused the supply of homes to rapidly increase, especially in Manhattan. In Brooklyn, there have been signs of a shifting housing market due to falling prices.

The pandemic prevented many buyers and sellers from entering the market and the number of homes for sale decreased considerably all across the United States. Now, many markets have still not seen these numbers return to levels seen prior to the pandemic. In New York City however, the number of homes available for sale in the market have started to return to the levels seen in 2019.

While the number of homes for sale decreased by almost 40% year over year in June, Manhattan saw a 23.1% increase in July. This is evident of the fact that buyers in Manhattan have more power in the market. Although Brooklyn has not yet witnessed a change to this extent, it is clear that it is heading in the same direction. In Brooklyn, the number of homes for sale decreased by 24.3% year over year in June but July saw only an 8% decline. This shows that once this value becomes positive, there will be more supply than demand which will give buyers greater leverage for negotiations in prices.

In August, the number of new house listings in Brooklyn significantly increased year over year. This included properties in all price ranges, which means that buyers looking for all types of homes will have the upper hand while deciding the sales price. Generally, sales prices have fallen slightly and rents in Brooklyn have also decreased.

While the real estate market in Manhattan is already favoring buyers, other boroughs in New York City are expected to follow. If more properties are added to the inventory in the upcoming months, it will be guaranteed that the residential real estate sector in New York City is a buyer’s market.

The Housing Market in Manhattan

Many of the richest neighborhoods in Manhattan were emptied out as soon as the COVID-19 pandemic hit New York City. The housing market was put on an indefinite pause due to nationwide shelter-in-place and social distancing regulations. Now that these restrictions have been eased and the city has somewhat returned to its normal operations, Manhattan’s housing market is up and running again.

Like other areas in the United States, the housing market in Manhattan currently favors buyers over sellers. The market conditions are still uncertain, and it is necessary to become acquainted with the different factors that are contributing to prices in order to get a bargain on a property. Presently, there is a higher supply than demand, which will lead to a further decline in prices.

Compared to the same time last year, active listings in New York City are currently 22% lower year over year. This remains consistent almost all over the country, as the number of homes listed for sale dropped significantly due to the pandemic. Now, however, data analysis has shown that these numbers are likely to improve in the foreseeable future. Newer listings in Manhattan have started to exceed the levels they were at a year ago. There is an increase in inventory, and this 22% gap is closing rapidly. Still, it remains unclear when the inventory will return back to the levels it is normally at.

While other cities that were not affected as much by the pandemic have seen a seller’s market, New York City has experienced a lower demand than supply. This has favored homebuyers over home sellers, and buyers now have more choices, there are fewer people bidding on more houses, and thus prices have fallen.

In Manhattan, many signed contracts rebounded in July, probably due to a lower inventory as people cannot purchase homes that are no longer for sale. However, other signs, such as the number of listed houses taken off the market in July now being available for sale, shows that there is low demand as well. People who decided not to sell during the earlier months of the pandemic waited so they could get a higher price. Now, when these properties are in the market again, they are unable to get the price they expect due to low demand and reduced interest rates.

Despite these signs, it is uncertain what the future holds for Manhattan’s housing market. There could be a higher demand in the future which drives up prices, or supply could continue to outweigh the demand for houses. The market could also reach an equilibrium and have similar demand and supply. What buyers and sellers should do amidst this uncertainty is keep an eye out for signs that offer insight into which direction the market is tilted, and act accordingly.

The Increasing Demand for Suburban Properties in New York City

Due to the pandemic and fears of contracting the virus, New York City’s residents are seeking homes with more space. Living in cramped apartments with shared amenities is no longer acceptable for many New Yorkers, who aim to take advantage of low interest rates and declining prices to purchase larger homes in suburban regions.

Being stuck at home for months during the lockdown has led to people, especially those with children, desiring living spaces with yards, an office, as well as physical distance from neighbors. It is rare to find such properties in New York City within budget, and hence, people have resorted to looking for homes in suburbs.

Properties have seen numerous offers in the past few months, despite potential buyers not having seen them in person. There has been an increase in demand for homes located in suburbs surrounding New York City. There has been a surge in the number of offer that have been made for residential properties of all price ranges, which has not been experienced in recent history.

In July alone, there was a 44% increase in the number of residential properties sold in suburban counties in comparison to the same month in 2019. Simultaneously, Manhattan saw a 56% decrease in the number of properties sold in July. One real estate agent claimed that about 60% of potential buyers reside in the city and are looking for properties in suburbs.

There still remains uncertainty regarding when things will return back to normal. Many companies have decided to continue with remote work for the foreseeable future. As a result, a major portion of people working from home have made the decision to move from the city to less populated areas.

Although New York City’s residents have moved from the city to suburban areas for years, the demand for properties in such locations has not been this high. Open houses have received an unprecedented number of offers, and people are willing to pay over the asking price as well. It can be said that this number will decrease once a vaccine is introduced, but this prediction lacks supportive evidence.

Many moving companies have also stated that they have been unable to keep up with the increasing demand. Some experts believe that people who have left New York will eventually return once the pandemic situation improves. However, this may only be applicable to those who temporarily moved to second homes to enjoy more space while being confined to their residences.

This increasing demand is good news for those who are looking to sell their suburban properties, as well as for those looking to move to the city. People who have secured homes in suburban locations wish to sell their urban properties as soon as possible and are likely to accept lower prices as well. Those who want to sell their suburban houses can make use of the increasing demand and ask for much higher prices.

The Current Situation of New York City’s Real Estate Market

The consequences of COVID-19 in the longer run have been difficult to measure, especially due to the grave economic impacts the pandemic has had. Following over three months of lockdown in the city, New York City’s real estate market has gradually begun to pick up its pace again. With things slowly returning to normal, it is important for buyers and sellers to understand the current situation of the real estate market.

Since 2015, real estate price increases in various regions in New York City have stopped. Property values dropped by 10-20%, depending on factors such as location, property size, property type etc. Following the COVID-19 pandemic, these values further declined by 5-10%. For buyers, this is an excellent opportunity to hunt for and purchase homes. Many people are taking advantage of this, and are moving from the suburbs to the city, and from the city to the suburbs.

However, some residential properties are still popular, such as those that are located in good locations, have terraces, or are in excellent condition. For instance, people are now favoring smaller boutique buildings over larger properties with shared amenities. Due to a high demand, buyers cannot expect to secure a good price for such real estate. Still, interest rates and prices are lower than they have been before, and there may not be a better time to purchase residential properties.

On the other hand, sellers are at a disadvantage due to such substantial reductions in property values across the city. Some sellers may be tempted to inflate the value of their property, but this is not a good idea in the current market. Most sellers who have been able to rent or sell their homes have done so by pricing the property about 5-10% below the rate it would sell at prior to the pandemic.

Additionally, if you are planning to sell your house or apartment, you must be committed to preparing it for sale in the current market. There is a high inventory in both rental and selling markets, which makes it even more important to ensure that your property is attractive to potential tenants or buyers.

If your property has remained enlisted without receiving any offers, it is possibly due to issues with the property itself. In this case, you may find it useful to change the price while considering the condition, location, and type of property.

It is still vastly unclear what the long-term effects of the pandemic will be, and both buyers and sellers must make informed decisions during this time. However, regardless of the pandemic, it is obvious that the real estate market in New York City will soon be running the way it did previously. There are more and more listings each day, and realtors have witnessed an abundance of potential buyers and renters. While there are undoubtedly changes in the preferences of buyers, sellers can expect to quickly sale their property in the current market.