Showings are down. Sales numbers are down. But people are talking about recovery. What will the real estate market look like in our "new normal?"
It’s been a difficult transition for everyone. Our market essentially froze in place on March 22nd. Thankfully, we successfully closed a few deals and put a few more under contract. That said, the vast majority of those deals were the result of work that started before the pandemic. We have focused much of our time on staying connected to our clients and to the brokerage community, to share information in real time and stay sane! Many of the same questions have come up repeatedly in these discussions, and we wanted to keep everyone informed:
WILL THE TOWNHOUSE MARKET SEE A SURGE IN ACTIVITY?
When the stay at home orders are lifted, we don't anticipate real estate to flip on like a light switch. It will take time. But we do anticipate (1) townhouses will be in greater demand than apartments in large buildings and (2) a temporary increase in moves to the suburbs from the city. Privacy and our homes are more important now than we've seen in our lifetimes. For those that can afford this lifestyle, townhouse living offers greater privacy, private outdoor space, and more square footage (for home offices, home gyms, and storage). Sheltering in place has forced many people to evaluate their personal space. The idea of sharing elevators, lobbies, and gyms is less popular today than it was before. Additionally, boards and management companies in large condominium and cooperative buildings have placed severe restrictions on entry, activity, and use of common spaces. This lack of independence, control, and privacy will drive many owners and buyers of 4-bedroom apartments to the townhouse market.
For some, a move to the suburbs will be the solution. We saw this in the past after 9/11. Few recall that it was widely accepted in the months after 9/11 that residential demand in Downtown Manhattan would never recover. And some moved to suburban homes. But in the years to come, New York City did what it always does - it persevered. As a center of global financial, arts, and cultural activity, New York City will always remain a coveted place to live. Suburban flight is an understandable reaction, but it will be temporary.
HOW WILL PRICES BE AFFECTED?
It is too early to say definitively what will happen to pricing. The most likely scenario is that pricing will decrease for a period of time because the vast majority of buyers expect this to happen. The news on the economy and real estate is mostly negative right now. This translates into buyers' psychology when they calculate what to offer on a property. How far pricing moves will depend on a variety of economic factors and the length of our economic recovery. The important variables in real estate will be (1) pent-up demand and (2) sellers' viewpoints on pricing. Before the pandemic, pricing had gradually decreased over the prior 18 months. Additionally, buyers have essentially been unable to transact for 2 months. While this event affects us all financially and personally, many of us still need more space, outdoor space, another bedroom, etc. This pent-up demand may at least partially offset some of the expected pricing trends.
Whatever the future holds in NYC, it is likely that this is a quicker real estate cycle than past downturns. Never before has inventory been frozen for two months and this is an event that has been impossible to avoid or notice. Nearly everyone in the city knows these events will affect supply, demand, and pricing. Once these trends become evident after the shelter in place order is lifted, buyers and sellers will eagerly seek new market data and adjust to it quickly.
WHAT WILL HAPPEN TO NEW INVENTORY?
We have held back much of our new inventory - approximately $80,000,000 of new product. Some sellers have chosen to list because our online traffic is extremely high and "days on market" clocks are frozen on all listing websites. This means more visibility and no "stale" effect from sitting online. But those who chose not to list did so because property tours are limited to non-existent. Townhouse buyers simply will not transact without visiting a property. The only buyers typically willing to do that are investment buyers of small apartments.
Data shows that inventory is down significantly compared to 2018 and 2019 at this time. We should expect an influx of new inventory over the next 4-5 weeks as the shelter in place order is gradually lifted.
WHAT DOES IT ALL MEAN?
Although this is a one of a kind world event, we will get through it by using the same skills and experience our clients have relied upon for years. We know our market better than anyone. And we also know what past downturns and recoveries have looked like. So we will leverage our wealth of data to provide the best guidance possible over the next few months to ensure you are able to make the most educated decision possible. Please feel free to reach out with any questions, at any time.
Stay safe. Stay healthy. Stay happy.
Matt & Ravi