The emergence of the pandemic during 1H2020 has had an unprecedented impact on the New York City real estate market. After a strong start to the year, the pandemic drove down sales dollar volume and transaction volume by more than 50% compared to 1H2019.
Beginning in March, the market came to a complete halt until the economy began reopening in June, with no showings allowed, an exodus of urban dwellers from the City, and profound uncertainty about the state of the nation’s financial condition. Exacerbating the year over year comparison was an increase in the mansion and transfer taxes in July of 2019 which resulted in a surge in activity at the end of 2Q2019. Despite this decline in volume, the average sales price is down only about 6% year-over-year, and average price per square foot is flat.
As we look ahead, now that showings have resumed, we are seeing some pent-up demand in terms of showing properties and contract signings, and we are also seeing new inventory coming back to market after historically low levels throughout the spring. The challenge moving forward is determining what level of pricing will create a meeting of minds between buyers and sellers. We have noticed increased demand particularly for finished single-family homes compared to those that need work, likely because of fears of renovation delays due to the pandemic. There’s also significantly more demand in the $4-8M range, as compared to the high-end of the market.
With uncertainty regarding the opening of schools and offices impacting both the sales and rental markets and thus both single-family and multi-family prices, we anticipate an uneven 2H2020. However, we continue to hear from buyers and renters that townhouses offer a desirable option to comfortably stay in the City during Covid 19, given the privacy and space inherent to townhouse living, and we believe that if any real estate asset class will show resilience during these turbulent times, it will be townhouses and small buildings. We also feel that, as with any market, the time to find the best values is during market upheaval. To a large extent, the current market conditions are a temporary pandemic-related phenomenon which will be resolved once therapies and vaccines are developed. Even with the advent of remote working, a return to a more normal urban existence unlocking demand for urban activities including culture, restaurants, open schools, stores and in-office working, similar to what occurred with the Roaring 20s following the Spanish Flu outbreak of 1918, will result in an increase in prices throughout NYC.
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