2020 thus far has clearly been dominated by the pandemic, and the NYC townhouse market is no different than any other industry in that regard. Sales volume is down about 50% year-over-year, and pricing is down about 25%. The size of the gap is largely due to the near complete halt to the market in 1H2020, compared to a very strong 2Q2019 as there was a significant push for sales to close before the increase in mansion and transfer taxes in 3Q2019. Quarter-over-quarter paints a very different picture, as 3Q2019 was one of the slowest quarters on record in recent years as a result of the implementation of the tax law changes, while the market picked up a bit in 3Q2020 from the Covid slump earlier in the year.
Despite the pandemic, the townhouse sales market has shown activity since March, with 33 contracts signed in Manhattan at the end of 3Q2020. We continue to hear from buyers that townhouses are a desirable option for City living given the privacy and space offered. There seems to be the greatest demand in the $4-8M range, particularly among product with little need for extensive renovation. By contrast, the higher end of the market is soft in comparison with last year, with 22 sales over $10M thus far in 2020 compared to 64 eight-figure sales this time last year. In the multi-family sector of the market, cap rates have expanded from around 3-4% to 4-5%, creating a favorable spread between cap rates and interest rates. This presents excellent opportunities for buyers who are willing to take on short-term rental vacancy risk for long-term value.
The rental market has taken the biggest hit this year, as most schools and offices are still not fully open and there is still uncertainty surrounding when they will be open. We are optimistic that as progress is made with Covid therapies and vaccines, there will be an end in sight to the uncertainty and the rental market will bounce back, it is just a matter of when. For now, it is truly a renter's market, with the highest inventory available in recent memory (over 23,000 apartments currently available for rent in Manhattan).
Overall, the New York City real estate market has remained resilient given the circumstances, and for buyers willing to purchase before the City fully returns to normal there is good value to be had. With a healthy number of contracts signed and active buyers in the townhouse market, we anticipate a solid finish to 2020.
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