August Market Update
We hope this update finds you and your loved ones safe and well. While we are facing obstacles during these unprecedented times, there are some unique silver linings that have emerged. This incredible city, known for its fervent culinary culture, has seen many of its beloved restaurants open outdoor dining options for the very first time. A day in Central Park, or in one of the city's many public outdoor areas, has taken on a much more relaxed nature. With less tourism occurring, and the usual summer exodus for New York natives in effect, our normally bustling city is experiencing a calm that locals are basking in.
We are fully engaged in Phase 3 of reopening in New York City, but price discovery and market trends are still not fully established. Due to the prolonged gap between contract signing and closing on our co-ops and condo properties, much of the verdict is still out. We do, however, have many anecdotal reference points from our own client base, as well as conversations with other top agents locally. What we are seeing is resale deals coming together in a range reflecting, on average, a 5-8% decline in price-per-square-foot year over year. When it comes to the city's vulnerable new development inventory, the story is one of much deeper discounting and an abundance of additional concessions. Depending on price point, location, and how the project was performing prior to Covid, year over year price decline is in the order of 10-15% – with 20% at the high end.
This is the reality on the ground. Many unique properties are still flying off the shelf and overpriced, or generally unexceptional properties, are often languishing. It was widely reported that the market had seen an average sales price decline of 17.7%. This, while accurately reflective of closed data, had some serious flaws in its true representation of the market.
According to the Curbed article highlighted later in this update, 'The 17.7 percent drop in sales prices suggests that a housing-market crash on the level of the 2008 financial collapse is under way. However, taking one number from a report and viewing it in isolation (as many headlines from last week presented it), distorts the reality on the ground, which is that New York’s housing market still isn’t fully functioning and any aggregate price data from this market should be taken with a grain of salt. The data highlights two fiscal quarters that saw unusual activity in the luxury market. In the second quarter of 2019, homebuyers rushed to close on homes to avoid the city’s newly-enacted 'mansion tax', a one-time fee on home purchases above $1 million. This led to an above-average number of luxury-home closings in Q2 of 2019, pushing up the median home-sale price for that quarter.' This, coupled with the slow out-of-the-gate luxury market during COVID, really explains the confluence of anomalies that led to this skewed median sales price decline.
Many renters have left the city while their offices are closed, but we are seeing just as many buyers looking to find a property before the school year, despite all the uncertainty. Summer is the slowest season of the year in real estate in NYC; this year is certainly no exception. We have been having many conversations with our buyer clients surrounding sub-3% 30-year fixed interest rates and the thought that about 25% (in our estimation) of sellers are what we could call vulnerable. We just have to poke around and find out which ones those are.
For our sellers, normal rationale for holding off listing property during summer – additional days on market, less traffic, etc. – are less of a concern because everyone is in the same boat during COVID's abnormal market behavior. At the start of Phase 2, listing inventory spiked, but we have seen a leveling off after that initial push. More than ever, we are looking for that one buyer for a property. Without the normal open house traffic, and with pre-vetting prospective purchasers before showing properties, pace is less of a marker and being on the market when the right buyer emerges is what is of the utmost importance. We have seen our share of correctly-priced properties trade as if we were in a normal market.
With proper guidance, there are many ways to take advantage of this dynamic and intricate market. More than ever a data-driven, research-based approach, rooted in decades of experience, will enable our clients to thrive in this environment. Please stay safe and let us know if we can answer any questions you may have about the market or how best to navigate complicated decisions. Enjoy these remaining days of summer, and be well.