June Market Update
We hope this finds you and your loved ones safe and well. Since our last update, much has changed in NYC- we are certainly trending in the right direction. While we are not out of the woods, there is an optimism and cautious readiness, among many of the city’s residents, to get back out there (in an adjusted and limited capacity). There is a lot of uncertainty out there, but conversations with our clients have pivoted to how best to take advantage of emerging opportunities.
We have been offering real estate training, speaking on panels, and attending meetings throughout the country from the comfort of our homes. We have been sharing apartment tours with prospective purchasers throughout the world. Many of these efficiencies will remain long after the pandemic is gone. For buyers, properties will be vetted more deeply before in person showings are arranged. For sellers, prospective buyers will be screened and showings will only be arranged after certain criteria are met, i.e. proof of funds or mortgage pre-approval, virtual tours. In person protocol will adjust as well to ensure safety. These changes will benefit all parties involved.
Urban markets in the U.S., that are open and engaged in real estate activities, are faring much better than many would have anticipated. According to Bloomberg reporting, over 60% of active listings in Boston, San Francisco, and Fort Worth, TX are seeing multiple offers. Demand didn’t go away but supply sharply withdrew at the start of the pandemic.
Based on our conversations with our clients and our local colleagues, many sellers will be holding back inventory that they would have otherwise listed. Most of our buyers, however, are ready to engage (many with a new focus on the inclusion of home offices, increased square footage, and private outdoor space). This slow release of inventory and back-loaded demand could certainly help the resale market from losing much ground. However, segments that were vulnerable prior to the pandemic should see that weakness exacerbate.
Market-wide, supply is down 35.5% year over year and pending sales activity is down 31%. 40% of current inventory is in contract, a slight uptick from this time last year. However, as you move into the upper reaches of the luxury segment (>10M), pending sales activity is down close to 60% from this time last year. New Development pending sales activity is down 45.1%. These already vulnerable segments will be even more opportune targets for savvy buyers. We have seen and heard of discounts ranging from 10-30% on new development properties, depending on project and price-point.
Then we have sellers of resale inventory that are hoping to take advantage of lower levels of competition, and demand that was percolating prior to the current pause. Many families that had one foot out of the city because of the high cost of family-sized apartments, as well as individuals that were getting ready to retire and move down South, are going to expedite that process. This is not the majority, however. Most would-be buyers are still ready to engage and a new crop of opportunistic investors and second home buyers from around the world are eager to take advantage of susceptible market segments.
The Case Schiller home price index, adjusted for inflation and interest rates, demonstrates a significant improvement in the affordability of NYC real estate than that of the period before the financial collapse of 2008/2009. NYC prices have not increased over the past several years, the change in the SALT tax deductibility had a lot to do with that (potential silver lining, the SALT cap could be rolled back). We are not coming off of a pricing bubble this time around. There will be areas of pain, there is no doubt about that, but our belief in NYC real estate as a strong investment vehicle is unwavering, and with proper guidance, opportunity abounds.
Please stay safe, let us know if we can answer any questions you may have about the market or how best to navigate complicated decisions, or if we can lend a hand with anything in general. We are a resource for you during these difficult times and we are incredibly optimistic about our incomparable city!