It has been over a year now since the first confirmed case of coronavirus in New York. The state then became the epicenter of the pandemic in the US, bringing almost every sector of our economy to a screeching halt.
The New York real estate market was drastically affected and significant uncertainties contrive to this day. This article highlights how the market is shaping up in the face of the COVID-19 crisis.
How Things have Changed Since the Beginning of the Pandemic
At the beginning stages of the pandemic, real estate professionals struggled with how to continue doing their jobs and supporting their clients. There was very little guidance early on, as this was new territory for all of us.
After some time, Realtors were given some direct guidance (both by the State and their respective, local governing bodies, NAR and SIBOR). For a time, in-person home viewings were prohibited. So realtors had to get creative. Virtual tours and drive bys became much more common. Despite these limitations, the market was still a frenzy.
From the legal side, attorneys were given little to no guidance, early on. The pertinent question was, “Is a lawyer considered an essential or a non-essential worker?” Banks were considered essential (and thus pushed for real estate attorneys to continue conducting closings). Yet, on the other hand, most courts had closed and other legal activities came to a screeching halt. As a result, there was a lot of confusion and a lot of people on different sides of the fence.
Eventually, as things started to open back up, we’ve gotten closer to some semblance of normal. But some changes have still lingered (and may not ever go away). For starters, we now conduct many more contract signings electronically and over the phone. Thus, we’ve seen a little bit of a shift to the use of more digital technology. Additionally, in order to limit the number of people attending a closing, many sellers opt to pre-sign their closing documents and not attend the actual closing. In this situation, the buyer will attend (along with the title company and bank) and once the closing is completed, the sellers’ proceeds are wired to them.
All in all, real estate professionals have found a number of ways to roll with the punches and adapt to the changing times in order to still provide service to their clients.
More opportunities for homebuyers and renters
A recent analysis of the state of the New York real estate market by Norada Real estate investments revealed key things:
- Sellers are listing more properties, with Nov. 2020 listings being 9.8% higher compared to the same period a year ago. Rates on 30-year fixed mortgage also fell below 3%, and as a result, people are refinancing! More details on that at the end of this article.
- Rent prices in Manhattan, Brooklyn, and Queens saw the greatest decline among all boroughs at 12.7%, 6.3%, and 5.7%, respectively.
According to a press release by the Real Estate Board of New York, even retail rents in Manhattan fell to historic lows of about 25% year-over-year. Prospective renters in New York will be amazed at the dirt-cheap price options, as will be homebuyers, who would also enjoy a slight negotiating advantage with properties now spending an average of 62 days on the market before they get sold.
Increased luxury real estate appeal
No sector of the New York real estate market is immune to the economic turmoil that came with the pandemic. Many investors saw New York luxury real estate as a crisis-proof investment to the extent that it closed significant property sales.
According to Barnes New York, “The US economy, the strength of the dollar, and the rare robustness of the New York market, in particular, make luxury real estate investment a singularly attractive safe haven.”
Contrary to logic, luxury New York real estate properties continue to sell well, even during a global pandemic. According to Mansion Global, thirty contracts for homes valued at $4 million and above were sold in the first week of February 2021. This completed the strongest three-week streak for the Manhattan luxury real estate market over the past six years!
New York construction activity at the lowest point in 10 years
The New York real estate sector hit a 10-year low point for construction activity in December 2020. The first three quarters of 2020, for instance, saw a total of 1,187 new building filings in New York City. This is a 22% decline compared to the same period in 2019, and the lowest since 2010. This is the result of the government’s order to halt real estate construction activities during the pandemic, except for a few strategic infrastructures and social housing projects.
Most homes scheduled for delivery during the second, third, or fourth quarters of the past year had to be postponed. And it’s unclear just how much effect this might have on other projects with much longer delivery dates. Despite the overall low activity in the market (investment and residential real estate sales in New York fell 46% in 2020), certain developers, especially those whose financing is dependent on delivery times, offer discounted prices to woo prospective buyers in compensation for the long and uncertain delivery times.
The market is coming out strong
The pandemic caused an emotional run on the New York real estate market. While it might seem over-the-top predicting a strong market (as I did last year and described it as “Looking Good!”) despite the lingering uncertainties, indicators are pointing to a bright outlook for the New York real estate market in the near future.
According to this Financial Times publication, January and February in Manhattan marked the strongest opening to a year since 2015. More houses were sold in February than any month since March 2013.
The REBNY also reports that $6 billion worth of residential and investment real estate sold in January 2021 in NYC, a 38% increase compared to January 2020.
It should come as no surprise that more homeowners and renters are considering outdoor spaces. Wealthy investors are also scouring the market for property bargains and deals. Inventory remains high, and mortgage rates remain low. Across New York, the markets are slowly recovering. And as the vaccines continue to roll out, there’s growing optimism that this sector of our economy will continue to be as busy.
One final thought.
Interest rates are rising slightly but are still very low!
I’ve said this before in my newsletter, and in case you missed it, I’ll say it again: Interest rates are still low, and many people are taking advantage of this fact by refinancing. We don’t know how long rates will stay this low.
You may or may not know that my office represents many lenders. In the past several months, we’ve closed on many refinance transactions. The process is often painless and straightforward. If you’re thinking of refinancing, call my office. I can certainly assist in seeing if it makes sense for you and if it does, I can point you in the right direction to help get you started.
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This information, based on New York law, was provided courtesy of The Law Office of Christopher J. Arrigali, P.C. It is intended to inform, not to advise. No one should try to interpret or apply any law without the assistance of legal counsel. Please click here for the full disclaimer.
