A ravaging pandemic and one of the most keenly contested presidential elections in US history are a combo that will more than likely send ripple effects across the real estate market. But 2020 is almost behind us with its barrage of challenges.
So, how exactly are the events of the outgoing year likely to affect the real estate market outlook in New York – more specifically, Staten Island – in the coming year? I discuss some of the critical points below.
Rents and sale prices will continue to drop in New York
Going into the new year, rental prices and property sales prices in Staten Island—and most of New York—will most likely continue to fall. This is at least expected in most of the ultra-luxurious segment of the New York real estate market. However, considering that we’re in the midst of lingering unemployment and an economic downturn, this comes as no surprise.
The New York Times recently reported that as many as 20% of New York City tenants failed to pay rent in September. Somehow, the market will need to find a way to weather this unprecedented economic storm.
Unemployment data as of August 2020 puts Staten Island’s unemployment rate at 13.8%. This was a drop from 17.3% in July, although Staten Island has had the lowest unemployment rate of all New York boroughs throughout the pandemic.
While the market is expected to undergo further price correction in the months ahead, improving economic conditions will be critical for the New York real estate market – and Staten Island in particular – to emerge stronger.
New York exodus to the suburbs is complicated and not as strong as made out to be
The coronavirus effect has caused a boom in the suburbs due to flocks of people fleeing city centers. However, many people are even leaving suburban Staten Island. Carol and I have witnessed many clients who have decided to move to the Carolinas, Virginia, and various other states. Many of these clients point to the ability to work remotely as being an important contributing factor to their move. However, this does not tell the whole story especially as it relates to Staten Island and the other NYC boroughs.
The current economic reality seems to have hit Manhattan the hardest. And though a similar exodus is happening in Staten Island, Brooklyn, and Queens, it is not nearly at the same clip. We have some clients who are moving to Staten Island from other boroughs. But even for those areas that have been badly hit by COVID-induced migration, real estate professionals insist that this trend is only temporary as the market rebounds, and they’re probably right!
The market is bouncing back already!
Residential and commercial real estate sales fell considerably in New York for the early part of 2020. From March to the end of June of this year, realtors were deemed non-essential and could not show homes. In August, sales of residential properties fell by a whopping 57 percent compared to the previous year. This is due to the lag between contract and closing (60 – 90 days). The lack of new deals between March to the end of June resulted in a corresponding dearth of closings from July to August. And yet, real estate experts were banking on the resilience of the New York real estate market for a turnaround.
Once the ban was lifted and realtors were allowed to show homes again, that led to a frenzied market with all the pent-up demand from those months of inaction, combining with the normal uptick of moves in the summer months.
Yes, the market underwent a slowdown, but that was temporary. That is definitely NOT the case right now. There have been more buyers and sellers since late June because showings were allowed to happen, allowing for new transactions to go into contract. Most everyone in the local real estate industry is extremely busy right now. Now, you might wonder…
But Chris, what about social distancing? How do people protect themselves?
Much is being done remotely. Want to shop for homes in Staten Island? Browse through Zillow. Sellers are becoming more creative with showing their homes by using Youtube videos and sharing their listings on social media.
When the sellers and buyers sign a contract, the parties can sign via electronic signatures. The parties can meet with their attorney and/or real estate agent via Zoom or Facetime. As for me, I’ve been spending a lot more time on the phone for contract signings.
Arrangements can also be made so that sellers don’t have to attend the closing. They can pre-sign documents and proceeds can be sent to them by wire after the buyer closes and funds.
There are also realtors and real estate attorneys who have decided to not work during the pandemic for safety concerns. Since I am in the low-risk bracket I’ve decided to continue to work on the condition that I practice social distancing, wash my hands frequently, and wear a mask whenever I’m out and about.
Refinance rates are outrageously low!
Another thing that has spurred the real estate market in New York is this: interest rates are very low and many people are taking advantage of this fact by refinancing. You may or may not know that my office represents many lenders. In the past several months, we’ve been closing a ton of refinance transactions. The process is often painless and straightforward. If you’re thinking of refinancing, call my office and we can help get you started.
We don’t know how long rates will be this low but if I had to guess, it’ll hopefully last through the middle of next year or at least until a coronavirus vaccine is released. With Pfizer announcing that its coronavirus vaccine trial was over 90% effective, we might just get there sooner than anticipated.
These times are highly uncertain. Heading into the new year 2021, the Staten Island real estate market is poised to be both a renter’s and buyer’s market. This trend is also likely to play out across the other boroughs of New York.
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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.