The Manhattan real estate market is currently in better shape now than it was during the peak of the Great Recession, according to a recent analysis by real estate market data firm UrbanDigs, though it remains to be seen how far it has to fall.
“This is partly because the impetus of the Great Recession was economic, affecting buyers as well as sellers,” write UrbanDigs cofounders Noah Rosenblatt and John Walkup. “COVID, on the other hand, appears to be more of an emotional motivator. While certainly there are some sellers who need to sell, the lack of a sharp spike in supply and a corresponding drop in demand suggests the market is not as one-side as the Great Recession, although lingering virus fears will keep a lid on demand for the time being.”
The report compared supply and pending sales, as well as “market pulse,” which is the ratio of pending sales to supply. A lower number reflects more sellers than buyers.
Prices in Manhattan ceased accelerating in late 2015; in Brooklyn it took a year or two longer. Since then, values had fallen between 10% and 20%, depending on a variety of factors including location, property type, property size, and price range. During the first quarter of 2020, the market strengthened noticeably. Then the COVID lockdown and its attendant ills added another 5% to 10% to those already substantial losses. In this environment, buyers committed to New York recognize opportunity. Especially in the larger apartment market, many sellers want out: maybe they have purchased another property, maybe they are estate executors, maybe their needs have changed and they have lost half a year waiting for this market to open up again.
At the same time that Manhattan looks to be entering its strongest buyer’s market since the Great Recession, with mortgage rates at historic lows, rents are also falling sharply, according to a recent report by StreetEasy.
“Comparing COVID to the Great Recession is ultimately an apples-to-oranges comparison, says Walkup, UrbanDigs’ chief operating officer. “Both saw spikes in the unemployment rate, but the nature of the job losses is much different. The Great Recession, being credit-based, took broad swings across the entire economy. NYC real estate felt the first tremors in late 2007 and did not fully recover for five years. By contrast, COVID lockdowns hit service industries such as hospitality and tourism disproportionally, while many other sectors were simply relegated to working from home.”
Sales activity in the Big Apple’s suburbs are going through the roof. In areas such as Westchester County and the Hamptons, contract signings are occurring at double the pace from a year ago, according to recent data from brokerage Douglas Elliman and consulting firm Miller Samuel.
Some neighborhoods are seeing bigger discounts than others. Apartments located near Midtown and the Financial District in Manhattan are a bargain right now.
On the flip side, apartments with outdoor space such as terraces are fetching a significant premium. Data from Miller Samuel shows that apartments with terraces in Manhattan are selling for 5% more per square foot than they were before the coronavirus pandemic began.
As you noted, low mortgage rates make buying a home a very appealing possibility right now. And economists say there’s no guarantee rates will stay that low — if a coronavirus vaccine were to come along, for instance, rates would probably skyrocket.