APRIL 2020 - COVID-19 MANHATTAN MARKET UPDATE
Manhattan Market Update
April provides us with the first full month of data since the COVID-19 crisis, and we are beginning to see the impact. April is the PEAK of what we’re experiencing to be the bottom of the market. Historically one of the busiest buying and selling months, April saw a notable decline in inventory and a sharp drop-off in new contracts signed. With the high level of uncertainty, demand has essentially evaporated. Monthly supply of new listings is down 74% from March 2020, and down 88% from April 2019 as sellers delay or take their homes off the market. With Cuomo’s announcement that real estate and related professional industries will be set to re open in mid-June we expect a marked uptick in activity.
The housing market is not performing as it normally would due to the crisis that arrived in the midst of what is typically the busiest three months of the year for NYC buyers and sellers. Looking at data covering the past three years, an average of 1,010 contracts were signed for Manhattan real estate in April, compared to only 216 this year, reflecting a 79% decrease.
The closed sales pricing and median pricing in the Market Update 1-pager is based on closed transactions, and these closed transactions were contracted pre-COVID and thus not reflective of today’s current market. It will still take 3-4 months for the contracts signed during COVID to close and become public record. Elegran and the brokerage community is tracking the bid-ask spread in order to gauge negotiability in the market. Based on the offers analyzed:
Offers were submitted for 14.5% less than the asking price on average
Sellers accepted an offer 8% below the asking price on average
Seller’s are drawing the line, rejecting offers on average 17% below their asking price.
As is all of New York City, we eagerly await Governor Cuomo’s directives regarding the economy and the winding down of the “NY ON PAUSE” order. As the economy begins to restart with Phases 1 and 2, Elegran continues to utilize technology and is finalizing protocols to create an environment where transactions can occur in a safe way that will include social distancing for in-person showings and the continued ability to go through the buying or selling process utilizing virtual showings and other supporting technology.
While market conditions and our understanding of the future shift daily, we believe there is pent-up demand, from both buyers and sellers, which we expect will come to market this summer and fall as restrictions ease and we all determine how to go about navigating our new normal here in New York City.
What this means for…
Buyers / First Time Home Buyers:
Is now the right time to buy? It depends on your specific circumstances, including financial picture, holding period and risk tolerance.
Buyers are becoming more confident with submitting lower offer —> Provides an opportunity to start a dialogue with seller’s and gauge the seller’s motivation to sell
On average, buyers are submitting offers for 14.5% below asking price.
Opportunistic buyers are in the marketplace looking for a “good deal”
Interest rates remain low, which increases your purchasing power
In a thinly traded dislocated market like we are in, this creates an opportunity for a buyer to secure a favorable deal. And for a buyer looking to trade up, with a longer holding period, this creates an opportunity to secure a unique deal.
Sellers are agreeing to concessions rarely seen in the last decade, including funding contingencies. Such contingencies help to reduce the risk for a buyer transacting in uncertain times.
Buyer’s should continue to use this time to get prepared for when the market does reopen. What is your risk tolerance, and what can you actually afford? Be cautious not to overextend yourself.
Remember, NYC prices have been in a slump the last 4-years, while nationally prices have been appreciated for much of the past decade. Traditionally, in crises, NYC falls less than the national average —and NYC hasn’t seen the recent price appreciation.
Sellers:
Over the last month, inventory has continued to decline, as homeowners pull their home off the market, and new sellers delay listings
Those that are still on the market, and have a need to sell are starting to accept lower bids
On average, sellers have accepted offers 8% below ask
On average, sellers are rejecting bids 17% below their asking price
Readjust your expectations for price [downward] if you are planning to come on, or back to market in the next few months
Continue to use this time to spruce up your home as you can, and be ready to hit the market positioned well once this passes
Renters:
Many landlords are renewing leases with no rent increases, and even a small decrease in some scenarios in order to keep a good and paying tenant Landlord concessions, especially in the luxury segment will come back this summer
Some Landlord’s are negotiating on things like delayed lease-start and waived amenity fees instead of decreasing the rent.
Some landlord’s are more hesitant to sign 2-year leases this year than last year, an indication they believe rents will rebound in the next 6-12 months
Investors:
Recent headlines have shown both domestic and foreign investors purchasing NYC real estate as a diversification play
Rental demand is expected to remain strong, offering opportunity to purchase at a depressed price and capitalize on appreciation and monthly rental income
Real estate has historically offered less volatile returns in an uncertain time than the equities market