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For the past year, new development buyers and the brokers who represent them have been asking, “How will I know when it’s the right time to buy or advise my client that ‘the time is now’?” With a growing economy and low interest rates, the only thing that seemed necessary was a little more give than take from the developers to get the market back on track. Just a few short months ago, residential sales at Manhattan new developments were looking up. Momentum, in total sales volume as well as absorption, was significantly above the prior quarter and Q1 2019.
Manhattan new development sales saw a 44% increase in signed contracts and significant jumps in sales volume in Q1 2020 over Q1 2019 (49%), while the $5 million-plus market absorbed nearly twice as quickly as the prior quarter, according to our firm’s data. There was also an 11% increase in absorption in Q1 2020 over Q4 2019, and Q1 2020 saw a 30% increase in total new development sales volume over Q4 2019 ($877 million versus $617 million). These are all very impressive figures, and a great indicator of consumer confidence and market equilibrium.
As the coronavirus spread in March and New York went “on pause,” so did much of the real estate market. Brokers were instructed not to perform any in-person appointments, which caused the surge from the first quarter to quickly come to a halt. While January and February 2020 alone showed impressive signs of growth and buyer demand, we found that sales in March declined 30% from February 2020 due to the impact of the pandemic, though absorption was still higher than March 2019.
As we review this data, it is clear that 2020 was off to a promising start. Buyers were feeling confident that the market had adjusted to the higher-than-average supply of new development condominiums. They accepted pricing, developer incentives and historically low mortgage rates, which combined to ultimately create momentum that seemingly would have continued into the second quarter and beyond — had we not encountered a pandemic.
As the impact of the health crisis became ever-present in March and April, the new development real estate community quickly innovated to keep buyers engaged, in the hopes of a bounce back to demand like Q1 when we return to a new normal. New means of doing business were created in the course of days and have already resulted in a number of virtual appointments, offers and, yes, even new deals with contracts out for execution.
Innovation such as virtual tours of sales offices and model residences via Zoom and other videoconferencing, as well as 3D floor plans and video walk-throughs, have allowed sales teams to engage with buyers and provide a sales experience nearly identical to what they would experience in person. Our teams who have been conducting virtual appointments have found that many potential buyers have expressed interest in in-person visits once the stay-at-home order is lifted, and some have submitted offers solely based upon the virtual tours. Many customers have found these tools have helped them to narrow their search and expect to quickly make a decision after seeing the product firsthand.
So what have we learned from this extraordinary experience?
Much like in many other areas of our lives as consumers, buyers are quickly adjusting to virtual real estate shopping. It wasn’t long ago that one would have laughed at buying a fitted dress or prescription eyeglasses online, but now, many wouldn’t think of doing it any other way. Well, this experience has now made virtually shopping for and buying a home a much closer reality. With the help of technological innovations, buyers can now begin to truly experience a home and are quickly realizing that they do not need to physically see all of their choices before narrowing it down to one or two.
The final decision for most will still be made after a physical inspection, but the days of seeing 10, 20 or even 30 properties before making a decision could truly be behind us. I envision a time in the not-so-distant future when buyers will do 90% of their shopping online and then visit two or three of their final choices before making a buying decision.
What this means is that brokers will spend much more time virtually interacting with their clients, which requires more adept communication and trust-building skills and even more ways for brokers to promote their expertise and goodwill. Reputation by means of testimonials and success stories will be even more important because building rapport may not happen until the day an offer is made. Consumers will also need to be more proficient in using such tools and trusting their advisors — who will have seen many more of these properties in person — to add valuable hands-on experience to the buying process. Brokers will become the boots-on-the-ground advisors to online real estate shoppers.
Much like with other historic events, we can hope that innovation and progress will follow this crisis. New sales tools and buyer experiences have been and will be born, and buyers and salespeople will become more efficient and well informed by the inventions being created today.