Prices and crises come and go, but the city always comes out shining.
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What will the New York real estate market look like when sheltering in place ends? Will the market resume its pace as of May 15th? Will it be down 5%? 10%? 15%? Amongst the New York firms, almost all the renegotiated deals of which I am aware have resolved at amounts no more than 5% below the original contract price. And this is regardless of whether the buyers began by asking for 10% or even 20% off. While there are almost no other data points which lead to a real conclusion since so few new deals have been signed, it is still possible at this juncture to offer a few hypotheses about velocity, pricing, and negotiability:
- The market will not come rushing out of the gate. For one thing, the opening of the city will be gradual, since we are Ground Zero once again, this time for COVID-19 cases. Co-ops and condos will open for showings on different schedules, just as they did with suspending building access to non-essential personnel. Moving in and moving out will be delayed, as will renovations. Some people will remain apprehensive about having strangers in their homes, and equally, some will fear going into the homes of strangers. While there may be pent-up demand, I don’t foresee an enormous burst of activity in June when I imagine some in-person showings will begin again.
- There will be a lot of discussion about leaving the city. As with 9/11, some New Yorkers will feel that they no longer wish to take the risk of living in the city, especially with so many of the city’s attractions – restaurants, theater, sporting events, concerts – unavailable for the time being. Many will actually leave, which is why brokerages in all the areas surrounding New York are currently so active. Rentals are particularly busy as New Yorkers decide to try life outside the city for a few months before deciding how to proceed. The reality is that life in the city will return to what it was. It always does. It may take some time until a vaccine is created and goes through the appropriate trials, but New York will come back. It’s too vital to stay down for long.
- Prices will adjust an additional 8% to 10%. In the absence of new sales data, predictions must depend on the amount of renegotiation accepted and the price adjustments in the few deals which have been made. The renegotiated deals I have discussed above; as to prices on the deals negotiated since March 15 (hearsay since none of these deals are closed yet) have been anywhere from 6% to 10% below early March expectations. There are two schools of thought about re-introducing property to the market: first, to price it as it was before the pandemic and see what happens, and second, to build an anticipated market decline into the price. I am more of the latter school, which I would characterize as realistic. Given the anxiety which will linger for the foreseeable future until a vaccine is developed and becomes widespread, added to the stress of a highly contentious Presidential race which will move into high gear just as the city begins to open its doors again, I want our sellers to prepare themselves for an 8% to 10% drop in value from what they might have anticipated three months ago.
- The way property is sold will change, at least for now. There will be fewer visits. More of the process will be conducted online. Fewer people will attend showings. As brokers, we will require greater sensitivity than ever before in listening to our clients and determining their hierarchy of needs; the buyer who sees 60 properties before deciding on one which he visits six times before signing a contract will, by necessity, become a thing of the past.
COVID-19 has placed us all in uncharted waters. Much as we try to analogize this experience to that of 2008, or 2001, or 1989, the fact is that we have experienced nothing analogous during our lifetimes. We don’t yet understand the scope of social and financial disruption caused by the disease and our necessary response to it. Nor can we know when it will be partially, or fully, over. But we know our city. We know all the beautiful homes all over town, from Park Avenue to Central Park West to Prospect Park West, from Ditmas Park to Jamaica Estates to Striver’s Row, will never go begging. Prices and crises come and go, but the city always comes out shining.