From My Desk To Yours May 2020
Since the March 10 shutdown, the city’s real estate markets have become dislocated. The eight-week lockdown has seen dramatic declines in supply and demand along with exceedingly thin volume for pending sales and closings. Once businesses are reopened safely, and we’re able to show properties in person, inventory will build and signed contracts will occur again, but there will be downward pressure on prices.
Buyers will return to the market, albeit gradually. No one expects a flip of the switch bounce back despite the fact that mortgage rates have never been better. After the Twin Towers fell, it took until the 4th quarter of 2002 to recover; after the financial fallout in 2008, it took even longer.
Coming into the new year 2020, buyers already had the upper hand. Next month, purchasing options are expected to increase sharply. However, the buyer pool may constrict, at least for the short term. Some sellers are considering trading their New York City apartments for the suburbs of Westchester, Long Island and Connecticut. Already we have seen an exploding rental market among city dwellers seeking a haven away from the virus epicenter. Other sellers may join those who have been moving to more tax favorable states.
Nonetheless there’s pent-up demand from purchasers who are seeking comfort and shelter, and their focus is shifting. The number of online searches for outdoor space on compass.com has doubled. Properties with pools and near parks are highly sought after. The 2nd home market has picked up as international and vacation air travel has stalled. As New Yorkers demonstrate they can work virtually, some homeowners will look to trade down to a city pied-à-terre residence with a 2nd home elsewhere.
Once re-opened, our market will need some time to regain its footing. The city will see construction resume soon after May 15th, and real estate services will follow in phase two, likely after Memorial Day. With no spring market to speak of, the promise of an active summer real estate season looms large. As pent-up demand meets more realistic sellers in the next several months, buyers who want to buy and sellers who want to sell will inform the market. In a flight to quality, purchasers will be motivated, pre-approved for a mortgage, and will have already watched a 360-degree virtual tour. “Business unusual” will continue, as brokers deliver virtual showings and adapt to new protocols.
Lawrence Yun, National Association of Realtors chief economist, projects the US market will normalize during the second half of 2020, anticipating a 13.5% drop in home sales compared to the 3% increase that was expected prior to the pandemic. The numbers from a recently enacted weekly survey of Compass agents on deal flow and negotiability tell a slightly different story: 67% of offers submitted in the last two weeks were accepted—a total of 53 pending deals; the overwhelming majority was for properties priced under $4M, and 7% or less was discounted from the last asking price.
Now more than ever, buyers and sellers need a professional to guide them. Despite job losses and economic uncertainties, there are deals to be made. It will take clear thinking, strong bargaining skills and transactional expertise to identify a buyer’s ceiling and a seller’s floor and get them to the closing table.
Stay healthy and be smart and kind, and call me for any and every reason.
Shirley Hackel, NYRS®
shirley.hackel@compass.com | (914) 980-0371