The amount of unsold apartments is now at the highest level in almost a decade
Why is this occurring? Suppose you are a married, young-to-middle-aged professional who lives in Manhattan or Brooklyn who has young children or expects to have children soon. You may have been planning to move to the suburbs in the next few years. And with the pandemic reducing your access to New York City’s amenities, reducing your concern about commute times, and increasing the appeal of a backyard and extra home-office space, you might be thinking about making that move sooner than you had planned. This is why people are a little more interested in buying in suburban areas, and a little less interested in buying in the densest area than they were before the pandemic.
According to Miller Samuel, a real estate appraiser in New York City and Douglas Elliman, a prominent New York City real estate company, the number of signed contracts for co-ops and condos in Manhattan dropped 57% in July compared with a year ago. The high-end of the market is especially getting the hard hit, with co-ops priced at $4 million to $10 million down over 75%.
Consequently, as the deals dry up, the number of apartments listed for sale is surging. New listings jumped by 8% in July compared with a year ago. The number of unsold apartments is now at the highest level in almost a decade, according to Jonathan Miller, CEO of Miller Samuel. At the current sales rate, there is more than a 17-month supply of apartments for sale which is more than twice the typical Manhattan average of about 8 months.
Meanwhile, suburbs around New York had an exceptional July, as New Yorkers purchased second homes as an escape and possibly a new primary residence. Sales contracts in the Hamptons more than doubled in July, with 267 deals. Signed contracts in Westchester County, New York, more than doubled to 987 deals as well.
Connecticut has been an especially large beneficiary of New York City’s troubles. There were more than 1,200 signed contracts in July in Fairfield County, Connecticut, while Greenwich saw an increase of 72%.
“Anything within a two-hour radius of the city is as busy as it’s ever been,” said Scott Durkin, president and chief operating officer of Douglas Elliman. “There’s just this general fear of density right now.”
Although it seems as though there are great bargains with the New York City housing market, there is still a strong level of uncertainty present. It is also very important to understand how the supply and demand are working to get a good sense of the conditions that could lead to those bargains. Right now, supply is coming back, and demand is a little depressed, which will generally put downward pressure on prices.
There is reason to think that number will improve in the near future. With new inventory coming to the Manhattan market at a torrid pace, the gap in active listings in New York City will likely start to fade, although it’s unclear how long it will take for inventory overall to return to normal levels.
Still, New York real estate brokers say the city will recover quickly, once there is a vaccine and companies start bringing workers back to the office. They point to Sept. 11 and the Great Recession as proof that the city always rebounds. They also say the deep discounts that many buyers are hoping for aren’t likely to materialize since sellers have so far resisted at big price cuts.
“We had price cuts before Covid,” Durkin said. “With interest rates so low, prices may not be as negotiable as some buyers might hope. But there will be people in different situations, and some might need to sell.”
A specific segment that will likely have to cut prices is new condo developments. Brokers say that new developments, which listed with sky-high prices during the past few years, will have to adjust to the more competitive market. For instance, the Getty Residences – a glamorous new condo building in downtown Manhattan – announced price cuts of more than 50% on some units. One full-floor unit, with more than 3,800 square feet, had once been offered for over $20 million and is now listed for $10.5 million.
Andrews, Jeff. “Manhattan’s Housing Market Is Coming Back.” Curbed, Curbed, 5 Aug. 2020, www.curbed.com/2020/8/5/21354200/nyc-real-estate-manhattan-home-prices.
Barro, Josh. “How Much Is COVID-19 Hurting NYC Real-Estate Values?” Intelligencer, Intelligencer, 27 July 2020, nymag.com/intelligencer/2020/07/is-covid-19-hurting-nyc-real-estate-values.html.
Lerma, Martin. “As Home Sales in the Suburbs Thrive, Manhattan’s Luxury Apartment Sales Fell 75% in July.” Robb Report, Robb Report, 6 Aug. 2020, robbreport.com/lifestyle/news/manhattans-apartment-market-plunges-57-covid-2941755/.
Stevens Institute of Technology |Class of 2023
Quantitative Finance Major | Stevens School of Business