Education is key to making any decision let alone a large financial decision. We pride ourselves on being quality advisors vs an average salesperson. Below is a compiled overview of what Manhattan has experienced in the last 2-3 years while providing some insight for buyers/sellers and investors/renters:
On March 8, 2020, the first death from COVID-19 was reported. By the end of May, housing demand in New York City was down 78% from its pre-pandemic average. But on June 1, 2020, demand began to recover and by July 19, 2020, demand had fully recovered. NYC's elasticity during the pandemic was not limited to demand alone, and examining the past few years through a price-per-square-foot lens shows that NYC absorbed the devastating blow of COVID-19 and recovered decisively. The pandemic showed us that the NYC residential real estate market can take a devastating blow and recover quickly.
The resilience of the NYC real estate market is not a new phenomenon. As New Yorkers remember, the attacks on the World Trade Center that occurred on September 11, 2001. Despite the trauma and fear that ensued, Manhattan's average condo price per square foot had increased nearly +13% over the year prior. The Financial District (“FiDi”) which was the site of the terrible atrocity, had given back less than 11% of the prior year’s price/sf benchmark. Over the course of the next seven years, Manhattan’s average price/sqft doubled, while FiDi average price/sqft increased by +161%. This data memorializes what investors have known all along, NYC residential real estate exhibits one of the highest volatility capacities of any asset class and has the catastrophe-hedging potential of heavy metals, the appreciation potential of stocks, yet offers what no other asset class can – the ability to enjoy one of the world’s greatest cities.
Today, Manhattan has seen a few significant changes in the real estate market since the pre-pandemic averages, yet again showing its' resiliency and strength. Despite the significant number of concurrent headwinds, many Manhattan metrics remain at pre-pandemic averages. However, certain metrics are diverging from those pre-pandemic averages. Where there is great strength is in price per square foot, which has not only recovered post-COVID but is on par with the high benchmark set at various points throughout 2015 to 2019. Where there is weakness is in terms of demand, measured by contracts signed. Demand has cooled from a record 18-month period that began in Q1-2020 and as mortgage rates have risen it cooled demand further to a level below the pre-pandemic average.
The resilience of the NYC real estate market is not a new phenomenon. As New Yorkers remember, the attacks on the World Trade Center that occurred on September 11, 2001. Despite the trauma and fear that ensued, Manhattan's average condo price per square foot had increased nearly +13% over the year prior. The Financial District (“FiDi”) which was the site of the terrible atrocity, had given back less than 11% of the prior year’s price/sf benchmark. Over the course of the next seven years, Manhattan’s average price/sqft doubled, while FiDi average price/sqft increased by +161%. This data memorializes what investors have known all along, NYC residential real estate exhibits one of the highest volatility capacities of any asset class and has the catastrophe-hedging potential of heavy metals, the appreciation potential of stocks, yet offers what no other asset class can – the ability to enjoy one of the world’s greatest cities.
Today, Manhattan has seen a few significant changes in the real estate market since the pre-pandemic averages, yet again showing its' resiliency and strength. Despite the significant number of concurrent headwinds, many Manhattan metrics remain at pre-pandemic averages. However, certain metrics are diverging from those pre-pandemic averages. Where there is great strength is in price per square foot, which has not only recovered post-COVID but is on par with the high benchmark set at various points throughout 2015 to 2019. Where there is weakness is in terms of demand, measured by contracts signed. Demand has cooled from a record 18-month period that began in Q1-2020 and as mortgage rates have risen it cooled demand further to a level below the pre-pandemic average.
What does this mean for sellers and buyers?
- Manhattan supply is historically normal which indicates a "healthy" market, there is enough inventory on the market for buyers to choose from which gives sellers room to negotiate on price. With weaker demand, it is also likely that it could take longer for sellers to find a buyer and get the asking price they want.
- Quick points: Listing discount (median) for December 2022 was 4.5%. Cash buyers are dominating the market currently. As inventory fell, demand fell with it keeping pricing stable. Private outdoor space remains the most sought after apartment feature.
- Overall, unique products are seeing demand and if priced right are selling, but if you have a "run-of-the-mill" home you're seeing less demand and level of interest comes with lower pricing than comps. Buyer's willing to renovate are seeing the greatest opportunities for discounts and price/sqft, while sellers with fully renovated homes (homes with minimal work) seeing bulk of interest.
What does this mean for investors and renters?
- It is also worth noting that with economic uncertainty, the job market and income levels are also influential factors in the rental market. That said, with weaker demand on the buy-side results in increased competition on the rental side. Landlords are seeing elevated pricing power and demand.
- Rental prices may have peaked in the start of Q4 of 2022, but remain above trend + concessions are still nonexistent.
Leverage in this market is skewed towards buyers, but it isn't guaranteed that this trend remains throughout 2023. History tells us that Manhattan moves by its' own beat when compared to other US markets. We will continue to have updated information month-by-month to advise you with any decision you need to make.
Information from Elegran Insights* and data partner UrbanDigs*