During the week ending August 16thIn Manhattan, 282 properties were added to its real estate register, with 302 contracts signed, nearly 100 more than the prior average (see chart courtesy of UrbanDigs below). This assumes a version of an inverted yield curve for residential real estate, and this happens week after week for several months. We see a market with muted supply and intense demand; as a result, the already scarce supply of real estate for sale is decreasing every month. The situation in Brooklyn was only marginally better this week, with an even number of properties entering and contracting: 205 for sale versus 203 sold. Across New York City, record sales in August are eating up already dwindling unit listings.
Even the Delta option cannot stop the flow of deals that revitalize the city. As requirements for vaccines and masks begin to influence the behavior of New Yorkers again, they nevertheless buy tickets to shows, concerts and sporting events. Manhattan and Brooklyn have high vaccination rates, and this, combined with COVID fatigue that affects nearly every segment of our population, continues to drive personal browsing and property purchases. Having been at the epicenter of the pandemic, the city has now become one of the safest places in the country. There is little anti-vax sentiment here, and people of all political views are generally able to discern medical reality from political futile work.
However, the pace and brutality of the city’s real estate recovery took almost everyone by surprise. A year ago around this time, after months of isolation, sales had slowed to near zero, and stocks were low only because most sellers saw no reason to accumulate days in the market when they did not foresee the likelihood of a sensible deal. And while new stocks will certainly dwindle before the end of the Jewish holidays in mid-September, buyers’ appetite for well-priced homes does not seem to be waning.
While tremendous demand pressures have forced the market to favor sellers, this shift in power from buyers still contains significant fragility. A combination of factors driving the market, including renewed interest in the city from both locals and suburbanites, as well as many of those fleeing the pandemic 18 months ago, also depended heavily on price declines. Since 2020, especially the second half, was a period of price surrender, 2021 was driven by the buyer’s reaction to this surrender. Especially in the spring, buyers actively bid on the few properties on the market that met their criteria. Sometimes they got involved in competitive bidding because the prices seemed quite reasonable. For now, the bustling market has more or less erased the 10% COVID rebate that shoppers enjoyed at the start of the year. But the market will not be able to withstand a sharp rise in prices. There is still enough uncertainty about the pandemic and its long-term global impact, especially when Delta is being developed, to allow rising prices to push buyers into the background.
2021 is unlike any other in recent memory. The ebb and flow of the virus, the sharp politicization of what were once considered medical imperatives, and the city’s prudent and cautious stance on safety protocols have actually made New York MORE attractive to many buyers – locally, nationally, and increasingly. internationally – as it has been in previous years. But the balance that supports the real estate market remains fragile. A spike in disease, renewed isolation, a significant slowdown in economic growth can all confuse the city’s rapid recovery. So, sellers, be careful! Don’t let current high absorption rates lull you with an expectation of 10% or 15% more than your last comparable sale. Massive underpricing is probably the biggest threat to today’s busy market.