New York’s housing market makes a stunning comeback
A year ago, while most of the country was seeing record home sales and prices, driven by low mortgage rates and roaming office workers, New York was on the outside looking in: Sales and rentals plummeted, and doomsayers predicted the city’s demise. Not anymore.
In a remarkably sharp turnaround, the sales and rental markets are approaching or, in some cases, exceeding pre-pandemic prices.
More apartments were sold in Manhattan in the third quarter of 2021 than at any other time in the last 32 years.
Sales in Brooklyn and Queens pushed further into record territory. And some renters, who took advantage of deep discounts just a year ago, are now facing the sticker shock of 30% to 40% rent hikes.
New York’s housing market is back — and with it, the hope of a more affordable city is fading. The rebound, largely fueled by the luxury market, carries risks for thousands of renters facing possible eviction, when a statewide moratorium is set to end in the middle of this month.
“The city’s real estate market is poised for further gains in 2022,’’ analysts and agents said, “as momentum shifts away from the red-hot suburbs and international travel returns.’’
But as the highly contagious omicron variant has shown, the path to recovery may be winding.
Across most of the country’s housing markets, 2021 was without precedent. The median US sale price reached $386,000 in June, a 24% jump from the same time the previous year, and the highest on record, according to the real estate company Redfin.
Over the summer, with remote workers chasing bigger spaces and lower interest rates, homes across the country sold at the fastest pace on record — a median of 15 days on the market.
The tightest supply on record sustained that frenzy: Just 1.38 million homes were available in June, a 23% drop from a year earlier, said Daryl Fairweather, Redfin’s chief economist. But the pace is slowing.
“By this time next year, prices could be just 3% higher than they are now — a far cry from the double-digit growth we saw over the summer — because mortgage rates will likely increase to around 3.6% from 3% by the end of 2022,’’ Fairweather said.
“New York, on the other hand, was an early virus hot spot, so it is about six to nine months behind the rest of the country and is still gaining steam,’’ said Jonathan J. Miller, CEO of the appraisal firm Miller Samuel.
After a year of depressed sales and prices, Manhattan had a record 4,523 apartment sales in the third quarter of 2021, the most in more than three decades, and the median sale price, $1,115,000, was nearly 9% higher than in the same quarter of 2019, before the pandemic, according to data from the brokerage Douglas Elliman.
“Everything is off the charts,” Miller, the author of the report, said of New York’s belated surge. “Not only on a year-over-year basis, where there can be distortion, but compared to two years ago, sales are still way up.”
New York’s sudden turnaround was spurred by the same group that left the city at the start of the pandemic: affluent renters and buyers with the means to move.
From March 2020 to June 2021, 254,500 households left the city, a 106% increase from the pre-pandemic baseline. But since July, encouraged by the city’s gradual reopening, net migration has begun to improve in many of the wealthy neighborhoods that led the departures, according to a November Comptroller report.
Renewed confidence is having an outsize effect on luxury sales, which for years had lagged the rest of the market. Through the third week of December, there were 1,877 contracts signed at or above $4 million, almost three times as many as in 2020 and the most since at least 2006, said Donna Olshan, the president of Olshan Realty.
“I think it was pent-up demand,” she said, coupled with sellers marking down prices an average of 9%, from listing to contract. “They were buying New York at a discount. Some of them would walk through a plague to get a deal.”
And 2022 could bring even larger gains, for a number of reasons. Recent sales have been driven almost entirely by local and domestic buyers, unlike past runs fueled by international investors. While omicron may delay some buyers’ travel, foreign interest is likely to boost sales, Olshan said.
While Manhattan gains steam, the surrounding boroughs of Brooklyn and Queens are climbing to new highs.
The median sale price for apartments in Brooklyn in the third quarter was $828,351, a record; the average sale price, lifted by luxury sales, was $1.02 million, both a record and the first time the borough exceeded the million-dollar mark, said Gregory J. Heym, the chief economist for the brokerage Brown Harris Stevens.
“A lot of people went to Brooklyn and Queens to escape Manhattan,” he said, citing the larger stock of single-family homes, the green space and the relative affordability.
Melissa Leifer, an agent with Keller Williams NYC, had a two-family town house in Cobble Hill, Brooklyn, listed in the $3 million range; it is now under contract for about $1 million above the asking price.
“Brooklyn is just insane,” she said, largely because of local buyers, although she added that foreign clients are once again calling her.
In the third quarter of the year, 25.5% of sales in Brooklyn ended in bidding wars, the highest share in three years, said Miller, the appraiser.
In Long Island City, Queens, the neighbourhood closest to Manhattan, sales also reached new heights.
From January to mid-November, there were 821 sales, more than twice as many as in the same period during the previous year, and the highest volume since at least 2006, said Patrick W. Smith, an agent with Corcoran.
The median sale price in November rose to $995,000, almost 8% higher than at the same time last year, Smith said, but the neighbourhood is still less expensive than Manhattan, and a lack of new supply in the next three years means demand should remain high.
“Any developer in the pipeline would love to be selling right now,” he said.
The Covid discount, as dramatic as it was for a subset of New York renters, was short-lived, leaving some tenants to scramble for new housing.
In January 2021, the median asking rent in Manhattan, including concessions, sank to its lowest price during Covid, $2,750 a month, a more than 21% drop from the same time the previous year.
In the first quarter, more than 24,360 apartments, or 43% of inventory, offered concessions in the form of one or more months of free rent — the most on record since 2010, said Nancy Wu, the chief economist for the real estate website StreetEasy.
“For a year, people were getting these crazy three-to-four-month-off deals,” she said, but a large share of those leases are expiring at the beginning of 2022, and landlords, encouraged by returning renters and shrinking inventory, have pulled back on sweeteners — just 22% of listings offered concessions in the third quarter.
In November, the median rent in the borough shot up to $3,475 a month, 24% higher than it was during the same period in 2020, and just below the prepandemic price of $3,500 in the same month of 2019.
While the market appears buoyant, hundreds of thousands of renters remain at risk of losing their homes when a statewide moratorium on evictions ends in the middle of this month.
As of mid-November, the more than $2 billion New York State Emergency Rental Assistance Programme has helped about 166,000 households pay overdue rent; the governor has requested nearly $1 billion more, which could aid 72,000 additional applicants, said Barika Williams, the executive director of the Association for Neighbourhood and Housing Development, a non-profit housing coalition.
But there are at least 120,506 applications that haven’t been approved and, as of mid-October, more than 590,000 households statewide had missed rent payments and had low confidence in their ability to stay current, she said.