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Market activity has likely bottomed out, with contract-signed activity off over 80% from last year at this time; HOWEVER, there are signs of life, as the market is now beginning to breathe. Although this activity is off by such an extraordinary margin, we are beginning to see a trend in a positive direction; meaning we are making a turn. Inventory levels are beginning to increase once again…slowly, but trending in the right direction. These are sellers who are setting the table for the anticipated open of the real estate market to apartment showings beginning on June 22nd.
Noah Rosenblatt of UrbanDigs has defined our marketplace in three stages and I could not agree more. The destruction phase, the normalization phase and the recovery phase. It seems we’ve fully experienced the destruction phase and just now are beginning to see that transition into the normalization phase. The puzzle pieces are beginning to be dumped on the table. The questions are: How many pieces will there be? How many players will be grabbing at those pieces? And what will it look like in a few weeks?
Since showings were suspended, there has been growing focus on virtual showings. These have served as only snacks for purchasers. For the most part these initiatives have been helpful, but have fallen short of providing the perspective needed to commit to a transaction. Note: when showings begin, activity will certainly increase, but each showing will be controlled (and with gloves and masks). Open houses, unless “by appointment only” are likely a thing of the past, as buildings and home owners will not want multitudes of people tracking through their buildings.
Mortgage brokers are seeing an increase in loan applications, a sign of buyer interest in the marketplace. Pent-up demand from buyers is anticipated to be substantial, as life simply demands movement. Leases have ended, jobs have been lost, downsizing, upgrading, more children, schools etc. Prior to the pandemic the market was, for the first time in 4-5 years, on the verge of making a turn back in the seller’s favor. It was anticipated to be a very strong Spring and Summer, a moderate Fall (due to the notorious uncertainty of an election year) and then a return to a very strong Winter and Spring of 2021. That momentum though was completely broken and buyers have been provided some bonus time to capitalize, especially considering current low interest rates. One’s ability to take advantage of these conditions is unique to the individual and their own personal circumstances and risk appetite.
Although we are seeing a reverse of fortune for sellers, one thing we have identified for sure is that they are not accepting super low offers. Any cases of such a thing happening are very isolated. Whereas there are discounts, they seem to be averaging 3-5% off the asking price. There are larger discounts stretching up to 10% and even 12%, typically only in the higher price ranges, but that level of discount is far fewer in number. The past years of decline have already been built-in to the majority of the pricing levels across all price ranges.
A few final thoughts: As I mentioned prior, the second half of this year could be one of the busiest markets we have seen in years. For various reasons, financing will be more challenging now; consequently, cash will often provide leverage. Every single person’s situation is unique; so there is no universal silver bullet solution. Likewise, every neighborhood will experience its own unique transition, so they must be studied independently of one another.
If you are inclined to dive in, are you prepared? You should always know what you are in a position to buy or sell at all times. If you don’t know, reacquaint yourself with the marketplace. What is your property worth? What can you afford to buy? Anyone interested in buying or selling, should be rolling up their sleeves to determine whether the time is right to sell or if there’s a home or investment property out there for them.
If you are indeed exploring whether buying or selling is the right time for you, do not hesitate to reach out to me, as I am here to help. Your best investment is often in the broker you choose. With Manhattan’s palpable level of competitiveness, my clients have considered me their hidden-hand. My experience affords me the expertise to pull back the curtain and reveal the circumstances as they are and the possibilities that exist.
On the rental side, many landlords are finding it challenging to renew leases for an additional year or more, especially in situations where schools are a consideration. Very little guidance has been given regarding schools opening in the Fall and what that might look like if they do. That uncertainty has landlords and tenants both in limbo. How will this play out? The consensus, generally, is that landlords should try to keep good tenants with reasonable incentives. The coming months will likely produce many vacancies, which will put downward pressure on pricing.
Roberto Cabrera
Licensed Real Estate Broker
Brown Harris Stevens
212.906.0554
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