Jerry Seinfeld will never leave New York, as he has publicly announced. Nor will Leonard Lauder. Many of those who did leave now, with a vaccine and the resulting pandemic management on the horizon, think hard about returning. Real New Yorkers don’t feel happy in the suburbs. New Yorkers who made their money here, got their high school educations at our extraordinary specialized public high schools, and now are Floridian tax refugees, you should come back! This is not the time to flee. Ask not what your city can do for you, ask rather what you can do for your city.
The fourth quarter of 2020 brought drama to the lives of many New Yorkers. In addition to our Presidential election, we saw a rebound of residential real estate activity which brought many sectors of the market to higher levels than they had seen a year earlier. Competitive bidding returned for many well-priced properties, as did the gazumping (overbidding after another offer is accepted) of agreed-upon prices by considerably higher offers received late in the game. Most buyers shopped more online and visited only those properties which seemed a perfect fit, cutting down on apartment visits (which were all still appropriately masked and curated.)
Buyers in particular have been surprised by the post-lockdown rebound in activity. Prices have firmed up at approximately 10% below their pre-COVID levels. New Yorkers make up most of the buyer pool: three months at home during lockdown made clear to them what they need changed in their living situations. Is it a home office, or outdoor space, or more space? Is it a home within walking distance of work, or of the kids’ schools? Or is it just a better view, or easier access to a park?
While statistical analysis of our fourth quarter residential sales market matters, to me the truth lying behind the statistics matters more. Pied-a-terre buyers come primarily from the New York suburbs. Even the biggest ticket properties are being bought by local families. The market for properties at $5 million up has bounced back; the city has even seen several trades above $20 million and $30 million. Meanwhile, December sales activity (as shown by new contracts signed) increased almost 13% from the previous month, and a whopping 31.5% from December of 2019. Prices per square foot show on average a 4% increase over November and a 1.5% increase over December of 2019 (all statistics courtesy of Urban Digs). Of course, prices and transaction volume rose strongly during the first two and a half months of 2020. And then we entered No-Man’s-Land.
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Several truisms remain. Properties in need of major renovation still linger on the market, regardless of price. For these homes, cleanup provides the surest route to a sale: the property will look completely different once the carpeting is removed, the floors are polished, and the apartment is painted some version of white. Neighborhood matters; more buyers than ever want to be centrally located within their neighborhoods, within easy shopping distance of groceries, wine shops, restaurants (even if now only for take-out) and schools.
Many questions remain about the city’s long-term recovery. Will a Biden Presidency bring desperately needed Federal finds to New York? How will the Black Lives Matter movement affect policing in minority neighborhoods? Will the Mayor be able to address the spike in violent crime which has made city residents anxious? Will workers return to the office once a vaccine is in place, and, if not, what will happen to the millions of square feet of currently unutilized commercial space? Will retail rents retreat to a level at which merchants will once again want storefront space? As the city grapples with these problems, will the City Council or the State Senate make ill advised taxation decisions which drive more businesses and affluent New Yorkers and other Americans away rather than bringing them back? And finally, will the spike in COVID cases bring about another shutdown of commerce, sending us all back home again?
More than anything else, the answers to these questions will shape the residential real estate market in 2021. For today our market is strong, our constituents are committed, and our city feels alive. Even without theater, concerts, sporting events, the unquenchable spirit at the heart of New York City beats on, not by this pandemic or any other crisis to be extinguished.