Investors and the Media Announced the Death of New York Real Estate – Data Tells us a Different Story
Published by Jordan Girard on April 5th, 2021
New York City's single-family and multifamily property prices were higher in February 2021 than ever before, per Whiterock's Market Tracker, a quasi-real-time analysis of real estate transactions. In February 2021, Manhattan reached $717 PSF, and Brooklyn reached $492 PSF. A boom may be happening in the suburbs and the Sun Belt, but it is now clear that it will not be permanent, unlike what many expected. The rollout of Covid-19 vaccines will push prices and transactions even higher, and the real question is: how far and how fast will it go?
With the onset of the Covid-19 pandemic, 3.57 million New Yorkers left the city for places that offer more space and outdoor living like Arizona, Florida, and the Hamptons. Most believed that this was the beginning of the downfall of New York's real estate.
And then New York came back.
While the media and analysts have been postulating on an alleged migration claiming the quiet suburbs will replace the hustle-bustle of the Big Apple, real estate professionals are experiencing signs that the New York City exit is only temporary.
Indeed, while the number of real estate transactions collapsed during the Covid-19 pandemic, prices did not decrease. The few properties that transacted in 2020 and 2021 sold at pre-Covid prices, unlike what most of the market expected. There seem to be three reasons for that.
First, wealthier buyers who stayed purchased larger residences to accommodate living and working from home. Second, in a low-rate environment, sellers attempted to hold on to their properties long enough for the market to recover or removed the properties from the market altogether. Third, when 3.57 million New Yorkers left the city, another 3.5 million moved into the city during the same period. The main difference is that newcomers have on average 40% lower incomes than the New Yorkers who left.
As of February 2021, there are market-wide indications that the New York real estate market is gaining momentum as offices start welcoming back its workers, restaurants its patrons, and stores its shoppers. Both buyers and sellers are moving forward with their investments to benefit from good deals before incentives dry up. Indeed, when most people think that there is a bargain, that collective belief helps strengthen the market making the bargain disappear. The fact that the number of transactions and prices are steadily increasing, vacant apartments are getting occupied faster than in the last twelve months suggests one thing: the market is in recovery mode and New York City remains the most attractive city in the world.