At the start of 2020, New York’s luxury real estate market was finally showing signs of life. There was still a large oversupply of new condos on the market, but buyer and seller expectations—never aligned in the best of circumstances— were slowly beginning to move in tandem. Manhattan sales volumes were up 13.1% year over year in the first quarter of 2020, according to a Douglas Elliman report, even as median prices declined by a modest 2.6% for the same period.
Now, more than two months into the Covid-19 pandemic shutdown, with the summer sales season looming, the industry is once again bracing itself for an uncertain market. “Prices had been falling for several years at the high end,” says Jonathan Miller, the president and chief executive officer of appraiser Miller Samuel Inc. “The question is: Will sellers and developers at the top of the market capitulate to another step-down?”
There are dozens of factors that could impact the luxury housing market. Some of the most pressing include the speed with which the city opens; the time-frame in which people in white-collar jobs are asked to return to their offices; whether or not services and stores (coffee shops, boutiques, restaurants) that make neighborhoods desirable will still exist when they do return; the strength of the stock market; the strength of the U.S. economy; the date that a vaccine becomes available; and whether the shutdown pushes New Yorkers to live in the countryside.
“I think the second-home market in this crisis is suddenly viewed as an equal partner to primary residences,” Miller says. “We could see less of prices rising to the stratosphere for primary residences, and more resources devoted to a second-home market, so that people could realistically live in both at any given time.”
With no robust sales data available, the only certainty is uncertainty. “We had 20 transactions last week [ending in May 17] in new development sales,” says Shaun Osher, the founder and chief executive officer of the real estate brokerage Core NYC. “But closings don’t define where the market is right now; they define a market that’s already gone by.”
Because the spring sales season was effectively canceled, Osher says, “We have a huge pent-up inventory of product that’s going to flood the market in the next 30 to 60 days, and it will be interesting to see what that does to pricing and consumer confidence.”
Winners
People in the industry suggest that some property types could sell more easily than others.
“If a property is renovated, there’s going to be a stronger demand than something that’s not,” says Donna Olshan, president of the luxury brokerage Olshan Realty Inc. “Who wants to renovate in this environment?”
Similarly, the convenience of walking to work could take on added import. “Everyone talks about location in real estate,” Osher says. “But Brooklyn was already priced high, and I think if people see they can buy the same apartment in Manhattan and walk to work, that’s going to be a huge driving factor.”