Agents embraced virtual showings and transaction management, but the pandemic took its toll on business in Manhattan and Brooklyn during Q2.
During Second Quarter 2020 Covid-19 had a profound impact on New York City and its real estate market. While business quickly pivoted to be conducted virtually, Manhattan market activity was a fraction of its pre-COVID level as a result of in-person showing restrictions. Now, as New York’s lockdown eases and inventory returns to the market, short-term contract activity will likely be supported by pent-up demand. Longer-term, for-sale market conditions will depend on the wider economic recovery and the containment of COVID-19.
Sales activity fell sharply this spring. The slide in contracts that began in March deepened in Second Quarter. In all, fewer than 700 contracts were signed this quarter. Closings, 90% of which were for contracts signed pre-COVID, fell less, but at 1,605 sales was still the lowest quarterly total since the 1990s. While dramatic in magnitude, the drops were the result of quarantine rather than serious structural shifts in demand. In fact, just as contracts fell immediately following New York’s stay-at-home order, sales activity stabilized and has trended upward since reopening plans were announced in the second week of May.
Listed inventory was also affected by COVID-19. In Second Quarter 2020, active listings fell annually for the first time since 2015, to 6,075 units as of mid-June, which was 26% below last June’s ten-year peak of 8,174. As with sales, the decline in listings that started in March accelerated in April and May as over 1,800 units were pulled from market and fewer new listings were brought to market. By early May, active inventory bottomed out under 5,900 units. However, as expected, these drops were only temporary, as nearly 1,400 units have hit the market since plans to reopen were first announced by Governor Cuomo on May 29, 2020.
Because of a drop in sales over $3M, median and average price declined for a fourth consecutive quarter. Last year, a rush of high-priced closings to beat changes in the transfer and mansion tax rates skewed Second Quarter numbers significantly. Also, since most closings this quarter were contracts signed before COVID-19, the price declines primarily reflect early-2020 market conditions, when demand at the lower end of the market was rebounding due to lower interest rates, while over-supply continued to affect the high-end. Thus, next quarter will provide a truer gauge of the pandemic’s effect on pricing.
Note that we have made some modifications to this quarter’s report given the pause in the market while the state ordered non-essential businesses closed during “New York on PAUSE.” The counting of days on market was suspended so is not shown. Percentage comparisons of this quarter to prior quarters are also not shown given the restrictions on conducting business make these comparisons not applicable.
In Second Quarter 2020, the Brooklyn real estate market hit pause due to the global coronavirus pandemic. Between mid-March and late-June, buyers and real estate agents were only permitted to conduct business virtually, yet market activity continued—albeit at a slower pace. As a result, sales unsurprisingly decreased this quarter to under 940 closings (over 80% of which signed before March 13th) and 355 contracts signed. Now that restrictions have been partially lifted, Brooklyn marketwide activity has started to trend upward as a result of pent-up demand, low interest rates, and increased negotiability.
In the last week of June, in-person showings resumed, accompanied by an increase in listings and appointments. On the day New York reopened, Brooklyn saw new listings double versus the daily average from earlier weeks. Yet, total inventory at the end of the quarter hit a seven-year low nevertheless. There were fewer than 1,600 apartments on the market as of the end of June. However, 13% of that inventory was apartments newly listed in the few short days leading up to the Phase 2 reopening and the return of in-person showings on June 22.
Nonetheless, despite the pause in the market, Brooklyn price figures did not change significantly this quarter. In fact, resale co-op median and average price hit record highs. New development prices moderated, but were already trending downward due to shifts in where closings were occurring. A more accurate gauge of how prices changed during the shutdown will likely emerge next quarter when there are a greater number of closings for contracts that actually signed in Second Quarter 2020.