We hope this email finds you and your families safe and healthy. With light finally at the end of the tunnel of Manhattan’s longest real estate lockdown in history, we saw a significantly busier May than April. The market appeared to have come to a full stop at the beginning of quarantine, while May saw a transition to the ‘new normal’ of virtual sales and leasing. As phase one in Manhattan has begun, we’re likely only a few weeks away from the return to physical showings. With the financial markets roaring back to life, still incredibly low interest rates and months of pent up demand, we may be on our way to delayed ‘Spring Market’ and a very active Summer. We’re in a time where people are realizing their home is more important than ever.
As the effects of the pandemic are hopefully subsiding, we find ourselves in the midst of another battle across the country against racial injustices.
Destruction, Normalization, Recovery We see three phases to the NYC resale market - Destruction, Normalization, Recovery. These phases apply to supply first, then to contracts signed (demand). At the start of the shutdown we saw the destruction of inventory, with about 1/3rd of the inventory in Manhattan coming off the market. Inventory should be at roughly 7,700 units and right now and we're in the low 5,000s. We are seeing more and more apartments coming on the market - 253 new apartments came online last week which is 3x higher than a low of 70 in week 5 of the shutdown. It's been ticking up every week since and supply should be in the mid-300s. We expect a huge surge in inventory after Phase 2 opening (June 22nd) - which should ultimately normalize supply.
Pending sales has been on a gradual decline since the start of the shut down - continuing to go down and we don't see any indication of normalization. 56 contracts were signed this week which is down from 61 last week. At the start of shutdown it was 136. The low was week 12 (two weeks ago). Contracts signed should be in the 200's to 250s (which has been the case for the last 10 years). At this point, we’re 12 days away from the gates opening and we hope to see more normalizing a few weeks later.
Inventory Drops Nationally, home values rose 5.4% annually in April, a sharp increase from the 4.5% annual increase in March. The gain in prices was driven by a record drop in the supply of homes for sale. Not only did some sellers pull their listings in April, but most of those who planned to list decided to wait. The inventory of entry-level homes for sale fell 25% in April from a year ago.
Manhattan Rental Vacancies Hit 14 Year High Manhattan’s vacancy rate hit a new high in the 14-year history of Jonathan Miller’s rental report, a leading Manhattan appraiser. Leasing activity in Manhattan was down 62% last month from a year ago. It was also 54% lower in Brooklyn and 61% lower in Queens. More Manhattan apartments were left unrented last month than in any month since Miller began tracking the market in August 2006. The vacancy rate of 2.88% was up from 1.65% during the same period in 2019. It was 2.42% in April.
Landlords also threw in more sweeteners last month in Manhattan. In 42% of Manhattan deals, owners made rental concessions, up from 34% a year ago. The value of concessions was equivalent to 1.5 months of free rent, up from 1.2 in 2019.
Mortgage Rates The average rate on the popular 30-year fixed mortgage hit 2.97% last week, according to Mortgage News Daily, as the stock market sold off and investors rushed to the relative safety of the bond market. Mortgage rates loosely follow the yield on the 10-year U.S. Treasury. For top-tier borrowers, some lenders were quoting as low as 2.75%. Lower-tier borrowers would see higher rates. Applications for loans to purchase a home also rose 5% last week from the previous week and were 13% higher than a year ago, according to the Mortgage Bankers Association.
