The COVID-19 pandemic had a considerable impact on residential real estate in New York City. Studies show that New York City has undergone a shift with more people opting for homes in the suburbs and leaving apartments and homes in NYC empty. With so much uncertainty surrounding the pandemic, the real estate market in NYC has been somewhat of a gamble for the past year and a half.

How The Pandemic Impacted the Real Estate Market New York City

The full lockdown in New York began in March 2020. By March 27, New York City had become the worst-affected area in the country. The state gradually reopened in four phases during 2020 and 2021, with most restrictions lifted on June 15, 2021 – more than a year after the initial lockdown was put in place.

Transaction Count Declined

These lockdowns had a significant impact on the residential real estate market in New York City. During lockdown, only “virtual showings” were allowed, which meant home shoppers only had access to walkthrough videos or a series of photos before putting down six or even seven figures for their purchase. The inability to physically see and walk through available properties directly impacted the transaction count in NYC, which declined drastically during the initial months of the pandemic. Typically, Manhattan would see about 1,000 contracts signed in April and May. In 2020, the average for these months was less than 200.

Demand for Housing Shifted to the Suburbs

According to a Zillow study, there were 19% fewer homes available in the greater New York City metro area during 2020 than there were in 2019. But the opposite was seen in the city itself, where there were about 7% more homes available in 2020 compared to the year before. The increased demand for housing in the suburbs has been attributed to the shift to remote working and fact that lockdowns were stricter in city versus the suburbs. Rentals in New York City were also impacted, with some of the most expensive neighborhoods experiencing a steep decline during the pandemic. Many renters were not willing to pay a premium to live near amenities they were not able to use or an office they were no longer required to be in.

Prices Decrease in the City, Increase in the Suburbs

During lockdown, purchase prices were down 2-5% in the city due to the large number of vacancies as people fled the city to the suburbs. At the same time, the prices of homes in the suburbs increased in response to the sudden influx in demand and bidding wars were at an all-time high.

NYC Real Estate is Starting to Rebound

As of June 15, 2021, nearly all COVID-19 restrictions have been lifted in the state of New York as the vaccination effort has accelerated. Normal life has begun to resurface, and the real estate market in New York City is rebounding. Although summer is not typically the busiest season for purchasing real estate in NYC, the pent-up demand likely means this year could be different. Plus, external factors such as employment rate will play a role in the future of the real estate market in New York City. “If you look at the job growth rate, unemployment is going down faster in metro New York City than in much of the United States,” says architect Victor F. Body-Lawson of Body Lawson Associates.

What to Expect in NYC Real Estate After the Pandemic

As vaccination levels continue to rise, restrictions are lifted and businesses reopen, residential real estate is beginning to bounce back to where it was before COVID-19. In Manhattan this spring, apartment sales nearly doubled compared to spring of last year, according to several market reports that released in May. The surge in closed sales is even strong compared to historical records, which show that not since 2015, a time of major boom, has there been three-month period with comparable activity.

Inventory in NYC is continuing to shrink while prices are reaching all-time highs. Recent reports indicate that real estate prices reached an all-time high in the second quarter of 2021, as people return to the city and demand continues to rise. Many NYC residents are also now looking to take advantage of the lower prices and lower mortgage interest rates caused by the pandemic.

Although no one can predict with certainty the future of NYC real estate, the continued recovery and stability of the economy should continue to warm up the market even further, making it a good time to consider buying in NYC at a potentially discounted rate. Even with prices now rising, there are still many great deals to be had across the city during a time of historically low mortgage rates. In fact, 2021 was the lowest 30-year mortgage rate ever. By July 2020, the 30-year fixed rate fell below 3% for the first time — and it kept falling to a new record low (in January 2021) of 2.65% for a 30-year fixed-rate mortgage. Due to the Federal Reserve’s promise of low interest rates post-COVID, mortgage rates are expected to stay low for years. But as we’ve seen in the past, predictions about mortgage rates are often wrong. That’s why when rates are good, experts recommend locking one in instead of waiting for potentially lower rates in weeks or months.

Another thing most experts can agree on is that the virtual home tour is here to stay. It has proved to be a convenient measure for buyers who aren’t local to narrow down their search initially before taking the time to go out to various properties.

The Bottom Line:

The COVID-19 crisis has significantly impacted the residential real estate market over the past year, with a particularly pronounced impact on New York City. As strict lockdowns were enforced and office workers learned they would be working remotely for at least a year or more, buyers and renters alike fled NYC in hopes of finding more for their money in the suburbs. This led to a record number of vacancies and discounts in New York City. As normalcy has started to return and restrictions have been lifted, the real estate market in New York City has warmed up quicker than expected. There are attractive opportunities across the city for buyers looking for residential real estate today, but as inventory continues to shrink and prices continue to rise, serious buyers may want to consider making a move sooner rather than later.

Hyponia Homes is Helping Buyers Navigate the NYC Real Estate Market

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