A man enters a building with rental apartments available August 19, 2020 in New York City.
Eduardo MunozAlvarez | SHOW press | Corbis News | Getty Images
Sales contracts in Manhattan for residential real estate increased by 73% in February, and brokers say that the days of big price cuts and deals in the city may end.
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After seeing a historic decline in contract volume in 2020, as hundreds of thousands of people migrated from the city to the suburbs and other states, Manhattan’s real estate market is bouncing back faster than many brokers and analysts expected, largely thanks to Covid vaccine propulsion and price cuts.
During the first two months of 2021, a total of 2,472 contracts were signed – the highest level since the market peak in Manhattan in 2015, according to Garrett Derderian, director of market information for Serhant, a real estate company. Sales contracts in 2021 have so far topped $ 5 billion.
“This is a remarkable improvement from 2020, and a trend we began to see emerged from the time Biden was elected in November to the announcement of the first viable vaccines for Covid,” Derderian said.
Brokers and analysts say much of the activity was driven by lower sales prices, which have fallen by an average of about 10% in Manhattan, according to Jonathan Miller, CEO of Miller Samuel. Many apartment buildings were forced to reduce prices by 20% or more, and the resale of some luxury apartments on “Billionaire’s Row” in downtown Manhattan has sold for less than half of the top prices in 2015.
But now, with increasing demand from buyers returning to the city, price declines and deals may soon end or fade, say brokers. The stock of unsold apartments, which had ballooned to more than 9,400 at its peak last fall, has shrunk by 20% to about 7,500, which is close to the historical average, according to Miller.
“It looks like it’s going to be a short window” for price reductions, said Steven James, president and CEO of Douglas Elliman’s brokerage in New York City.
Of course, there is still a large supply of “shadow furniture” – or apartments that are empty but not listed – and sellers who need to sell quickly will still need discounts, analysts say.
Potential tax increases in New York could also prolong any recovery, along with external labor policies that allow workers to live outside the city. Many say it could still take years for Manhattan prices and contract volumes to return to pre-pandemic levels.
Still, analysts and even the most bullish brokers say they are surprised at how quickly Manhattan properties bounce back after last year’s record decline. Brokers say buyers are a mix of three categories: those who left the city and are back, younger buyers who were priced out of the market for years and can now buy thanks to falling prices and low mortgage rates, and new buyers who sold their homes in the suburbs to high prices and will try to stay in the city.
Much of the growth is driven by high end, with contracts signed for listings over $ 10 million quadrupling. Nevertheless, even studio apartments and one-bedroom apartments see strong gains from younger buyers.
“The bigger story is the incoming migration to Manhattan,” Miller said. “I think the youth renaissance we’re going to see in Manhattan is a big part of the story.”