The New York City real estate market was already cooling off before the coronavirus pandemic put everyone in lockdown. As per the latest news, sixty people have died from coronavirus in New York City, as statewide cases jumped to over 10,000 on Saturday. Some 8,115 people had tested positive for the virus in the city as of 6 p.m., helping make New York the global epicenter of the pandemic.
Social distancing is being enforced everywhere. Testing and treatment is being ramped-up. The state officials are taking many measures for noncompliance of curbs on social distancing, especially in the parks of New York City, where many people were seen chilling on Friday.
The governor criticized young people for not heeding the warning to avoid unnecessary contact and danger of viral transmission to others. Till Saturday, coronavirus has sickened 2,484 people in Brooklyn, 2,254 people in Queens, 1,868 in Manhattan, 1,071 in the Bronx and 437 in Staten Island, the mayor’s office said. At least 1,450 people were hospitalized, including 370 people in intensive care units.
Amidst this deadly virus outbreak in the New York City, its real estate market is also finding itself being impacted by the pandemic. New York City was already seeing a slowdown in the housing market, especially for luxury housing. One reason was the “mansion tax” that applied to all homes over a million dollars (which isn’t much in NYC) but up to four percent for homes worth more than 25 million dollars. This is why an estimated half of all luxury condo units in NYC are vacant.
What about the overall NYC real estate market? The average property was worth roughly 600K. Prices were down seven percent, while days on market hit nearly six months. Brokers, buyers, and sellers are all navigating uncertainty amid the pandemic. The potential home buyers are hesitating to attend open houses and are suspending their home hunting till things become better. Let’s look at the short-term effect of the coronavirus pandemic on the New York City's economy and housing market. Then we’ll make an educated guess as to the long-term effect of the coronavirus on the NYC real estate market.
Short Term Impact of Coronavirus On NYC Real Estate Market
Landlords in NYC real estate market were already reeling under ever tighter tenant protection in a city that was already one of the hardest to evict a non-paying tenant or someone who made life hell for everyone else. Combine reductions in income with high taxes, and a growing number of property owners want out. This increases the opportunity for finding bargains in the NYC housing market as an investor that are worth the hassle and risk. And then you get the coronavirus shutdown.
Many of us have seen the pictures of nearly empty streets that are more fitting a zombie apocalypse movie than a news reel. Non-essential businesses, defined as anything except a pharmacy, grocery store, health care facilities (including vets and walk-in clinics), utilities, mass transit and airports, restaurants (for delivery only), banks and other financial institutions are shut down. The residents across the state are being told to stay home as much as possible in an effort to stop the spread of the novel coronavirus.
This is effecting the local economy. It isn’t just Broadway canceling everything. This means that there are many of small business owners who aren’t earning income, and millions are out of work. New York residents are encouraged to continue to practice social distancing, and limit activities to things that can be done alone or while maintaining at least six feet of distance between themselves and others.
Mayor de Blasio announced Tuesday that he is on the verge of ordering city residents to “shelter in place” to combat the coronavirus that has quickly overwhelmed the area and the nation. Although the mayor did not lay out in detail what such an order would look like, it almost certainly would restrict movement within the five boroughs and limit outside trips to essential errands like grocery shopping and pharmacy visits.
They don’t have an income, and 70 percent or more were living paycheck to paycheck. Promises of government checks don’t cover the rent, groceries and utility bills. This is why Governor Cuomo suspended mortgage payments for people who lost their job. Evictions and foreclosures, as well, because the courts have closed. As of this writing, there is a push to get rent payments paused, as well. These last two issues hit property owners hard.
Working people across New York State are facing lay-offs and struggling to pay rent and buy basic necessities. Now, as officials consider a more radical shelter in place policy, advocates have broadened their calls to state lawmakers for a full eviction moratorium and state investment in affordable housing. They have also imposed immediate suspension on rent, mortgage, and utility payments.
Suppose you have tenants who were already two or three months behind on the rent. They are now going to sit in the apartment another few months, and you’re not generating income from those units. Your taxes, insurance and other bills are unchanged. There hasn’t been a push to pause mortgages for multi-family properties, so that bill is probably still due. Telling property owners to be charitable and write off the losses doesn’t help them pay their own mortgage payments.
Furthermore, they’re going to face a cash crunch as they work out payment deals for those who don’t have to pay rent during the coronavirus crisis. As local businesses shutter and the number of laid-off workers rise, it’s unclear how many will pay their rent and other basic expenses. Where does this leave us? It means many renters and home owners will stay put, and many won’t be paying for that privilege. This will hurt the budget of property owners, whether it is a retiree who owns a four unit condo building or an institutional investor who owns a 500 unit apartment building.
The Trump trillion dollar stimulus bill probably won’t have much effect on the NYC real estate market. Suppose the government sends stimulus checks of one to three thousand dollars per adult. That’s roughly one month’s rent in NYC. Sending stimulus checks to shuttered businesses won’t solve their lack of cash for the months it takes for business to return to normal. All it does is stem the bleeding.
The Democrats are fighting for aid to severely distressed businesses. Their focus is on dramatically expanded unemployment, something that’s desperately needed due to the estimated two million people expected to file for unemployment as all “non-essential” businesses are shuttered for who knows how long. And it will be vacant hotels and resorts that get money before building owners who are seeing 10 percent of the revenue they used to get.
Long-Term Effects of Covid-19 On NYC Real Estate Market
Inventory of luxury unit was already equal to several years’ worth of sales. And the prices of these units had already hit a low not seen since 2013. While the coronavirus virus is slowing down construction, that won’t really affect the over-supply or falling prices in that market segment.
Real estate brokers are shifting from in-person to virtual open houses. This population is going to suffer economically due to decreased sales, since people don’t want to go tour properties and may not be able to meet up to sign the paperwork. A long-term impact may be more rentals and fewer buyers, if long-term unemployment and business closures hurt people’s credit.
There is a real possibility that there will be a bailout of major financial institutions for this slow-moving financial catastrophe for real estate investors. Unfortunately, it is the small investors who are the least likely to get help. Bailouts in the form of low-cost government loans or the feds buying securities doesn’t help the person who lives in one triplex and rents out the other three.
One of the long-term effects of the coronavirus virus on the NYC real estate market is the certain bankruptcy of many small property owners. That creates an opportunity for investors with the funds to buy these properties. If you qualify for a mortgage, this is an ideal time to buy property in the NYC real estate market. The government is lowering interest rates to essentially zero in an effort to prevent a Great Depression.
The promise of low interest loans from the Small Business Administration or subsidized loans from the government may not be enough, and they may not want to take on additional debt. And given how many people just wanted to get out already, we can expect an uptick in rental properties in the NYC area by the end of 2020.
According to StreetEasy economist Nancy Wu, those who were planning to buy this spring are “in a good position as the number of homes on the market has reached all-time highs and mortgage rates reached seven-year lows.” But she stresses that “ it may be wise to wait” if you’re uncertain or have a more flexible timeline, as sellers have yet to adjust to the current economic downturn and “we’ve seen in the past that stock prices adjust to economic news faster than home prices.”
Key Takeaways – Covid-19 Impact on New York
The NYC housing market was already seeing a decline when COVID-19 arrived. It was good time for buyers. Due to this coronavirus pandemic that the NYC real estate market is going to fall much lower, and it may drive many small business and real estate owners into little trouble. For those who have the resources, it will become a once in a lifetime buying opportunity if you want to deal with the massive red tape. The NYC state officials have repeatedly urged residents to stay home if they’re sick and try to work remotely even if they’re not. The NYC market will bounce back when the things get normal.
Testing is being increased in the United States by day by day. CDC is aggressively responding to the global outbreak of COVID-19 and preparing for the potential of community spread in the United States. As of the evening of March 20, the total number of public health laboratories that have completed verification and are offering testing is 91. This includes one or more PHL in 50 states plus DC, Guam and Puerto Rico.
Meanwhile, Senate Republicans investigational vaccine designed to protect against coronavirus disease 2019 (COVID-19) has begun at Kaiser Permanente Washington Health Research Institute in Seattle. The study is evaluating different doses of the experimental vaccine for safety and its ability to induce an immune response in participants. This is the first of multiple steps in the clinical trial process for evaluating the potential benefit of the vaccine.emergency legislation to address the economic fallout from the outbreak. The third phase of the legislative response to the pandemic includes direct cash payments to many Americans. A Phase 1 clinical trial evaluating an
The way we consume news has changed drastically. The power of mainstream and social media in amplifying bad news is unprecedented. Whether it is a communal clash or a viral epidemic, it feels like its happening in your house. This constant fear of things going from bad to worse feels like like a sword hanging over your head. I'd say that there is a lot of noise and myths that you need to filter out from the news and pay attention to only facts and figures. Be safe and take precautions. Let the situation calm down before you try to do anything else.
- State of market before pandemic
- Short term effects
- Long term effects
- Trump stimulus