No real estate market within recent memory offers both the challenges and opportunities inherent in this one. The longer-term impacts of both the COVID crisis and the attendant economic disruption, on both the city and state level, remain difficult to quantify as so much remains up in the air. That said, for those buyers and sellers who choose to transact in the current environment, it’s important to understand how the market works today. Which strategies seem to work and which don’t? Which properties are sought after and which are not? And how best to position a property for success?
- Mostly, you’re in charge. Prices in Manhattan ceased accelerating in late 2015; in Brooklyn it took a year or two longer. Since then, values had fallen between 10% and 20%, depending on a variety of factors including location, property type, property size, and price range. During the first quarter of 2020, the market strengthened noticeably. Then the COVID lockdown and its attendant ills added another 5% to 10% to those already substantial losses. In this environment, buyers committed to New York recognize opportunity. Especially in the larger apartment market, many sellers want out: maybe they have purchased another property, maybe they are estate executors, maybe their needs have changed and they have lost half a year waiting for this market to open up again.
- Some properties are still popular. Outdoor space sells. Good condition sells. Sensible pricing sells. Neighborhood sells. A well-located property with a terrace and a reasonable price may receive multiple offers within a few days of going live. Buyers who seek these features must anticipate the possibility of foregoing any COVID discount in order to secure them.
- Asset conversion works in your favor. The securities markets have never been higher. At the same time, real estate assets are substantially cheaper than they were only a few years back. So converting highly appreciated assets in stock to meaningfully depreciated assets in residential real estate, especially when combined with a strategy of strategic financing at historically low rates, opens the property markets to a new echelon of potential buyers while offering opportunity to experienced buyers at all price levels.
- Clean it up! Many sellers, facing disappointing prospects regarding the sale of their house or apartment, don’t wish to commit funds to prepare it for sale. In fact, preparing a property for the market has never been more important. Inventory in both the sales and rental markets is unprecedentedly high; the first impression a property gives matters more than ever with so much competition. At the very least, the property must look clean, bright, and spare. The moment an apartment is placed on the market it becomes a product, and every seller must understand that. What will show the product off to its best advantage: cluttered, draped, and filled with pattern, or spare, bright, and open? Buyers will ALWAYS react better to the unit which doesn’t have a strong stamp of personality. Buyers want to imagine THEIR life in the space.
- Don’t inflate the value. A brisk marketplace remains for homes in established neighborhoods offering good value for $2 million or less. As prices move up from there, deal flow thins out. This past week, The Olshan Report, which tracks residential contracts signed for $4 million and over, showed twelve new deals; the preceding week the number was nine. The sellers whose properties move take both the February market and the additional COVID discount into consideration, pricing at 5% to 10% below pre-pandemic levels.
- Listen to the market. If a property lingers on the market without receiving offers, it’s most likely NOT because the marketing is inadequate or because the agent doesn’t work hard enough. It may be that it needs clearing out and brightening up, it may be that the neighborhood is a tough sell today, but whatever the issue, the price always sits at the root of the problem. The market is impartial; it delivers its verdict regardless of whether the news cheers or distresses the property owner. Every serious seller needs to listen.
Too much uncertainty remains to allow experts to predict how the various market segments will fare over the next year. The possibility of a resurgence of the virus with flu season, the Presidential election, and the difficult economic situations facing New York, city and state, render any predictions highly speculative. That said, buyers will buy, and sellers will sell. And the more informed and attentive they are to the particularities of this market, the more successful those transactions will be.