New York City Real Estate Market Predictions for 2020 – Everything Has Changed (Update)
When I first published a round up of predictions for 2020, it seemed we were going to be in for quite an interesting year with some market rocking shifts.
I had no idea what was actually in store and how tectonic that shift would end up being.
The coronavirus pandemic has upended almost every single prediction we could’ve had. And it’s completely unprecedented so we’re very much in uncharted territory. Even 20+ year veterans of the industry have never seen anything like this.
So…what’s likely to happen next in New York City real estate for the rest of 2020?
That’s a question that’s extremely hard to answer at this point, since we’re only a little over a month into this. Once brokerages have more sales data through the end of April, we’ll have a better idea.
But for now, here are some thoughts I have on how things could shape up.
Signed Contracts and Closings Will Decrease
Unless a buyer saw something of interest before the shutdown and feels pretty secure in their financial situation, signed contracts are going to be much skimpier than in previous months and quarters. Preliminary data trends are already showing this.
Some people may want to move forward, but with limited ability to show (many buildings have banned open houses and private showings by brokers) they may not feel comfortable pulling the trigger based on virtual showings alone. We can’t say for sure because we still need to get more data. But numbers from April will hopefully provide some key insights on this point.
Closings will also certainly decrease but not necessarily for the reasons people think. Many buyers and sellers still WANT to close pending deals. But factors out of their hands – such as buildings banning move ins and move outs or delays in configuring virtual closings – are putting them in limbo.
Prices Will Decrease – But It’s Unclear by How Much
Anecdotal evidence is showing that sellers aren’t budging too much on their list prices for now. Why?
For one, lots of listing portals have actually suspended days on market, effectively creating a bit of a “market freeze” due to the current circumstances. And then there’s the next point…
New Inventory Will Tank
THIS is where things stand to get verrrry interesting in the coming weeks and months.
Spring is typically the busiest time of year for new listings and sales. In addition to some sellers pulling their listings off the market, lots of sellers are holding off on listing their properties at all until the lockdown starts to be lifted and more buyers show a willingness to get out and start buying again. So that’s a hefty chunk of inventory that’s outright missing. Usually during a downturn, there’s a glut of inventory. But that may not end up being the case here because of all the listings being held back.
With limited competition on the market and days on market being held less harshly against them, sellers who can wait it out have less of an incentive to lower their prices aggressively. It’s the sellers who HAVE to sell who are most likely to engage in aggressive price cuts to get their homes sold.
Things are super fuzzy when it comes to longer term projections (i.e. more than 3 months from now).
We don’t know when the lockdown will start to ease up. We don’t know when the stock market will show clearer signs of stabilization. We don’t know when more buyers are going to feel secure enough to attempt to buy a new home.
But, if inventory continues to be low, we could actually be looking at a relatively rapid bounce back once the lockdown finally eases up. Not necessarily in terms of sales prices, as buyers are likely going to expect deals in the aftermath of all of this. But in terms of the number of sales done – i.e. contracts signed.
Once sellers sense that market activity is back, we’ll likely see an uptick in inventory. I think prices still won’t see any increases even at this point. But, if prevailing factors regarding the pandemic continue to be positive and buyers feel more and more secure, I think that as inventory starts to improve, so will prices.
Important caveat, however – all of this happening will hinge on there either being no or a very limited second wave of infections. And this is a really, REALLY big “if” at this point.
But, regardless, we’re certainly months and months away from seeing any kind of significant improvement happening. Could there be an incredible opportunity around the corner for potential buyers? Absolutely. So if you were hoping to buy in 2020 (and still feel secure enough to even consider it), it’s definitely worth it to keep your eyes open and your ears to the ground.