(NYC + Real Estate) x COVID
This is an account from Mukul “Micky” Lalchandani, an on-the-ground perspective in the life of a New York City real estate agent and how he is navigating through the pandemic as it relates to real estate.
How is the market?
When NY State began implementing stay at home orders in March 2020, we began removing our sales listings from the marketplace. Our thought process was that serious buyers spending USD$1 million and above would not be willing to part with such a large sum without seeing a property in person. Many buildings would not allow guests to enter residential towers, and the State mandated that real estate agents were not essential workers and had to stay home as well.
Initially, several of my clients in the Finance industry were predicting massive devastation to the real estate economy and a far worse outcome than the Great Depression of the 1930s. As the days progressed, and the infection and death rates soared, that prediction was quickly becoming reality. Fast forward to today, nine weeks later, hospitalizations and deaths in NY are steadily decreasing. The human toll, as horrific as it is, can be measured, but its effects on the real estate market are less known. Real estate trends tend to move and react slower than Wall Street, and in this case also Main Street.
No COVID discounts
In reality, NYC’s real estate market is more in a state of PAUSE than an actual crash. NYC was already in a soft market since 2017, and finally, during the first quarter of 2020, we began seeing signs that the market was rebounding. By March, when the pandemic took hold, rather than taking a price cut many sellers opted to instead remove their listings from the market completely. This resulted in a 30% reduction in listing inventory compared to last year. Keep in mind, sellers of million-dollar homes are also shielded to a certain degree from the realities of pandemic-induced hesitations occurring nationwide. Many of these individuals are considered high net individuals and have the ability to work from home fully employed. They also tend to have a larger safety net than the average homeowner. This week we’ve begun to see listings return to the market – albeit at a snail’s pace. We have yet to see any significant COVID discounts. Real estate developers have opted instead to provide incremental incentives above what was already being offered prior to COVID, i.e. sweeter broker commissions, parking space concessions, and larger carrying cost and closing cost concessions. Missing are any dramatic price cuts that weren’t already present pre-pandemic.
Robust rental market
The residential rental market, on the other hand, continues to be robust. Many people still need to relocate due to an expiring lease, job change, or life event that doesn’t halt or pause for a pandemic. Life continues to move forward. In fact, rental prices are continuing to rise.
The real estate industry was jolted when agents and clients accustomed to face-to-face meetings were no longer allowed to experience a property in person. Today, more so due to dire need than ever, everything is being done virtually – from appraisals and showings, to punch lists and closings. If you don’t know yet, I am a big tech nerd and have been an advocate of propelling the industry forward by harnessing the strength of technology and automated systems. The time has now come for everyone to get on board as this is the only way to do business. Over the past year, I’ve invested heavily in launching online services to simplify the home-buying process, including a client portal that automates the customer journey. I’ve also enthusiastically learned the art of virtual tours. These kinds of services will differentiate those agents that survive post-COVID.
Exodus of agents
Prior to the pandemic uprooting our lives, NYC had seen significant changes in the real estate industry. Zillow and Streeteasy were stripping away our online dominance and New York state had passed rigorous rent laws that ultimately increased the barriers to entry for newcomers. COVID has likely exacerbated the exodus of real estate professionals that already had a tough time surviving. Many of my colleagues have filed for unemployment and government stimulus, a majority of which are still waiting to get their first check.
The future is generally optimistic
It is still too early to tell where the for-sale market will go in the future, or how long the lockdown will continue. But for the moment, all signs point to an opening of the real estate market with not as much doom as predicted. Interest rates continue to be historically low, the stock market is surging and the federal government has pumped trillions of dollars into the economy with more to come. With no historical precedent, only time will tell.