The real estate market had its strongest February in many years, with Manhattan sales leading the charge and even the decimated rental market gaining some ground.
Much like its meteoric decline at the peak of Covid, the Manhattan market's recovery since the start of 2021 has been swift. February signed contract volume jumped by nearly 160% compared to September 2020, and was up 24% compared to just one month before. This sudden uptick in buyer activity in Manhattan ushered in increased absorption (with total inventory declining 4%), decreasing discounts, and the return of the bidding war, especially in Downtown listings priced <$2M. While February’s average and median sale price and PPSF figures were still slightly lower than early 2020 figures, there is a growing consensus that the Covid discount era in Manhattan is firmly over as the average discount from asking prices has shrunk to below pre-Covid levels. As the market heated up, many sellers were spurred into listing ahead of the traditional "Spring" market with new inventory in February up compared to historical levels.
A combination of factors may have contributed to the recent rebound, including continued low interest rates, renewed optimism following vaccine news, federal financial aid earmarked for NYC, and the impending change in administration at Gracie Mansion. The recent v-shape recovery in the stock market and increased savings during the lockdowns has also grown the net worth of many would-be buyers.
Across the river in Brooklyn, contract activity also increased in February, albeit less dramatically than in Manhattan. Contract volume grew by 9% compared to January, and was up 6% compared to February 2020, while average days on market decreased by ~3%. Discounts in Brooklyn remained few and far between, as the borough-wide average discount dropped to just 5% for homes sold in February, representing a 4% decline from January, and a 2% decline from last February (pre-Covid). Unlike in Manhattan, Brooklyn prices increased in February, with average and median prices up 4-5% from January, and up by double digits (~17%) compared to this time last year.
New inventory levels in Brooklyn have been exceptionally low this year, and overall inventory declined another 4% between January and February, leaving many Brooklyn buyers waiting for the influx of new listings this Spring.
Manhattan was off to the races In January with the strongest sales activity in the last 7 years. Signed contracts were up 26-27% compared to January 2020 and up 57% compared to September 2020. Many properties that had been lingering on the market since early Fall (or before) suddenly received multiple offers in December/January. In the same time period, there was not much new inventory, and anything appealing that came on was snatched up almost as soon as it was listed. While the data shows lower sale prices, the median and average prices were not substantially different than in January 2020, suggesting that the Covid effect was not nearly as drastic as many feared.
Market-wide the sentiment in Manhattan seems to be that the bottom has passed, and buyers seem anxious to make deals happen before prices rebound further. With inventory still tight and buyers on the prowl, we encourage sellers to list now ahead of the Spring burst of inventory.
In Brooklyn, things were quieter as contract activity was even with or below last year's levels and inventory grew. Closed sale prices were higher compared to both December 2020 and January 2020. As sale prices are a lagging indicator, the strong prices are a testament to the strength of the Brooklyn market throughout the Fall, when political and pandemic uncertainties had Manhattan largely paralyzed.
As we enter the new year, we are taking a break from charts or statistical tracking to give you a more holistic recap of the 2020 market. For those of you that are more numerically inclined, fear not -- we'll be back with that sort of analysis in early February to recap market activity and data from the first full month of 2021.
Looking back, the first two months of 2020 were actually quite promising, with renewed activity that seemed poised to reverse the gradual market slowdown that had been ongoing since mid-2018. Then, just before the busy Spring market really got going, the world stopped. Covid effectively shut down all real estate activity in NYC from March 20 to June 28. Several things happened during "NY on Pause." First, virtually any deal that had an accepted offer in early March but had not yet been signed into contract either fell apart or, if the sellers were lucky, was re-negotiated. Deals that were in contract were at best delayed (with most of those closings taking place in June/July) and some buyers even chose to walk away from signed contracts, leaving behind their 10% deposits. Many buyers combed through their sale contracts to find seller defaults to re-negotiate their contracts. As for new deals, there were only a handful of contracts signed, most early on, which were negotiated at deep discounts as uncertainty loomed. With a moratorium on all in-person showings, the market was at a relative standstill. In the early days of the moratorium, with no clear picture of when activity would resume, speculation, uncertainty, and apocalyptic predictions abounded.
Even before in-person real estate activity was permitted to resume on June 28, things had begun to look up. The stock market had begun to climb, while NYC's Covid numbers were finally on the decline. In May and June, some new deals came together. Aside from a handful of outliers, a majority of contracts signed during this time were within 10% of asking price in Manhattan and within 5% in Brooklyn. New listings began to slowly enter the market in June, followed by a surge in the first few weeks of July when in-person showings were able to resume. Listing prices largely remained at pre-Covid levels, as sellers braced themselves for buyers expecting to negotiate. Contract activity picked up, but aside from a small number of new listings that were snatched up immediately, buyer demand lagged relative to the new wave of listings.
The Fall market saw more buyer activity -- showings, inquiries, interest -- but deals were slow to culminate, and new inventory continued to enter the market adding to a growing surplus. Some neighborhoods -- like Midtown -- were hit harder than others, with very little buyer activity even after drastic price cuts on most of the listings. In the deals that did come together, contract prices in Manhattan largely remained within 10% of ask, although some neighborhoods saw far less (or more) negotiability than others. While Brooklyn numbers seemed to track on paper, on the ground activity was less frenzied than in the past. With buyers taking a more cautious approach, days on market figures in Brooklyn had risen borough-wide by the end of the year.
Since the election and announcement of the initial vaccine distribution plans in November, the Manhattan market has regained some ground. By the end of the year, sellers and buyers seemed to be converging. While total number of closings were lower than in previous years, contract activity picked up and ultimately exceeded historical levels in the final months of 2020. Many properties that had been on the market for months suddenly saw an uptick in interest, with a few even receiving multiple offers, pushing sale prices closer to asking than anticipated.
By the end of the year, low rates and negotiability enticed many buyers who were sidelined into recognizing value, especially in the luxury sector which has seen a healthy rebound from a years-long slump. Those looking have flocked toward larger homes with the average square footage of 2020 sold listings up a whopping ~30% compared to 2019. At the end of the day, we have not seen the mass exodus out of the city that many predicted, although Covid did accelerate the move for many folks who were already considering it.
As we enter 2021, we are seeing a significant uptick in activity with our own buyers, and inventory levels remain low, with very few new listings entering the market since the start of the year. It remains to be seen how this dynamic will play out, or if it will continue as we get closer to the start of Spring. Currently, we expect the market to continue improving during 2021, although there are still deals to be had, especially for buyers looking in the areas of Manhattan that were hit the hardest during 2020.