New York property agent Weimin Tan on when will Manhattan recover

Posted by Wei Min Tan on November 14, 2020

The Manhattan, New York sale market has been steadily picking up since the low in April and May when we had the Covid lockdown.  As a broker, I have been experiencing bidding wars at the $3 million+, three bedroom price segment.   Apartments that are priced well are getting a lot of interest from buyers who are all ready to take advantage of the historically low mortgage rates.

 

Separately, Manhattan rental prices slumped 19 percent as tenants did not renew leases amid work from home policies at companies.

 

Contact:  tan@castle-avenue.com

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Manhattan sales data from UrbanDigs

According to data analysis firm UrbanDigs‘ Nov 6 market update,  active supply was at 9,323, up 23 percent compared to prior year.  It seems to be leveling off since increasing weekly from the lows of April and May.  There were 2,399 listings in contract as of Nov 6, a 29 percent increase compared to prior month.  208 contracts were signed, still over 200 which is good considering we are entering the slow holiday season.

 

A very interesting graph shared by UrbanDigs is that supply at the sub $1 million price point is at 2012 levels during which demand (deal volume) was a lot higher than demand now.  Meanwhile, demand  currently is at 2009 Great Financial Crisis level.  This means the market is favoring buyers.  However, we don’t expect this to last as supply decreases and demand increases.

 

Weimin’s article, Investing in a Manhattan penthouse apartment

 

 

Deal example:  Represented multiple buyers at FiDi’s 130 William Street. which performed well through the pandemic.

 

 

Nationwide Trend

 Nationwide supply was tight going into the pandemic, and that was only intensified by the pandemic-induced decrease in supply as sellers delayed listing their property in fear of strangers coming into their homes.  Now that the market has opened up again, the whole country is experiencing a very hot real estate market, driven by low supply and high demand fueled by record low mortgage rates.

 

According to a Freddie Mac’s survey, Monday’s announcement by Pfizer that its coronavirus vaccine is more than 90 percent successful in trials sent stocks soaring, and bonds were sold off.  That pushed mortgage rates higher and reversed all of the previous week’s rate declines.  Nevertheless, rates are still very low and is driving purchase and refinance transactions.

 

 

What lower rates translate into at a national level

Redfin chief economist Daryl Fairweather said that despite all the economic uncertainty from the coronavirus, prospective homebuyers now have an additional reason to buy a home – low interest rates.  Meanwhile, existing homeowners now can refinance and free up extra cash for spending.

 

According to Freddie Mac, mortgage rates fell from 3.69 percent in Oct 2019 to 2.83 percent in Oct 2020.   At a national level, the monthly payment on a $400,000 home at 80 percent financing dropped from $1,471 a year ago to $1,320 in Oct 2020.

 

At a Manhattan level where property prices are much higher, on a $1 million condo with 80 percent loan, monthly payment was $3,300 in Oct 2020 vs $3,678 a year ago.  While most of the economic effects of COVID-19 have been negative, low rates represent some good news.

 

 

Deal example:  Client’s investment apartment in West Village which was purchased during the Covid lockdown.  It is now providing good rental cashflow to owner.

Manhattan Rentals

In Manhattan, the historical rental vacancy rate has been around 1 percent.  The most recent October 2020 data from Miller Samuel shows rental vacancies at 4.11 percent.  That’s four times the historical average.  Why so high?  Reason is because when leases expired, many tenants did not renew their leases.  Companies have work-from-home policies, allowing employees to work from anywhere.  To save on high Manhattan rents and take a break from NYC, a lot of tenants temporarily moved out of Manhattan.

 

But the tide is changing.  According to CNBC, new leases in Manhattan climbed 33 percent as renters return to the city. This surge is the first in over a year.  Meanwhile, rent prices went down by 19 percent with landlords offering an average of two months of free rent. Falling prices are luring young renters back to the city.

 

In my 21 years of living in Manhattan, there has never been a better time to be a renter in NYC.

 

 

Normalcy will happen when work-from-home ends

Despite the uptick in rental contracts signed, the rental market is still not back to normal.  When companies require employees to be back at work, that is when normalcy will arrive.  Employees are fed up of working from home while the bosses at companies are noticing decreased productivity.  Many top firms are slowly getting employees back to work, although fractions at a time.

 

From an employee’s perspective, it is difficult to concentrate while the whole family is working or attending school from home.  Humans are social creatures.  As a fundamental need, we need to communicate and be with others. Looking at zoom video conferences, our basic need for socialization cannot cannot be met.

 

I expect rental prices to surge back up next year, based on when companies call employees back to work.  In the meantime, landlords could renovate their vacant apartments to offer a better product commanding higher rents when the market recovers.

 

Weimin’s articleIs now a good time to invest in Manhattan, New York residential property?

 

 

What We Do

We focus on global investors buying Manhattan condos for portfolio diversification and long term return-on-investment.
1) Identify the right buy based on objectives
2) Manage the buy process
3) Rent out the property
4) Manage tenants
5) Market the property at the eventual sale

 

 

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About Wei Min

  • Focuses on investors of Manhattan condominiums, interviewed by CNBC, CNN, Wall Street Journal, New York Times
  • Ex-Citibanker, managed $500 million portfolio
  • MBA, University of Illinois at Urbana-Champaign
  • Manhattan resident since 1999. Currently lives in Tribeca with wife and 2 kids
  • 352 burpees in 23 minutes, student of muay thai kickboxing

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About Wei Min


  • Focuses on investors of Manhattan condominiums, interviewed by CNBC, CNN, Wall Street Journal, New York Times
  • Ex-Citibanker, managed $500 million portfolio
  • MBA, University of Illinois at Urbana-Champaign
  • Manhattan resident since 1999. Currently lives in Tribeca with wife and 2 kids
  • 352 burpees in 23 minutes, student of muay thai kickboxing

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