“The fourth quarter Manhattan report gives us our first real look at COVID-19’s impact on closing prices, as the overwhelming majority of deals were negotiated after the lockdowns began. While the overall average resale price fell just 3% compared to a year ago, we need to look at specific sizes and types of apartments to get a real picture of pricing.
All sizes of both co-ops and condos posted lower average resale prices than a year ago, but the declines range from just 3%, to 23%. That 23% decline belongs to three-bedroom and larger co-ops, not surprising given the sharp rise in inventory over the past several months.
While the number (scott’s emphasis) of closings bounced back from the past two quarters, they were still 29% lower than 2019’s fourth quarter. The rise in contract activity over the past few months tells us that closings will continue to rise, and the worst of the market has now passed us.
Please review the message from CEO Bess Freedman on page 2 of the report, for her thoughts on the market and pricing in the current environment.
You can view the full report at the link below:
This paragraph is how our 4th market report began. The statistical takeaway, the headline? The impact of COVID-19 overall, on average, was about a 10% drop in pricing, NOT MORE. The referenced 23%, is only reflective of the discounts of units that were RIDICULOUSLY overpriced. We have seen the same thing in new development- bigger discounts, just because many prices never changed from their original 2017-2018 levels!
People (maybe even YOU!) will continue to mistake these huge discounts for the overall market. That is the big mistake.
Yet it remains such an excellent environment for buyers. At a moment when over 20-25% of sellers are walking away from the closing table with a loss, how can it be otherwise?
Yes, this prospect of such a loss will not encourage many owners to sell. Therefore, we need ongoing good news and more of it. We will otherwise fumble along, looking for footing.
As we are seeing in the market report, inventory continues to shrink, and we could see an INVENTORY ISSUE we did not expect- not enough listings- which seems CRAZY! Sellers take note!! Really, it will take serious effort on the part of agents to educate buyers and sellers about the realities of the market. Optimism about the deals to be had, combined with surety that there are buyers who are making this a functioning market.
The “breakthrough” data point that sellers are waiting for, to kick the market into its next gear, will be that sellers, especially those who bought in 2005-2008, are at least breaking even when they sell. That will be the tipping point of an pricing recovery.
So far, it seems that the sales market of 2021 is beginning very similarly to where 2020 did, before the pandemic struck. The biggest differences are the additional pricing discount, and FEAR. As we see more buyers enter the market shaking off concerns and the protective shell into which we all crawled, 2021 could prove to be that breakthrough year that 2020 tried to be last January. -S