Nearly nine months into the pandemic, many have begun to ask how and when markets will bounce back. The housing market is no exception, and may indeed be the pivotal market to watch. Rent being one of the most contentious aspects of COVID-19 related public discourse, more and more figures have begun to scrutinize the housing market’s proceedings. With slowdowns decreasing economic activity and the NYC moratoriums on evictions in place, landlord’s have been forced to adapt to a radically different environment than last year’s.
This is reflected in the market. According to the Elliman Report–which records shifts in housing market activity–we are very much in a renter’s market. In spite of the burdens imposed by COVID-19, rental activity is actually increasing, and the housing market is showing signs of recovery. The Elliman Report recorded an increase in Manhattan leases signed last month–a first since July. In fact, the increase in lease signings is not only 12% higher than last month’s, but 33% higher than that of last year. [1]
Some have explained the increase in signed leases as an indirect result of a pattern reverberating throughout other markets. [2] Commercial entities–in this case, landlords–are facing devastating drops in demand (here: increased vacancy rates). With revenue losses stacking up over months, they are forced to make concessions. In the housing market, landlords have lowered rents, offered better leasing deals such as inclusion of utilities, and even gone so far as to offer several months of free rent. They have done all of this in hopes of stimulating demand; and it appears to be working. This year’s third quarter spike may bring in less profit for landlords, but it will at least prevent them (and the market) from going under.
On the other hand, the housing market has not been as hospitable to sellers. While lessors have managed to spur economic activity, sellers have experienced the full brunt of the slowdown’s force. Sales have suffered a significant decline, nearing a dropoff of 50%. [1] The almost unprecedented drop in sales comes from the low end of the housing market, with dropoff concentrations in smaller apartments and co-ops. Moreover, Manhattan’s vacancy rate is at 6.14%, the highest it’s been in 14 years. In a similar vein, listing inventory is also at a 14 year high. Together, these facts might explain why 2020 saw the slowest market pace since 2009, even with the end of year spike. [1]
With the pandemic still underway, it is likely that these new patterns in the housing market will continue and may be exacerbated by a second wave or a reinstated lockdown. As such, it is likely that the market will continue to play out in favor of those looking to rent. As renters begin to recognize this en masse, we may see significant shifts in demand which could ultimately be the key to the housing market’s recovery.
Sources:
[1] – Miller, Jonathan, “Q3-2020 Manhattan, NY Sales,” Elliman Report, Nov. 2020, https://www.elliman.com/resources/siteresources/commonresources/static%20pages/images/corporate-resources/q3_2020/manhattan-q3_2020.pdf, accessed 30 Nov. 2020.
[2] – Kolomatsky, Michael, “A Manhattan Rental Recovery?,” The New York Times, 19 Nov. 2020, https://www.nytimes.com/2020/11/19/realestate/manhattan-rental-recovery.html?searchResultPosition=2, accessed 30 Nov. 2020.