The luxury housing market in New York City is grinding to a halt at the hands of the novel coronavirus.
Only one contract was signed for properties being sold for at least $4 million in Manhattan, New York, during the week ending May 3, according to local residential brokerage Olshan Realty Inc. The last time only one contract was signed was a week in February 2009. Prior, except for the week ending April 6 when there were five contracts signed, only two contracts were signed for four straight weeks since the week ending March 29. It was the first time since the brokerage started publishing the weekly data that the same exact number of contracts were signed for an entire month.
“The luxury market has gone into hibernation,” said Donna Olshan, president of her namesake brokerage, in her latest weekly luxury market report.
In the past six weeks, only 14 contracts have been signed at $4 million and above totaling $111,745,000 compared to 135 contracts that totaled $1,029,844,699 in the same six-week period last year.
In an effort to combat COVID-19, New York Governor Andrew Cuomo ordered a mandatory shutdown of non-essential businesses on March 20, putting the real estate market on pause during what was supposed to be the busiest season for the industry. While New York abruptly changed its tune Wednesday, declaring certain residential real estate functions essential, the damage has already been done on the high-end market.
“I have no expectations going forward for contracts signed at $4 million and above. If a few trickle in, I would expect that the buyers got fabulous deals bordering on steals,” wrote Olshan in an email prior to the state’s announcement. “Between the coronavirus and the stock market finishing its worst first quarter in history, real estate looks bleak—if you are a seller.”
In recent years, the luxury market in the city has been experiencing a glut of inventory. Even when the stock market was reaching record highs In 2019, the high-end real estate market remained weak — puzzling since the real estate market usually correlates with the stock market.
Now that the stock market has turned, things are likely to get ugly for the housing market. At market close on March 31, the Dow posted its worst quarterly drop since 1987.
“The luxury market was already challenged because it had a larger supply going into the outbreak, it is just exacerbated by the virus and market stall,” said Jonathan Miller, president and CEO of Miller Samuel.
He added that leading up to COVD-19 New York’s high-end market had been disproportionately impacted by the increased mansion tax on homes over $1 million and the SALT (state and local tax) deduction limit to $10,000. There’s also the threat of other tax changes, like a pied-a-terre tax. Then there’s this notion that real estate developers are just out of touch with reality and New York’s housing needs.
Sellers of pricey homes appeared to have started pulling back before the coronavirus overtook New York City. Listing inventory (active homes for sale) for luxury properties, defined as those that are at least $3.875 million by the latest Manhattan quarterly sales report from brokerage Douglas Elliman and appraisal firm Miller Samuel, fell 24.4% to 1,371 in the first three months of 2020 from the previous quarter.
Today, new listings in New York City for all price points have plummeted. Barbara Corcoran told Yahoo Finance YFi PM on Tuesday that “the listings are down, way, way, way down.”
Jobs are key to housing market health
“The real estate market is a very lopsided market right now,” Corcoran said. “The high end market is suffering already. The middle end of the market is clicking on like there's nothing wrong with it, and the low end of the market has actually gotten stronger surprisingly.”
But all parts of the real estate industry across the nation will likely take a hit as employment tanks. Weekly jobless claims ending March 28 skyrocketed to a record of 6.648 million, double from the week prior, according to the data released Thursday morning from the U.S. Labor Department. The unemployment rate for March will be released Friday but those figures won’t even reflect the full impact of the virus on the economy. The April statistics should be more telling.
“It depends more on what the unemployment rate is and how well they roll out the new package that has so many benefits for people,” said Corcoran, referring to the $2 trillion stimulus package, which includes $250 billion for American households. “It depends on those two cards more than anything else that is actually happening in the real estate market.”
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Amanda Fung is an editor at Yahoo Finance.
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