Now that 2021 has come to a close, we can look back at the real estate market in Manhattan for the last year and see what actually happened, and where we stand now. So, in this post we’ll look at the numbers to better understand how the advent of the COVID vaccines and the easing of pandemic restrictions in the first part of 2021 impacted the Manhattan real estate market, and how the market differed from 2020. And we’ll try to understand, given the available information, where we might be headed in 2022. So let’s dive in!
The Key Headlines
The major story in Manhattan Real Estate was the incredible speed of recovery in the 2nd, 3rd and 4th quarters. As the COVID vaccine became more widely available and more and more people got vaccinated, businesses began to come back to some sense of normal, and the Manhattan residential real estate market came back with a vengeance. Along with a record sales volume, the unprecedented price drops of 2020 were almost entirely erased.
Record number of sales
The first and biggest headline for the 2021 Manhattan real estate market is that it broke all kinds of records with respect to number of sales, or sales activity. It also set records in sales volume (total dollar value of the sales). Starting around March of 2021, as more and more people were being vaccinated against the COVID virus and the pandemic restrictions eased off, the sales market in 2021 really started to turn around. The pent up demand, coupled with the significant price drops across the board that had come as a result of New York being shut down for much of 2020, led to an unprecedented spike in sales activity. What came next, however, nobody quite saw coming. The Manhattan real estate market took off at such a break-neck pace that it left many brokers literally breathless, trying to keep up with the avalanche of activity.
According to several articles, including one published in the New York Times, the 3rd quarter of 2021 had more sales activity than any point in the last 32 YEARS. The fact all this happened just 11 months after the market had hit bottom — with only 159 contracts registered in May of 2020 — made it a totally stunning turnaround.
Recovery driven by the luxury sector and the low end
Now, as we all know, there isn’t one “Manhattan market,” but rather many micro-markets. What’s happening in one segment of the market (i.e. condos vs co-ops, 1-bedrooms vs 2-bedrooms, new development vs resale, etc) at any given time isn’t necessarily going to be happening in another. In keeping with that, the recovery of the real estate market was not the same across all price points and property types. Most media outlets took note of the recovery of the luxury market. The luxury market, with its flashy layouts, headline-grabbing super-tall buildings, and “ready for prime-time” decor, is always the most visible and the most watched segment of the Manhattan market. And it was the segment that perhaps suffered the deepest losses in 2020. As things started to turn around in 2021, the luxury market saw a large and rapid influx of buyers. Wealthy individuals, who had the means to jump into purchasing real estate, took the opportunity to jump into the Manhattan market while prices were “low” and there were discounts to be had. That activity soon erased any discount there might have been, and the luxury market was largely responsible for the price recovery of the Manhattan market as a whole in 2021.
Interestingly, the low end of the market also saw a huge surge in sales. The reason seems to be that, with prices depressed by the pandemic, many buyers on the lower end of the market who could not afford the Manhattan market previously, all of a sudden had the opportunity to purchase Manhattan real estate for the first time. The lower prices, coupled with very low interest rates that gave buyers more buying power, meant that many could now take advantage to become owners. So, smaller co-op apartments in the more affordable areas of Manhattan like Hell’s Kitchen, the East Village, Harlem, Washington Heights, and Inwood, saw large spikes in sales activity and price surges as a result.
The Price Drops of 2020 Were Erased
As we’ve already mentioned previously, 2020 saw an unprecedented drop in prices across the board in the Manhattan real estate market (and even more in the commercial sector), with some segments experiencing price drops as large as 20-25%. While sales ACTIVITY in the 2nd and 3rd quarters of 2021 was at all-time highs, prices were not. Prices did experience a tremendous surge year-on-year from 2020, but 2020 was also a uniquely depressed market due to very specific circumstances. According to data-compiling website UrbanDigs.com, the highest median price in Manhattan over the last 8 years was $1.4 million set in June of 2019 (and driven by a slew of record breaking high value transactions). The Manhattan median price then dipped to a low of just $976,000 in June of 2020 — a whopping drop of 30%. By June of 2021, median prices rebounded to just under $1.2 million, which was still 14% below the high mark of June 2019. As of December, 2021, the median price in Manhattan sits at $1.13 million. Comparing to December of each year to remove any changes due to seasonality, we can go back all the way to December of 2015 without seeing much change, year on year. The positive takeaway is that, in terms of price, the Manhattan real estate market largely recouped its losses in 2021, but sellers would be wise to keep a level head and realize that the breakneck rate of sales in 2021 doesn’t mean the sky’s the limit on pricing their homes. Especially for homeowners that own your “meat and potatoes” 2-bedroom resale apartment, you likely won’t be setting any pricing records in the near term. Sellers who have done the best in this market are still those who price conservatively to attract as many buyers as possible, and then let the market forces take over as the buyers duke it out to win the home.
Where We Stand Now
As we begin 2022, we start off the year with a low level of inventory in the Manhattan real estate market. The supply currently stands at 4,766 units, which is as low as it’s been since December of 2017. The absorption rate, which measures supply relative to demand, is at it’s lowest levels since January of 2017, at 4 months (the lower the absorption rate, the stronger the market). Just to put that into further perspective, the absorption rate market-wide for the Manhattan real estate market sat at 13 months in November of 2020. Even before the pandemic, in 2019, the absorption rate was close to 8 months. 1,128 transactions entered contract in December of 2021, Which is the strongest December on record at UrbanDigs, which has data going back to 2013. In fact, the contract activity in December was 46% higher than the overall monthly average for the Manhattan real estate market — an astounding number.
Where Are We Headed in 2022?
No real estate agent has a crystal ball or can predict the future, but most professionals expect the trends of Q2-Q4 of 2021 to continue, albeit at a slower pace. There are several reasons for this. The trend is expected to continue because the underlying economy and the demand for Manhattan real estate remain strong. Despite some of the headlines that might lead one to believe otherwise, employment and salary figures are strong, the stock market continues its bullish trajectory, and the recovery will continue. That being said, the rate of growth in the Manhattan real estate market will probably slow and plateau as the year progresses. Interest levels are set to rise several times over 2022, and that will inevitably moderate the feverish housing market as it impacts buyers’ purchasing power and their perceptions. Slight inflation is likely to continue, which, as we’ve seen, impacts consumer perception on the economy (even though inflation remains at historically low levels and there’s no need to panic). In addition, the feverish buying frenzy in New York City was largely the result of pent-up demand and depressed prices. As that inventory gets soaked up (which it largely has been) and prices rise to normal levels (which they largely have), there is likely to be a natural tapering off of the activity, as the Manhattan real estate market gets back to a state of equilibrium. The Spring sales market is likely to be strong and active. Price growth, however, might be more moderate, and some outlets are predicting moderate price growth of just 2-3% over the course of the year.
One big question looming over everyone’s heads is what effect the surge in COVID cases as the result of the Omicron and Delta variants will have on the NYC real estate market. The CDC and Dr. Anthony Fauci have both indicated that, while the Omicron variant is extremely infectious and is placing strain on the hospital system, the very rate of infection that is so alarming may actually shorten the surge as it burns through the population faster. In addition, we have more knowledge on COVID treatment now, many more people are vaccinated, and governments and the medical establishment are telling us that the effects of the Omicron variant do seem to be milder. All this taken together makes it less likely that we’ll see the same sorts of shutdowns that we saw in 2020 and into 2021. We’re more experienced and better equipped to deal with a COVID-positive world, and sales in Manhattan, if they are impacted at all, might be impacted only for the first month or two of 2022. Time will tell!
What Does This Mean For You?
The $1.13 million dollar question, of course, is what does this all mean for you if you’re a Manhattan homeowner thinking of selling in 2022? As we mentioned previously, the Manhattan real estate market is hyper-specific, so while the numbers discussed here give one a broad overview of the health and state of the sales market overall, they don’t necessarily speak directly to YOUR home and YOUR situation. Pricing and statistics in Manhattan are sensitive to a multitude of factors, including property type (co-op vs condo; resale vs new development), location (down to what floor an apartment is on and what direction it faces), and many many other factors. For detailed information on your neighborhood and property type, please reach out to us using the form below, and we’ll be able to provide you reports of the latest data for your property type and neighborhood.
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