Real Estate

In 2021, New York’s Housing Market Made a Stunning Comeback

A year ago, while most of the country was seeing record home sales and prices, driven by low mortgage rates and roaming office workers, New York was on the outside looking in: Sales and rentals plummeted, and doomsayers predicted the city’s demise.

Not anymore.

In a remarkably sharp turnaround, the sales and rental markets are approaching or, in some cases, exceeding prepandemic prices. More apartments were sold in Manhattan in the third quarter of 2021 than at any other time in the last 32 years. Sales in Brooklyn and Queens pushed further into record territory. And some renters, who took advantage of deep discounts just a year ago, are now facing the sticker shock of 30 or 40 percent rent hikes.

New York’s housing market is back — and with it, the hope of a more affordable city is fading. The rebound, largely fueled by the luxury market, carries risks for thousands of renters facing possible eviction, when a statewide moratorium is set to end in mid-January.

The city’s real estate market is poised for further gains in 2022, analysts and agents said, as momentum shifts away from the red-hot suburbs and international travel returns. But as the highly contagious Omicron variant has shown, the path to recovery may be winding.

Manhattan Bucks National Trends

Across most of the country’s housing markets, 2021 was without precedent. The median U.S. sale price reached $386,000 in June, a 24 percent jump from the same time the previous year, and the highest on record, according to the real estate company Redfin.

Over the summer, with remote workers chasing bigger spaces and lower interest rates, homes across the country sold at the fastest pace on record — a median of 15 days on the market. The tightest supply on record sustained that frenzy: Just 1.38 million homes were available in June, a 23 percent drop from a year earlier, said Daryl Fairweather, Redfin’s chief economist.

But the pace is slowing. By this time next year, prices could be just 3 percent higher than they are now — a far cry from the double-digit growth we saw over the summer — because mortgage rates will likely increase to around 3.6 percent from 3 percent by the end of 2022, Ms. Fairweather said.

New York, on the other hand, was an early virus hot spot, so it is about six to nine months behind the rest of the country and is still gaining steam, said Jonathan J. Miller, the chief executive of the appraisal firm Miller Samuel.

After a year of depressed sales and prices, Manhattan had a record 4,523 apartment sales in the third quarter of 2021, the most in more than three decades, and the median sale price, $1,115,000, was nearly 9 percent higher than in the same quarter of 2019, before the pandemic, according to data from the brokerage Douglas Elliman.

“Everything is off the charts,” Mr. Miller, the author of the report, said of New York’s belated surge. “Not only on a year-over-year basis, where there can be distortion, but compared to two years ago, sales are still way up.”

New York’s sudden turnaround was spurred by the same group that left the city at the start of the pandemic: affluent renters and buyers with the means to move.

From March 2020 to June 2021, 254,500 households left the city, a 106 percent increase from the prepandemic baseline. But since July, encouraged by the city’s gradual reopening, net migration has begun to improve in many of the wealthy neighborhoods that led the departures, according to a November Comptroller report.

Renewed confidence is having an outsize effect on luxury sales, which for years had lagged the rest of the market. Through the third week of December, there were 1,877 contracts signed at or above $4 million, almost three times as many as in 2020 and the most since at least 2006, said Donna Olshan, the president of Olshan Realty.

“I think it was pent-up demand,” Ms. Olshan said, coupled with sellers marking down prices an average of 9 percent, from listing to contract. “They were buying New York at a discount. Some of them would walk through a plague to get a deal.”

And 2022 could bring even larger gains, for a number of reasons. Recent sales have been driven almost entirely by local and domestic buyers, unlike past runs fueled by international investors. While Omicron may delay some buyers’ travel, foreign interest is likely to boost sales, Ms. Olshan said.

Political changes, including the prospect of a higher cap on state, local and property tax deductions, as well as an increase to the conforming loan limits in high-cost cities like New York, could also push prices higher, Mr. Miller said. And there’s already evidence that buyers are ginning up prices: 8.3 percent of Manhattan sales ended in bidding wars in the third quarter, above the typical range of 5 to 7 percent.

Few believe that feverish pace will continue for the long term, but there’s also little reason to think it will be followed by anything resembling the 2008 housing crisis, which was fueled by risky lending and low-cash sales that are much less prevalent now, several analysts said.

“The other side of this ends up looking more like a plateau than a correction,” Mr. Miller said.

Brooklyn and Queens Remain in Demand

While Manhattan gains steam, the surrounding boroughs of Brooklyn and Queens are climbing to new highs.

The median sale price for apartments in Brooklyn in the third quarter was $828,351, a record; the average sale price, lifted by luxury sales, was $1.02 million, both a record and the first time the borough exceeded the million-dollar mark, said Gregory J. Heym, the chief economist for the brokerage Brown Harris Stevens.

“A lot of people went to Brooklyn and Queens to escape Manhattan,” Mr. Heym said, citing the larger stock of single-family homes, the green space and the relative affordability.

Melissa Leifer, an agent with Keller Williams NYC, had a two-family townhouse in Cobble Hill, Brooklyn, listed in the $3 million range; it is now under contract for about $1 million above the asking price. “Brooklyn is just insane,” she said, largely because of local buyers, although she added that foreign clients are once again calling her.

In the third quarter of the year, 25.5 percent of sales in Brooklyn ended in bidding wars, the highest share in three years, said Mr. Miller, the appraiser.

In Long Island City, Queens, the neighborhood closest to Manhattan, sales also reached new heights. From January to mid-November, there were 821 sales, more than twice as many as in the same period during the previous year, and the highest volume since at least 2006, said Patrick W. Smith, an agent with Corcoran.

The median sale price in November rose to $995,000, almost 8 percent higher than at the same time last year, Mr. Smith said, but the neighborhood is still less expensive than Manhattan, and a lack of new supply in the next three years means demand should remain high.

“Any developer in the pipeline would love to be selling right now,” he said.

Emiliya Zhivotovskaya rented a two-bedroom apartment on the Upper West Side for $5,000 a month in 2020. When her lease ended this year, her landlord raised the rent to $7,500 a month; she negotiated it to $7,000 a month, she said, but “it left a sour taste in my mouth.”Credit…Katherine Marks for The New York Times

Fleeting Discounts for Renters

The Covid discount, as dramatic as it was for a subset of New York renters, was short-lived, leaving some tenants to scramble for new housing.

The Coronavirus Pandemic: Key Things to Know

Card 1 of 4

The global surge. As the Omicron variant sweeps across the planet, the global tally of new coronavirus cases has for the first time passed one million per day on average. The previous daily average global case record set last April has already been broken three times this week.

Canceled flights. With Covid surge, has come thousands of flight cancellations, as airlines are unable to adequately staff their flights. Looking for relief, the airline industry pushed the CDC to shorten its recommended isolation period for Americans infected with Covid-19. On Monday, it reduced the recommended quarantine period to five days for those without symptoms.

Around the world. South Africa announced that its Omicron wave had passed without a large spike in deaths. Case counts in the country are down 30 percent in the last week. The announcement offered cautious hope to other countries grappling with the fast-spreading variant.

Staying safe. Worried about spreading Covid? Keep yourself and others safe by following some basic guidance on when to test and how to use at-home virus tests (if you can find them). Here is what to do if you test positive for the coronavirus.

In January 2021, the median asking rent in Manhattan, including concessions, sank to its lowest price during Covid, $2,750 a month, a more than 21 percent drop from the same time the previous year. In the first quarter, more than 24,360 apartments, or 43 percent of inventory, offered concessions in the form of one or more months of free rent — the most on record since 2010, said Nancy Wu, the chief economist for the real estate website StreetEasy.

“For a year, people were getting these crazy three-to-four-month-off deals,” Ms. Wu said, but a large share of those leases are expiring at the beginning of 2022, and landlords, encouraged by returning renters and shrinking inventory, have pulled back on sweeteners — just 22 percent of listings offered concessions in the third quarter.

In November, the median rent in the borough shot up to $3,475 a month, 24 percent higher than it was during the same period in 2020, and just below the prepandemic price of $3,500 in the same month of 2019.

The shift was shocking for Emiliya Zhivotovskaya, the chief executive of the Flourishing Center, a well-being training company. For a 950-square-foot, two-bedroom apartment with a large outdoor space on the Upper West Side, she agreed in late 2020 to pay $5,000 a month — $800 less than the landlord sought earlier in the year. But when her one-year lease ended in December, she said her landlord raised the rent to $7,500 a month, a 50 percent increase, and tried to shorten the lease term to three months. (The apartment is in a condo building that is not rent stabilized.)

“I gasped,” she said, adding an expletive. “It was just so stressful.”

She negotiated the rent to $7,000 a month, a 40 percent jump, and was able to keep the one-year lease, she said, but “it left a sour taste in my mouth.”

Yoselyn Gomez has been unable to pay the $1,616 rent on her two-bedroom apartment in the Concourse section of the Bronx since the start of the pandemic; she lost her job in customer service shortly before the pandemic, and caught the virus in April of 2020.Credit…Katherine Marks for The New York Times

A Looming Crisis

While the market appears buoyant, hundreds of thousands of renters remain at risk of losing their homes when a statewide moratorium on evictions ends in mid-January.

As of mid-November, the more than $2 billion New York State Emergency Rental Assistance Program has helped about 166,000 households pay overdue rent; the governor has requested nearly $1 billion more, which could aid 72,000 additional applicants, said Barika Williams, the executive director of the Association for Neighborhood and Housing Development, a nonprofit housing coalition.

But there are at least 120,506 applications that haven’t been approved and, as of mid-October, more than 590,000 households statewide had missed rent payments and had low confidence in their ability to stay current, she said.

The risk falls disproportionately on Black and Latino renters in parts of the Bronx, Staten Island and Queens, home to a large share of essential workers who remain vulnerable during the pandemic. A March study found that landlords sought evictions four times more often in neighborhoods with the highest Covid-19 death rates.

Yoselyn Gomez, a longtime renter in the Concourse section of the Bronx, has been unable to pay the $1,616 rent on her two-bedroom apartment since the start of the pandemic; she lost her job in customer service shortly before the pandemic, and caught the virus in April of 2020. After applying for emergency aid in June, she recently received notice that part of her back rent will be covered, but even with her new job — a temporary retail position at a department store — she said she won’t be able to stay current.

“This still isn’t over,” Ms. Gomez said in Spanish, through a translator with CASA, a tenant advocacy group of which she is a member.

Pablo Estupiñan, the group’s director, is lobbying the state to double the next tranche of rental assistance to $2 billion, and to extend the pause on evictions. The community district where many of his members reside, including High Bridge and Concourse in the Bronx, is among the city’s poorest, with a median household income of about $32,000.

Unlike the so-called exodus of mostly affluent renters at the start of the pandemic, the next wave of departures could be permanent.

“Folks moved here because they had no choice,” in terms of affordable housing, Mr. Estupiñan said. “If they can’t afford to live here, they will no longer be able to stay in New York.”

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