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New York Real Estate Is On the Mend

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The suburbs have had their moment.

New Yorkers who left at the peak of the pandemic are starting to come back, lured by a range of discounts and a sense, albeit tenuous, that the city is on the mend.

The city is far from over Covid-19, but residents are returning to find deals on bigger and better apartments for less, especially in Manhattan’s crowded rental market. Buyers are moving to Brooklyn and Queens, to take advantage of near-record-low mortgage rates and relatively lower prices. Newcomers are arriving with job offers, even as remote work and high unemployment disrupt their industries. And for those who never left, there is a measure of vindication that they — not the investors or pied-à-terre owners who for years have spurred prices — are now driving the real estate market.

At the same time, a spike in new sales activity in several suburbs surrounding New York seems to be slowing, as pent-up demand wanes, said Jonathan J. Miller, the president of the appraisal firm Miller Samuel.

Bidding wars arrived in some suburbs in late spring, as coronavirus cases in the city climbed and in-person showings were restricted. But by July, sales in several suburbs, including Westchester and parts of Long Island, appeared to peak. Sales there remain higher than the same time last year, but it’s likely that many of those buyers were planning to leave the city eventually, and the pandemic simply accelerated their plans, Mr. Miller said.

Moreover, surging prices in the suburbs could stunt demand. In Westchester, the median sale price in the third quarter rose to $680,000, a 20.4 percent jump from the same time last year, and the largest bump in at least 28 years, Mr. Miller said.

“We’re peeling back the onion and getting to what the real market is,” Mr. Miller said, noting that, despite New York City taking longer to recover, it is, in fact, improving. And the market that is emerging could benefit first-time and move-up buyers, as well as renters who intend to live year-round in the city.

ImageManuel Pares and Derek Saathoff, with Oliver the French bulldog, near their Chelsea apartment. A vacancy in their building enabled them to get a deep discount on a bigger, better space on a higher floor.
Credit…Katherine Marks for The New York Times

In June, Derek Saathoff and his husband, Manuel Pares, both 37, left their cramped studio rental in Chelsea to move to Miami and be closer to family there. The couple, who work at One Management, a talent management agency, expected to stay at least until the end of the year, because they could work remotely. But, while away, they learned of a new vacancy in their Chelsea building — a sunny, 900-square-foot one-bedroom on a higher floor — marked down nearly $1,000 from its pre-Covid price tag. They signed the lease, sight unseen, and returned to New York in August.

“Pre-Covid, we wouldn’t have gotten this deal,” Mr. Saathoff said, noting that the apartment was significantly bigger, newly renovated, and just a few hundred dollars more expensive than their nearly $3,000-a-month studio. “We’ve never had a door before,” he said, relishing the perks of a true one-bedroom.

The city is still reeling from the virus. The number of apartments sold in Manhattan in the last three months was down 46 percent, compared to the same period last year. There is a gaping budget deficit, crime is on the rise, and the share of positive Covid-19 results, while lower than in many other cities, is climbing just as schools and struggling businesses are reopening. In response, the state announced this week that it will once again close schools and nonessential businesses, and sharply restrict attendance at houses of worship in parts of Brooklyn and Queens, as well as in swaths of some northern suburbs, for at least two weeks, based on the severity of recent spikes in new cases.

But there are signs of improvement, too. Outdoor diners line commercial thoroughfares, young families animate the parks, and some cherished cultural institutions are reviving. That renewed energy has contributed to a 27.5 percent drop in new listings for sale in September — the first decline in inventory in five months, said Mr. Miller, and a strong indicator that sellers are no longer in panic mode. While sales have not yet exceeded year-ago levels, the number of contracts signed have increased every month since May. Discounts of under 10 percent are widespread, but prices have yet to plummet, except in segments of the ultraluxury tier.

Brooklyn, and to a lesser extent, Queens, have had even greater momentum since in-person showings restarted in June. There were 364 new contracts signed in Brooklyn last month, a 21 percent jump over the same time last year, according to the brokerage Douglas Elliman. And the focus has been on more affordable stock: Over half of the sales were under $1 million, and nearly all were below $2 million.

The pace of sales on the lower-end of the market is a reflection of who remains in the city. A disproportionate share of the New Yorkers who left — an estimated 420,000 people, from March to the beginning of May — were affluent, mobile, and precisely the target demographic for thousands of overpriced, currently vacant apartments. Their departure to the suburbs and beyond flattened an already sluggish market reliant on people who own more than one home. Many others left because of job loss, school closures and health concerns.

For those with the means to stay in New York, there are new incentives. Rental inventory in Manhattan reached a 14-year high in September, with 15,923 units available, roughly triple the inventory from the same time last year, Mr. Miller said. The average concession in Manhattan is now two months of free rent on a one-year lease, which is tied for the highest rate in the last decade.

One large apartment firm, Choice New York Companies, which manages 225 buildings in Manhattan, Brooklyn and Queens, said their vacancy rate has shot up to 13.5 percent, up from just 3.5 percent this time last year, in part because of tenants breaking their leases and moving away.

“Folks are not just offering free rent,” said Peter Davis, the managing director of Waterside Plaza, a nearly 1,500-unit rental complex on the east side of Manhattan. “I’m seeing other types of lifestyle concessions,” he said, like free Wi-Fi and fitness club membership (that is, when more residential gyms reopen). At his buildings, brokers are offering two months free on a one-year lease, when last year they didn’t offer any concessions.

Credit…Katherine Marks for The New York Times

Alex Domond, 52, a Harlem renter, left the city in mid-March to stay with family in Lake Harmony, Pa., because her sons have asthma and she feared riding the subway to her office in Midtown, where she works in finance. She returned in May and began biking to and from work, on a scenic 30-minute ride, but she knew the route would be difficult in the winter.

So she inquired about an 850-square-foot, two-bedroom, one-bath apartment at Waterside Plaza on a high floor overlooking the East River that was listed for $4,300 a month — and negotiated the price to $3,600, a 16 percent discount. The rent is higher than what she paid for her Harlem apartment, but her bike route is now much more manageable, the complex has several amenities, and the views of the river are prismatic. “It’s like the windows are this ever changing canvas,” she said.

Many left the city out of financial necessity, but found a way back, in spite of the flagging job market.

Credit…Robert Wright for The New York Times

Tariq Mitri, 26, a professional dancer, entered 2020 feeling like he had found a way to support himself while pursuing his passion. He worked four part-time positions, including two service jobs in hotels and performing with two dance groups. He was paying his share of roughly $3,000 to live with two roommates in a duplex in Bushwick.

“I was saying, ‘Yeah, we’re doing it,’” he recalled. “And then the pandemic hit.” He lost both hotel jobs in March, and his dance projects were suddenly mothballed, forcing him to move back in with his parents near Portland, Ore., for four months.

But he, and the dance world, adapted. The company he worked for, Dance Church, was able to hire him part-time in an administrative role, and he is now part of a team producing a dance film with the New York-based company HEIDCO. He returned to his Brooklyn apartment in August, with a new puppy and a used Toyota. His landlord allowed him to pay half-rent while he was away, on the condition that he pay back the balance. His pay is significantly lower than it was before the pandemic, but with the aid of temporary unemployment benefits, he has so far been able to cover his expenses.

“I wasn’t sure if I was going to come back,” he said, purely for financial reasons. “But I realized New York is where I want to make my forever home.”

Staying may not be possible for thousands of New Yorkers who have fallen behind on rent and face possible eviction, despite assurances from federal and state government that protections are in place through the rest of the year. Without a mechanism for rent forgiveness, there are several scenarios in which evictions may proceed. The unemployment rate in New York City was 16 percent in August, and some of the hardest hit neighborhoods are in Queens and the Bronx, where rents have rapidly increased in recent years, because of an affordable housing crunch in the city.

Credit…Katherine Marks for The New York Times

Despite the fragile economy in New York, some newcomers are finding job opportunities and a reason to move cross-country. Sasha Palo, 38, a medical lab scientist, moved to the Upper East Side from Kansas City, Kan., after landing a new job here during the height of the pandemic.

Ms. Palo had dreamed of moving to New York since she was a child living in the Philippines, but moved to the Midwest on a work visa. When she learned her lab position was going to be eliminated in February, she applied, on a whim, for a similar role at a large hospital in New York — work that would soon include testing a flood of patients for Covid-19.

“I felt like my job is very critical in this crisis,” she said, especially in a city like New York. When she got the offer, “I didn’t hesitate at all — I didn’t even think about where I was going to live.”

In June, she moved into a first-floor prewar apartment in Yorkville with her 13-year-old son, Rivers, who just started attending a nearby public school. She pays $1,900 a month, significantly more than the $500 a month she paid for her Kansas City rental, but her new salary is considerably higher. If she had more time to shop around, she might have looked at apartments in Astoria, Queens, where she has often visited for its eclectic restaurant scene. “Nothing compares to New York,” she said. “Nobody has this kind of diversity.”

Buyers, too, have taken advantage of the market slowdown, especially in parts of Brooklyn and Queens with new inventory and less burdensome carrying costs.

In Long Island City, Queens, new signed contracts for condos were down 57 percent from January to September, compared to the same period last year, according to an analysis by Patrick W. Smith, an agent with Corcoran. But every month since May, the pace of sales has come closer to surpassing the year-ago period; in September, there were 40 new contracts signed, matching the number of deals made in the same month last year.

Credit…Robert Wright for The New York Times

For William Pan, 32, a Manhattan renter who grew up in Queens, now seemed like the right time to buy, in part because of the exceptionally low mortgage rates, but also because of condo developers’ eagerness to proceed with deals. He and his fiancée, Cammy Vu, an accountant, are under contract to buy a more than 1,000-square-foot, two-bedroom apartment with an additional 400 square feet of outdoor space at the Neighborly, an under-construction condo in Long Island City.

Mr. Pan, who works in finance, declined to give the sale price, but said the developer offered to cover a full year of common charges and real estate taxes, worth more than $20,000; to pay for all of the associated transfer taxes, or about $38,000; and to throw in a discounted, deeded parking space.

“It’s really the deal of a lifetime, compared to what I was eyeing in Manhattan,” he said, despite the fact that the apartment likely will not be ready until early next year. In the meantime, he is living in a rental apartment nearby.

He doesn’t mind, however, since the move brought him closer to his parents, who still live in nearby Elmhurst — one of the neighborhoods hit hardest by the pandemic. As for the potential for a second wave of Covid-19, he is of course concerned, but unfazed by the city’s detractors.

“New York City real estate has just been immune to everything life throws at it,” he said. “I just don’t see it failing.”

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