The coronavirus crisis has fueled a mass exodus from cities across the country as more people seek out extra space and added room to work from home. The impact has been exceptional in New York City, whose suburbs have boomed in the wake of the pandemic. In fact, real estate investors should, in theory, have a prime opportunity to scoop up older suburban properties, flip them, and turn a sizable profit. There's just one thing stopping them: a dearth of inventory.
Baby boomers aren't moving
Low housing inventory has plagued the real estate market since mid-last year on a national level. But in the suburbs of New York City, the issue is even more pronounced. Property listings for Westchester County houses dropped 41% this past January. They also fell 64% in Fairfield County, Connecticut, and 30% in the Long Island towns closest to New York City.
While some younger suburbanites may be looking to ride out the rest of the pandemic from home without moving, part of the problem is that older homeowners are also making the decision to stay put rather than head south or downsize. Empty nesters are typically a reliable source of available homes, but those in the New York City area don't seem to be going anywhere.
Part of that has to do with the economic impact of the pandemic. Given the number of people who have lost jobs over the past year, many workers have moved back home after leaving the nest -- and that's causing older homeowners to put off plans to downsize. Parents have also been struggling with a lack of full-time, in-person school, and some families with younger children have taken to bunking with their older parents for childcare coverage.
Furthermore, general economic uncertainty may be prompting some baby boomers to hang on to their homes -- particularly those with paid-off mortgages and loads of equity. While many retirement plans did nicely in 2020 given the stock market's performance, an initial crash back in March threw many near- or current retirees for a loop, so a lot of people in that boat may be looking to keep their homes until the greater crisis settles down.
Unfortunately, all this is making for a very tight residential real estate market in the suburbs surrounding New York City, and investors might struggle in the near term to get a piece of that action. A 2020 Redfin (NASDAQ: RDFN) study reveals 25% of U.S. homeowners have lived in the same house for over 20 years, up from 14.3% a decade earlier. But in New York City's most popular suburbs, those percentages are higher.
An estimated 35% of Long Island homeowners have been in the same place for over 20 years. And in parts of Northern New Jersey, which are considered New York City suburbs, that percentage sits at 31%. The result? A glaring lack of inventory that's challenging real estate investors and regular homebuyers alike.
The Millionacres bottom line
While some older homeowners may be prompted to move or downsize for the right amount of money, that's not a smart strategy for investors at a time when home prices on a whole are extremely inflated. Investors and buyers looking to break into New York City's suburban market may need to sit tight and ride out the pandemic -- and hope older homeowners are inspired to dump some square footage once things return to normal.