Though the coronavirus crisis has had an impact on residential real estate, it's mostly given sellers the upper hand. Low inventory has helped home prices surge on a national level, due in part to the fact so many purchases have been subject to bidding wars.
But if there's one city whose residential real estate market is not faring well during the pandemic, it's Manhattan. Apartment sales dropped 46% in 2020's third quarter, and a record 10,000 apartments are now available to be purchased.
Clearly, all this is bad news for real estate investors looking to unload Manhattan properties, as well as individuals looking to sell. But for new investors, it could open the door to a world of opportunity.
Is now the time to buy in Manhattan?
When the coronavirus outbreak first erupted in the U.S., Manhattan quickly emerged as its epicenter -- a dubious distinction the city has fought hard to shed. Despite a recent surge in COVID-19 cases, the situation improved tremendously in Manhattan over the summer, to the point it was announced indoor dining at restaurants could resume at limited capacity.
But despite all that, there's been little demand for Manhattan homes, for a number of reasons. First, the lockdown earlier this year drove many Manhattan residents to take their money across the river to New Jersey or nearby Long Island, Westchester County, and Connecticut, all of which are commutable to Manhattan but offer a lot more square footage per dollar. Additionally, unemployment has been high in Manhattan, forcing some residents out, not so much by choice but necessity.
It's also estimated only 10% of office workers in Manhattan are actually returning for in-person work. With proximity to jobs no longer being a draw, many people are opting to forgo the convenience of living in Manhattan and instead enjoy larger living spaces outside the city.
All of this makes investing in Manhattan apartments somewhat precarious despite the opportunities involved. While sellers may be getting desperate, now may not be the ideal time to buy an apartment to rent out, given Manhattan's growing vacancy rate.
On the other hand, buying a Manhattan apartment as a longer-term investment could be a smart move. Once the pandemic is over and Manhattan nightlife can reopen in full force, many of the people abandoning the city may quickly come back to capitalize on the amenities they enjoy. As such, at some point in 2022 or beyond, demand could surge for residential real estate in Manhattan. So scooping up apartments at a bargain could really pay off.
It is worth noting the median apartment sales price in Manhattan increased by 7% to $1.1 million in 2020's third quarter. But analysts are chalking much of that up to introduction of the mansion tax last year that slowed down purchase activity. Also, this year's third quarter saw more luxury apartment sales than in previous quarters, which explains why prices have trended upward despite an uncomfortably high level of inventory.
The bottom line
As more Manhattan apartments sit out on the market, sellers are apt to get antsy and come down on price, so 2020's fourth quarter may be a prime time to buy for investors who are willing to be patient and give the city some time to recover. This isn't the first blow Manhattan has taken in recent years, and there's a good chance the city will soon become the desirable hub it was before the pandemic took hold.