The coronavirus has dramatically reshaped the luxury real estate market in the Tri-State area, and while the pandemic upended much of the economy, industry veterans say they’ve never been as busy as they are now.
While the early days of the crisis were marked by a mad rush for a limited supply of rental properties on Long Island and Upstate, transplants from New York City are starting to warm to the idea of staying in the suburbs for the long haul, brokers said Wednesday during the latest installment of TRD Talks.
“One of the really interesting things is that people are doing the opposite of what they usually do,” said Deirdre O’Connell, CEO of Daniel Gale Sotheby’s International Realty on Long Island.
“They’re buying in the secondary home market for their primary residence, and they’re rethinking Manhattan as their second place to live,” she said, noting that some buyers no longer expect to be in their Manhattan offices five days a week even after reopening.
O’Connell was joined by Compass’ Heather Harrison, who covers Westchester County; and Paul Breunich, president and CEO of William Pitt – Julia B. Fee Sotheby’s International Realty in Connecticut. The three spoke with The Real Deal’s managing web editor James Kleimann.
“Overnight it went from a buyers market to a sellers market, and also overnight it went from people migrating to the city to people escaping to the suburbs,” said Breunich, adding that many buyers no longer expect the New York City school system to open up on time in the fall.
Given New York’s massive population, “just a very small percentage of them have to move and it’s going to flood our markets, and that’s what’s happening now,” he said. “That’s why I think there’s permanence in this whole movement.”
While young families moving out of New York City have always been a mainstay of the Tri-State real estate business, the pandemic appears to be pushing some to move even earlier than usual.
“One of the trends we are seeing is families with no children moving to the suburbs,” Harrison said. “Newly married, not pregnant yet, and some not even married, moving and buying homes in the suburbs.”
At the same time, the archetypal sellers in these markets — empty-nesters looking to downsize to a Manhattan apartment or a Florida home — are also staying put more. This has even led to sellers cancelling contracts, paying a premium just to not move.
“So many of my potential sellers … have now decided that they’ve enjoyed quarantine in their home, and are very glad that they didn’t move and didn’t downsize to an apartment necessarily, and now those people have decided not to put their homes on the market,” Harrison said.
Even as New York and the suburbs have begun to gradually reopen from months of lockdown, some practices adopted in the Covid era might be here to stay — like virtual tours.
“I don’t think it’s going away,” O’Connell said. “Yes, we can do in-house showings now and that’s great, but I think it’s a lot more effective if someone can virtually tour a property before coming and physically touring a property.” She added it was “less intrusive for the homeowner who doesn’t have their home exposed to people that potentially are tire-kicking or just trying to figure out where they are in their journey of purchasing a home.”
Meanwhile, issues that had hampered the Tri-State resi market prior to the pandemic, like the new federal cap on state and local tax — aka SALT — deductions, may now be in the rearview mirror.
“I think now more than ever, it’s not as big an issue as it was,” said O’Connell, arguing that the market has largely digested the impact of the new rules. “If you want to live here, it is what it is.”
The panelists noted that the wave of new interest in their markets have touched submarkets across the board, as commutability to Manhattan has become less of a factor and the supply-and-demand dynamic has forced buyers to be less selective.
“When you have a lot of demand there and there’s multiple people that are going after it, that’s pure capitalism,” Breunich said. “And that’s why it’s such a good industry to be in, because nobody sets the market except the people.” The buyers, he said, are “coming in with cash. They want to move in in three to four weeks and they’re going for the mortgage afterwards. There’s a middle-to-upper crust of the population, in my opinion, that’s doing this.”