The August statistics supplied by One Key Multiple Listing Service show our market markedly improving after the several month shutdown for Covid-19. All markets are benefiting from the lowest mortgage Interest rates on record. The reported trends of those leaving Manhattan is true and as many employees can now work remotely, areas outside of the city, meaning Long Island and Westchester, are capturing many Buyers as well as many moving out of state. Queens sales have been very active but not to the extent Nassau County has experienced. In both counties the high-end price ranges are feeling weaker demand as the criteria for a Jumbo loan, which most high-end buyers want, is more restrictive than conventional lending.
Queens closed sales for August were down -49.3% while new contracts were up +25.2%.
Nassau County closed sales for August were down -28.9% and new contracts up 45.6%% for August.
Median home price for Queens increased 4.2% to $615,000.
Median home price for Nassau County increased 7.6% to $595,000.
Inventory levels have been decreasing in Nassau County and increasing in Queens so this will be what we watch to better gauge the trends going forward. With a smaller supply of homes for sale, we see prices continue to rise. With levels increasing we will see downward pressure on home prices. It is important to analyze each market and location separately, as well as category meaning co-op/condo, multifamily or single-family as each sector has different dynamics affecting pricing.
Where Are We In This Market Cycle and Pandemic Response:
Economists are now saying we are experiencing a K-shaped recovery as opposed to a U or V-shaped recovery they originally expected. This is Stage 1 and we have certain groups and businesses doing well And certain sectors which are directly impacted industries such as travel, entertainment and some retail with employees experiencing continuing loss of income with no immediate sign of relief or a way forward. The owner-occupied home sale market will continue to see strong demand driven by low interest rates and those with stable incomes.
As renters begin to struggle with missed rents because of high unemployment in the service and retail industries, rents could be pushed down, and loss of cash flow could lead to more rental properties going up for sale. Institutional investors may move in and concentrate rental markets further.
In Stage 2 economists and market experts feel the housing market will move into a more traditional recovery. The pandemic is a very unique situation and timing as to when it will end is very uncertain. We will likely see a negative impact on other parts of the economy and the recovery will be slow. Demand for purchasing homes will slow when the demographic of groups typical of homeownership begin to be negatively impacted. Finally demand will begin to recover as unemployment recovers across the economy.
What to Watch Out For:
The risk from the high number of forbearances is something to pay attention to. The forbearance system gave a maximum forbearance period of 12 months. The assumption is that within that period most borrowers will have regained employment and be eligible for restructuring of their loan. As we get to spring and Q2 of 2021 and the number of these loans in forbearance remains high, we are likely to see homeowners deciding to sell their homes if they can’t qualify for restructuring. We could also see an increase in foreclosures.
What Would Make a Difference?
Anything that would give people confidence they can avoid infection in public spaces such as in-home rapid testing for daily evaluation, widespread organized contact tracing or improved treatment protocols. Getting a vaccine sooner than expected will impact when businesses can start or increase hiring.