Queens Real Estate Market Update Q4 2020 and Real Estate Forecast for 2021
QUEENS REAL ESTATE MARKET UPDATE Q42020 AND REAL ESTATE FORECASTFOR 2021
You can see the full video on our YouTube channel at https://www.youtube.com/watch?v=2fTtv8nhaUA&t=2s
In the first place I want to wish you a happy new year 2021. I also want to say that in spite of all of last year´s challenges (some of which we are still experiencing) the year 2020 brought us a renewed collective awareness about what is essential, about our quality of life, not just about productivity. Our happiness became central in our considerations, along with efficiency and sustainability. I have a sense of gratitude to 2020 in the sense that this crisis can become a portal, an inflexion point for innovation and renewal so we can come back stronger and better.
Before we jump into the real estate analysis for the Fourth Quarter of 2020 I want to present to you the summary for the real estate statistics provide by our Multiple Listing System, the One Key MLS which covers now not only Queens, Long Island, Manhattan, The Bronx, Westchester and parts of the Hudson Valley. Here are the real estate numbers for Queens, all residential property classes taken together and including 1 Families, 2 Families, 3 and 4 Families, Coops and Condos:
2020 CALENDAR YEAR SUMMARY FACTSACCORDING TO MLS DATA
NEGOTIABILITY (DIFFERENCE BETWEEN ORIGINAL PRICE
AND FINAL CLOSING PRICE) IN 2020 5.3%
IN 2019 5.6%
A DIFFERENCE OF 0.3% PERCENTAGE POINTS LESS
IN NEGOTIABILITY ILLUSTRATING INCREASED DEMAND AND LESS INVENTORY YOY
MEDIAN PRICE IN 2020 $640,000 MEDIAN PRICE IN 2019 $625,000
AN INCREASE YOY OF 2.4% IN MEDIAN PRICE
A HEALTHY MARKET IF ALL PROPERTY CLASSES ARE TAKEN TOGETHER…
TOTAL INVENTORY
END OF 2020 6,744 UNITS = 7.4 MOS. @ CURRENT SALES PACE
END OF 2019 4,754 UNITS = 7 MOS. @ 2019 PACE YOU WOULD THINK THIS MEANS A MORE BALANCED MARKET…
Now, what is important to note about these numbers provided by our MLS system, is that all property classes are being put together, from coops to small multifamily. We can derive some important conclusions from them, but I believe that each property class should be taken separately, as I have been doing for you in previous Real Estate Market Updates. Why?
Because the market for 1 families is quite different to the market from small multifamilies; because the motivation to buy or sell a 2 family is quite different to the motivation to buy or sell a coop apartment and so on. You will agree with me that in Queens there are different submarkets and not just because the different neighborhoods or zip codes, but because of the different property types.
So looking at these statistics we can say the following, for the group of all residential real estate classes taken together:
It was a good average year for appreciation (2.4% increase in mean real estate prices for all property classes),
In general the seller´s seemed to be more in control of the negotiations than in 2019, because the difference between asking and final prices was smaller.
That the transaction numbers decreased largely due to the Pandemic although they recovered nicely towards the end of the year.
That the year 2020 ended up with higher inventory than 2019, signaling a more pronounced trend towards a buyer´s market in the months to come.
I will show below if all of these conclusions hold true for the different property classes taken individually.
I want to point out that at the national level, it was a landmark year for real estate sales. Existing Home Sales were 6.7 Million nationally, which is a record since 2006, at the height of the real estate boom 14 years ago. Queens, as I will discuss, enjoyed some of this kind of activity in some sectors of its real estate market.
Here is a quick recap of how Q3 ended for Queens Real Estate, going into the beginning of Q4:
END OF Q3 AND THE START OF THE HOLIDAY SEASON
FAMILIES MEDIAN PRICE WAS TRENDING HIGHER ($680K)
FAMILIES MEDIAN PRICE WAS SLIGHTLY HIGHER ($880K)
AND 4 FAMILIES WERE STABLE ($1.27M)
CONDOS MEDIAN PRICES WERE 4% LOWER AT $530,000
COOPS MEDIAN PRICE SLIGHTLY UP TO $300,000
TRANSACTION COUNTS FOR ALL PROPERTIES WERE MARKEDLY LOWER INVENTORY FOR 1 FAMILIES, SPECIALLY IN THE SUBURBS WAS LOW.
Here So you can start seeing here that different property classes were behaving differently. The big story in Q3 was the exodus of population from the city centers to the suburbs because people wanted to live in less crowded environments, they were working from home, homeschooling, even working out at home. This is why 1 families were such a bright spot and why small multifamilies and apartments sales were slowing down. In small multifamilies some tenants could not afford rent and small landlords in turn could not afford their mortgage. NYS and the Federal Government avoided a foreclosures and eviction crisis by mandating eviction moratoriums and directing the mortgage lenders to offer forbearance to homeowners in general.
Also, I want to take a brief moment to thank all of you who donated to our fundraiser to benefit the food pantry of the First Presbyterian Church on Astoria Blvd., in East Elmhurst. This is the way we started Q4 of 2020, raising money for the community and I have to say that it was very rewarding to see how many of our clients, and businesses, in spite of going through difficult times themselves, were so generous and found a way to contribute. Our campaign was a success and we were able to feed 500 families right before Thanksgiving. Thanks again.
The fourth quarter started with the general election in everyone´s mind. Because of the uncertainty we did see some hesitation in buyers and sellers to pull the trigger before the election and right after. We were expecting this to happen and we knew that the summer months were a golden opportunity to make things happen and so we advised our clients to move before November. Nonetheless, mortgage rates continued to be at record lows and kept motivating buyers to search for property. At the end of Q4 we saw interest rates go up for a couple of reasons, one being some optimism about the economy because of the roll out of the COVID-19 vaccines and the other being an increase in 10 years treasury bond yields. However, rates continued to be near record lows. We have to monitor closely this year because with prices being at peak, a movement in rates will affect affordability and prices.
Another set of data that we contemplated was unemployment in Queens county. According to federal data, unemployment in Q2 of 2020 in Queens was as high as 20%. At the end of Q4 there was an improvement of economic activity and the figure was better, at around 11% but still high compared to prepandemic levels.
Meanwhile, the exodus to the suburbs by both buyers and renters increased rental vacancies by 45% year over year in strong rental markets such as Northwest Queens (Astoria, Jackson Heights, Long Island City, Sunnyside, Woodside, E. Elmhurst, Corona, Elmhurst). This exodus paired with the inability to pay rent by some tenants and the eviction moratoriums lower rents in this area by over 14% year over year. This meant that landlords would need to offer many incentives to entice tenants to remain or rent a place in Queens. This data is provided by Miller Samuel, the appraisal company.
Inventory was moving quickly and for some types of properties, it was low, creating a seller´s market for 1 family homes and even 2 family homes. For 3 family homes, 4 family homes, coop and condos this was a different market. Because rents came down and because there was less of a demand to live in a community close to other residents, the market for the latter type of properties was a buyer´s market. Here are the figures that we obtained for 1 thru 4 family properties:
RESIDENTIAL TRANSACTION COUNTS AND MEDIAN PRICE
Q4 2020 FOR SMALL RESIDENTIAL BY PROPERTY CLASS
FAMILIES SALES SALES % MEAN PRICE MEAN PRICE %
2019 2020 CHANGE 2019 2020 CHANGE
1 FAMILY 2,726 3,261 -17.2% $665,000 $690,000 +3.8%
2 FAMILY 1.597 1,249 -21.8% $870,000 $875,000 +0-8%
3 & 4 FAMILIES 176 119 -32.4% $1,260,000 $1,251,000 -0.6%
So we can observe that there was a different market for different property classes. One family homes were in high demand (in fact their mean price increased by 3.8% year over year) since buyers were looking for a more private way of living, with extra space to work from home and do all those activities that needed to be done at home. The transaction counts for 1 family homes was lower (-17.2%) than the previous year due to the pandemic and also due to the fact that some sellers decided to stay put and refinance at great rates or to wait because of safety concerns due to covid.
The 2 family homes did appreciate but less than the 1 families (0.8% increase in mean price year over year) and their transaction counts were 21.8% lower. And we can see that small multifamily homes, meaning 3 and 4 families, were more stagnant, with transaction counts 32.4% lower year over year and mean prices that actually were down 0.6% in the same period. The explanations are varied: on one hand, the lack of desire from buyers to live with other people in the same building; on the other hand, the fact that many tenants were not able to afford the rents and many investors lost their appetite for small multifamilies for the time being; last but not least, we do have a strict protocol to show properties at the current state of this phased reopening, which makes these sales still doable but they do take longer to close. We can still sell your property, be it1 family or Small Multifamily in a safe manner in this market and we do follow current protocols. One of them is that the unit shown must be vacant at the time of showing. So that dwelling has to be vacant or the occupants have to leave the unit for that particular showing. And we have other protocols that must also be followed.
If we look at the inventory for these small residential properties, we can see a similar market trend:
RESIDENTIAL INVENTORY BYPROPERTY CLASS
FAMILY PROPERTIES, Current Inventory 1,504 Homes, 501 units sold/mo
in 2020, 3 Months of Inventory. Clear Seller´s Market
FAMILY PROPERTIES, Current Inventory 975 Homes, 231 units sold/mo
in 2020, 4.2 Months of Inventory. Moderate Seller´s Market
3 & 4 FAMILY PROPERTIES, Current Inventory 213 Homes, 23 units sold/mo in 2020, 9 Months of Inventory. Clear Buyer´s Market
So the market for 1 family homes, with 3 months of available inventory at the end of 2020 and going into 2021 it´s a clear seller´s market. For 2 family homes, with 4.2 months of inventory, the market is a moderate seller´s market. And for 3 and 4 family homes, with 9 months of inventory, we can say that they are in a clear buyer´s market.
If we take a look at how coops and condo´s behaved in the same period we can see that transaction counts for both were over 25% lower year over year and that there is over a year of inventory for both, placing them in a buyer´s market. There was a difference in mean price changes though. While condominiums came down to $525,000 or 2% lower year over year, coops actually showed an increase, with mean prices ending the year at $305,000 or 2.4% higher, year over year. One explanation is that coops are much less liquid than condos in the sense that sales need to be regulated and approved by the coop board which may object to units selling at lower prices. But for both these types of properties, there is a glut of inventory and buyer´s have plenty to choose from.
An interesting statistic that we found is that average property prices and mean prices almost got to be equal at the end of Q4. For all of you who like statistics and numbers, this is one of the ingredients of a symmetric statistical distribution. In plain English, it means that most of the sales, are occurring around that average or mean price. For our purposes there are important implications:
There are not a lot of sales at the lower end of the market. So not a lot of distressed sales or sales of cheaper properties. We know that the government mandated forbearance to relieve those homeowners struggling to pay the mortgage.
There are not a lot of sales at the very high end of the market. We just said that one family homes were very active, and specially around that mean price. For luxury homes at the very high end of the market in Queens, this was not the case, as they were competing with properties in the suburbs, with more space, land and amenities. We know that the Hamptons for example, had a terrific year.
As you know, this 2021 is an election year for NYC. This is important because the current NYS and NYC administrations have left a mark in affordable housing. I think the initiatives have been good but incomplete, in the sense that the interests of landlords have been forgotten and you cannot really have affordable private housing without landlords. I know many of them are waiting for a new administration and a new approach to affordable housing and rent stabilization.
And without further ado, here are our predictions for 2021, based in our 26 years of real estate experience, our knowledge of the Queens market and our conversations with many stakeholders in the community, be it real estate developers, real estate attorneys, homeowners, landlords, contractors and elected officials. Although nothing is guaranteed, we can see the following trends taking shape in this new year:
QUEENS REAL ESTATEFORECAST 2021
Interest Rates will regulate Median Prices up or down. Because mean prices reached a new peak in Queens, mostly due to a decrease in interest rates, if interest rates do go up in 2021, prices may be more sensitive than expected. We need to monitor rates to see how the market will do. This already happened back in 2016 when rates were increasing because the economy was doing better.
Absolute Seller´s Market for 1 and to a lesser degree, 2 family homes. At least for the first half of the year, the demand will be high for private residences where one can work, workout, teach and entertain without leaving the home.
Absolute Buyer´s Market for 3, 4 family homes, multifamily, coops and condos, specially at the beginning of 2021. Once vaccines are given to the majority of Queens County population and the situation with tenants gets more normalized, these type of assets will come back and demand for them will increase. Holding investment real estate for the long run will always be a great strategy. Condo and coop living has its perks and they will come back to the forefront.
Residential rents will be lower and with landlord concessions at the beginning of the year and tending to stabilize after spring. For the same reasons than above, the beginning of the year will show a soft rental market. As companies start calling back their workers and asking them to be physically present for some days a week, tenants may start getting tired of the suburbs and return to the city, the city that never sleeps, which will continue to offer a myriad of entertainment options and will continue to attract young professionals from all over the country. Who in their twenties wants to have dinner at 6 pm and go to bed at 8 pm?
The work from home, and workout from home trend is here to stay. Not so much remote learning… A certain percentage of folks will not come back to their old office as we know it or to their gym for that matter. To lose 2 or 3 hours in a commute is not efficient and many have discovered that they would rather utilize this time to be with their family, to work or to take care of themselves. This is a trend that will continue in postpandemic world. But homeschooling, I am not so sure if it will continue being a trend. I think that the general consensus is that remote learning cannot be compared, specially for small children, to in person learning. They do need the social interaction and to be taught dedication and discipline by their teachers.
The success of the vaccination campaign in NYC will determine the economic improvement. Most of our industries in New York and Queens deal with large contingents of workers or consumers. As soon as vaccines start making a dent in the pandemic, construction, marketing, entertainment, investment, restaurants, etc., will come back strong.
NYC will be relatively affordable for buyers due to lower Real Estate taxes and less of a commute. Once tenants and homeowners who left the city look at their tax bill, I promise you they will start longing for the city. New York City real estate taxes will surely go up, but will be lower than in other areas. In Queens, the average home pays $6,000 to $7,000 in taxes. That, along with many public transportation options, makes a difference in your household expenses. In that respect, Queens, with its mix of urban and suburban neighborhoods is the best of both worlds, affordable but still close to everything and with many outdoor amenities.
The Urban to Suburban Exodus will subside, NYC comes back with a roar, sooner, stronger in 2021. New York City always comes back. Because NYC is an international hub, a financial center and because it attracts people from all corners of the world, NYC will be back faster than the rest of the nation, and it will be back stronger. It is something difficult to explain to non New Yorkers. Take Queens for example, where almost every language in the world is spoken, and were many immigrants start their American Dream.
Commercial Real Estate: Retail, Office and Mall space would need to be reinvented. Urban Warehouses, will be an exceptional bright spot. There will be a surplus of commercial space even in the postpandemic word. This space will be reimagined and repurposed. This trend had already started with shopping malls before the pandemic due to online sales and e-commerce. Warehouses closer to urban centers, for the same reasons, will be in high demand, and some of them will be used for storing inventory and some for industrial kitchens to supply the booming food delivery industry.
Distressed homeowners will receive government support, which in turn backstops lenders, avoiding a foreclosure crisis. I remember the 2010 foreclosure crisis that never happened. I don´t think that real estate in Queens is in a bubble like the one that burst in 2008 and 2009. What I can say is that the homeowners that are struggling with their mortgage will be offered options like in the past, because it´s in the interest of everyone, including lenders, to avoid a foreclosure crisis.
Lending standards including appraisals, will, tighten, because values would reach a peak and also due to low mortgage rates… Let´s be honest, mortgage lenders do not like it when they make less in interest. And it is understandable that they are not hiring personnel to meet the excess refinancing demand because of the uncertainty of the economy. They will rather be more demanding with borrowers and scrutinize values more so as not to be left with an underwater asset in the future. It is important for the home seller and the home buyer as well, to be familiar with an accurate idea of property values. We offer this market analysis at no cost or obligation.
With a new administration, NYC would need to rethink affordable housing, and include landlords in the picture as well as affordable homeownership, not just affordable rentals. Putting the brunt of affordable housing in the landlords alone does not bode well for the long term. If landlords are alienated with very restrictive rent stabilization laws, they will not invest in buying and improving their assets. On the other hand, if the emphasis is put only in affordable rentals, many qualified tenants will be trapped in an affordable rental for a long time and won´t realize the wealth opportunity that comes with homeownership. Affordable homeownership needs to be part of the puzzle as well. I have seen it in my 26 years career many times: tenants with a decent job who got an stabilized apartment years ago, worked hard all their lives but never bought a property which is the single most important investment people make in their lives and one of the most important additions to their net worth at retirement. We must think affordable homeownership, not just affordable tenancy.
Thank you for taking our opinion into account when in comes to Real Estate in Queens. Stay tuned to our news in social media, follow us @topqueensagent, subscribe to our blog and youtube channel and do not hesitate to contact us if you are wondering about the price of your property, thinking about making a real estate purchase or you have any other real estate question in mind. Our email is mvargasny@gmail.com and our direct cell is 917-559-2002.
