2021 looks to not be so different than 2020 yet, with the coronavirus pandemic raging in most places more than ever before, significant political unrest in the US Capitol, ample negative press on office vacancy levels and the monumental shift to work from home, and a continued housing frenzy in the suburbs due to a severe shortage of supply. Manhattan has been recently called the outlier, and not in a good way, regarding current housing values.
I encourage you to look closely at the data, though, rather than the headlines. For those tracking our MarketWatch email weekly* , you will notice that the number of homes being sold in Manhattan is consistently outpacing the same period in 2019, although at lower prices (certain weeks by more than 50% of volume). The luxury, $4M+ market outperformed 2019 in Q4 and is doing the same in the first two weeks of 2021. Brooklyn is performing at historic highs and just this past week, it was announced that the Brooklyn townhouse record was broken, with the borough recording a $25.5M townhouse sale.
Early January brings us some major news politically, too, that stands to have significant effects on the NYC market.
As this is written, Congress has flipped blue, and Biden will be able to much more easily pass highly progressive policies. Chuck Schumer is the new majority leader, a New Yorker. Those predicting a “handcuffed” president will be incorrect. I take the stance that although many fear high taxation, a completely blue presidency is a net positive for NYC. Why?
The probable reintroduction of the SALT deduction: One of the major causes of pain in the market in the past couple years and a big reason for the wealth flight to no income tax states could be back on the table.
Objectively better handling of the vaccine distribution and COVID: Mask requirements, better funding, and better distribution of the vaccine should alleviate the fear of city living more quickly.
Higher probability of federal stimulus to NYC and other blue cities/ states: The most major positive in my mind, avoiding a fiscal crisis requires the federal government’s help—specifically for quality of life issues such as transportation, crime and cleanliness.
All at the same time, the city and state government are operating in a manner that is a net negative to New York. Violent crime has risen in the city, the MTA is strapped, the vaccination campaign has been slow, and there are a lot of questions around how the next mayor will pull us out of the deeper effects of the pandemic. There should be as much attention on the mayoral race for New Yorkers as there was the presidential. I’ve so far been drawn to Ray McGuire and Zach Iscol.
The pied-a-terre tax stands to potentially pass this legislative cycle, which is a proposed recurring tax on non-primary homes worth more than $5 million or on coops and condominiums with an assessed value above $300,000. A tax like this stands to be catastrophic for the high-end market, which brings the city and state billions per year in city transfer taxes and mansion taxes.
All in all, with continued low interest rates, ideally a federal stimulus and vaccine distribution, and a slowly falling supply of attractive listings on the market, the spring and summer of 2021 are shaping up to be potentially frenzy-like in NYC once it feels safe to return in full. Buyers are still grabbing “COVID discounts,” particularly in the super-luxury market, but there is potential that the window for deal making is closing.