By Colin R. O'Leary
The Coronavirus Pandemic of 2020 was a big surprise for almost everyone. Never before have entire industries been forced to shut down all at once. As we speak, America is still mostly shut down for business. Schools across the nation are still shuttered. The real estate market is being significantly impacted because of all of this. So how will the Coronavirus Pandemic affect the real estate in 2020? Let's take a look at a few ways the real estate industry may be impacted.
1. Consolidation: Real estate companies, especially brokerages, operate on slim margins even in the best of times. The cost of doing business gets higher ever year with operating expenses. Agents are demanding higher splits. It's becoming more and more difficult for companies to succeed in today's marketplace even without a pandemic. The Coronavirus Pandemic will likely force the closure or consolidation of many small and mid-size brokerages who will be unable to weather the current financial storm. Larger firms with more financially stable will be forced to re-evaluate business operations. The drop in revenue could lead to larger and more financially stable companies to consolidate by cutting staff, slashing expenses, and closing offices.
2. Technological Advances: Technological advances in real estate will likely speed up because of the Coronavirus Pandemic. Virtual tools such as Zoom and Docusign have been around for years, but are now in much more demand. Real estate is one industry that hasn't been completely disrupted by technology. Firms like Redfin and Purplebricks distrupt the industry but have made little impact. Why? because its impossible to replace the human factor that traditional brokerages offer the market no matter how good the technology that's offered to buyers and sellers. Still, expect technology that enables the real estate industry to do business more remotely to improve. Real estate closings are already happening virtually here in NYC right now. Brokerage and client meetings done virtually will become more common. Expect to see more real estate activities like closings happen virtually in the future even after the pandemic becomes a distant memory.
3. Home Values Shift: Home values will be affected by the Coronavirus Pandemic. Only time will tell how much. Home values could rise or fall faster in certain places because of the pandemic. Home values in places that were buyer's markets before the pandemic could be further depressed. Home values in places that were seller's markets before the pandemic could potentially rise in value because of the lack of new homes coming onto the market. There will inevitably be sellers who decide to hold off from listing their homes this spring. This could lead to a supply issue that favors sellers in certain areas.
4. Rural Markets Boom? Could there be a potential boom in rural markets? City dwellers might begin to rethink their current living situations. This could lead to many people purchasing homes in rural areas, whether as a primary residence or a vacation home. There will always be people who prefer to live in cities, but as workers become more remote because of technological advances some may rethink their living situation altogether. The pandemic may lead to more homes sold in rural and suburban areas.
5. Foreclosures Rise: Unfortunately due to the pandemic, millions of people will lose unemployment. How long the economy takes to rebound is unknown. Many homeowners will be affected. Fortunately, most states and banks have already agreed to a 90-day Forbearance for borrowers who are affected by the Coronavirus Pandemic. This doesn't mean you can stop paying your mortgage, rather that the terms of the loan will be extended. Still, expect the number of foreclosed homes to rise in 2020. Homeowners who tapped out the equity in their homes by doing things like "cash-out" refinancing or a reverse mortgage will be at most risk. Homeowners who lose employment because of no fault of their own may be able to avoid foreclosure by doing a short-sale. A short sale is when the bank allows homeowners (with no equity) to sell the property for less than what is due on the note or mortgage.
By Colin R. O'Leary
Gotta go to Mo's? Sadly it's no longer going to be an option as the company has filed for Chapter 11 bankruptcy. America’s oldest family-owned and operated retailer of sporting goods has voluntarily filed for Chapter 11 in the District of New Jersey.
The company has been struggling in recent years. Online sales of sporting goods by companies like Amazon have cut into the business of traditional sporting good brick-and-morter retailers like Modell's. The local New York sports teams have also been performing poorly for the most part in recent years, leading to less fan gear being sold at Modell's. All stores will soon be shuttered and the remaining assets will be liquidated.
The company attempted to raise money by outside investors in past years to tryto avoid a bankruptcy filing. Unfortunately the company was unsuccessful. “Over the past year, we evaluated several options to restructure our business to allow us to maintain our current operations. While we achieved some success, in partnership with our landlords and vendors, it was not enough to avoid a bankruptcy filing amid an extremely challenging environment for retailers,” Modell’s Chief Executive Officer, Mitchell Modell, said.
The company has 153 stores in multiple states including New York, New Jersey, Pennsylvania, Connecticut, Rhode Island, Massachusetts, New Hampshire, Delaware, Maryland, Virginia and Washington, DC. Modell's Sporting Goods has been in operation for over 130 years. The company was founded by Morris Modell in New York City back in 1889. Commercial real estate brokerage A&G Realty Partners has been selected market the retail spaces that will be vacated by Modell's, according to the Real Estate Weekly.
By Colin R. O'Leary
New York Governor Andrew Cuomo has promised homeowners who are financially affected by the Coronavrus pandemic a 90-day moratorium on mortgage payments. The ongoing Coronavirus pandemic has effectively shut down businesses across the state. Many are out of work completely right now, especially wage earners and "gig economy" workers. Others have the flexibility to continue working from home. No one knows what extent this will damage the local economy this year. Many homeowners will inevitably lose unemployment over the situation, most likely leading to an increase in the number of foreclosures properties in 2020.
Governor Cuomo said the state wasn’t exempting people from making the mortgage payments altogether. Rather mortgage terms would be extended to make up for the missed mortgage payments. The governor also mentioned that there would be no late fees or black marks on homeowners’ credit reports if they have to postpone payments due to the crisis. Banks across the country are working with elected officials to adopt similar plans to help effected homeowners.
By Colin R. O'Leary
The real estate market in NYC has been disrupted like most businesses due to the affects of the ongoing Coronvirus pandemic. The springtime is typically the busiest time of the year in most real estate markets across the country. Right now, the sales market is in a pause. Brokers are questioning whether its moral or not to continue showing properties as the virus worsens. Some sellers are refusing showings completely right now. Showings have nearly ground to a halt over concerns of the Coronavirus here in NYC. No one is sure how long this will continue at the moment. So how will the NYC real estate market be affected by this over the long term? The short answer is that we don't know yet.
Real estate is a cyclical business by nature. While the market for people buying and selling real estate is 24/7/365, the springtime is usually the busiest time of the year when it comes to showings and new sales listings hitting the market. The busy springtime market usually leads to an increase in real estate closings happening around the early summertime. New listings typically slow over the summer in NYC, when homeowners are out of town visiting the beach or mountains, until September when things pick up again. The same cycle occurs every year. This year is different though.
Real estate is a very hyper-local business here in NYC. At any given time it can be a buyer market in one neighborhood and a seller market in another neighborhood within the same borough. The Bronx real estate market is separate from the Brooklyn or Manhattan real estate market. The real estate market for condos in NYC is different than the real estate market for townhouses. The residential real estate market is separate from the commercial real estate market. Each neighborhood, borough, and property type will be affected in different ways this spring by the Coronavirus pandemic. How they will be affected is TBD.
Buyer's markets could worsen in some neighborhoods, especially if potential buyers who are on the fence about buying decide to stay on the sideline this spring. There could be excellent buying opportunities in the marketplace this spring for those who are willing to come off the sidelines during these troubling times. Interest rates on mortgages are at historic lows. Inventory levels are high in many neighborhoods, especially in the condo market in places like Manhattan and Brooklyn. This combination of factors is driving prices lower in many markets.
On the other hand, seller's markets that had little inventory before the Coronavirus pandemic could see prices rise this spring (think single family and multi-family townhouses). If potential sellers hold back from listing properties this spring, it could create a supply shortage driving prices even higher in certain neighborhoods. Real estate sales are driven by supply and demand. The lack of supply might create favorable market conditions for some sellers in NYC this spring.
The uncertainty level right now is high in real estate, just as it is in most industries. One thing that is for sure is that the pause in property showings right now will surely put a damper on the number of contracts that are signed this spring. Deals that are in-contract could be at risk if borrowers are unable to secure financing from lending institutions. Will properties still be trading hands? Yes, absolutely, but at a slowed pace. Only time will tell how the Coronavirus pandemic will affect the NYC real estate market in NYC over the long term.
While the Coronvirus pandemic continues, most people are holed up and working from home. There's no doubt these are challenging times. Lives and businesses are being disrupted. Some people are losing hope. It's important to realize that the world has overcome difficulties far greater than this. We will overcome this pandemic. In troubling times like this, its important that we stay focused on our goals, dreams, and aspirations. In every difficulty lies opportunity. I've put together a list for you below of 10 amazing that will help keep you fired up in troubling times like this.
1: “Obstacles are like wild animals. They are cowards but they will bluff you if they can. If they see you are afraid of them...they are liable to spring upon you; but if you look them squarely in the eye, they will slink out of sight.” - Orison Swett Marden
2: “Don't wait for extraordinary opportunities. Seize common occasions and make them great. Weak men wait for opportunities; strong men make them.” - Orison Swett Marden
3: “Most of our obstacles would melt away if, instead of cowering before them, we should make up our minds to walk boldly through them.” - Orison Swett Marden
4: "It is a mistake to suppose that men succeed through success; they much oftener succeed through failures. Precept, study, advice, and example could never have taught them so well as failure has done." - Samuel Smiles
5: "Ideas can be life-changing. Sometimes all you need to open the door is just one more good idea." - Jim Rohn
6: "We must all suffer one of two things: the pain of discipline or the pain of regret or disappointment." - Jim Rohn
7: "The starting point of all achievement is DESIRE. Keep this constantly in mind. Weak desire brings weak results, just as a small fire makes a small amount of heat.” - Napoleon Hill
8: "Do not wait: the time will never be 'just right'. Start where you stand, and work whatever tools you may have at your command and better tools will be found as you go along.” - Napoleon Hill
9: “You can make more friends in two months by becoming interested in other people than you can in two years by trying to get other people interested in you.” - Dale Carnegie
10: “When dealing with people, remember you are not dealing with creatures of logic, but with creatures bristling with prejudice and motivated by pride and vanity.” - Dale Carnegie
11: “Instead of writing down what you’re going to do (chances are you’ve been doing that your whole adult life anyway, and it doesn’t make you any better at doing them), write down at the end of the day what you did do that day." - Jeff Olson
Mortgage rates fell to their lowest level on record this week, according to the WSJ. Rates have declined as fears of the coronavirus continues to weigh on the overall U.S. economy. The average rate on a 30-year fixed-rate mortgage is down to a record of 3.29%, according to mortgage giant Freddie Mac. Lower mortgage rates typically help boost home sales, however fears of the coronavirus could keep some buyers on the sidelines this spring. Only time will tell what kind of effect the virus has on the real estate market.
Quick look at 368 Third Avenue. This new residential tower in midtown Manhattan will rise to 388 feet when completed. It will include 100 new apartments and a ground floor retail space. It’s expected to be completed in 2021.
1/8/2020 1 Comment
Real estate taxes have always been a key contributor in funding the city's operations. New York City’s real estate taxes generated the city $31.9 billion over the last fiscal year, according to a recent report by the Real Estate Board of New York (REBNY). NYC Property Taxes generated the city $28 billion alone, enough to cover the salaries of the 300,000 plus full-time employees currently working for the city. Additional revenues generated from real estate related taxes were generated through Property Transfer Taxes ($1.4 billion), Mortgage Recording ($1.0 billion), Commercial Rent ($900 million), and Hotel Room Occupancy ($600 million).
The total amount raised from real estate related taxes alone represented 53% of the City’s total tax revenue, up from 47% of the total tax revenue in 2009. According to the report from REBNY, Personal Income Taxes generated the next largest amount of revenue for the city at 21% of it's total tax revenue.
“This report demonstrates the importance of real estate related tax revenue to our thriving city,” said James Whelan, REBNY President. “A healthy real estate industry is vital to the health of the city, as real estate related taxes make up more than half of all taxes collected. This revenue supports the city’s share of salaries for every single police officer, firefighter, and schoolteacher with billions left over to pay for parks, libraries, and other critical public services that ever New Yorker enjoys. If we want a progressive city, then we need a prosperous city. These findings underscore that policies that limit the amount of tax revenue generated by our industry are counterproductive to improving the lives of New Yorkers they aim to help.”
See REBNY report here
Written by Colin R. O'Leary
By Colin R. O'Leary
Although the economy is booming and unemployment is at record lows, 2019 was a challenging year for the NYC real estate market. The market is showing mixed results depending on which borough you look at. Medium home values have risen in Brooklyn and Queens over the past year, however slightly at just over 1% over the past 12 months. Zillow predicts that medium home values will decline slightly in both Brooklyn and Queens in 2020.
The Bronx real estate market is the outlier, where the market continues it's hot streak. The medium home value in the Bronx has risen over 10% year-over-year. The median price of homes currently listed in Bronx is just $385,500, which makes it the most affordable borough in New York City. Zillow is predicting the medium home value in the Bronx will continue to rise in 2020.
Medium home values have decreased year-over-year in both Manhattan and Staten Island. The Manhattan market has been the most troubling for home sellers in NYC, where the medium home value has decreased -6.3% over the past 12 months. Staten Island home values have also declined by -1.2% over the past year. Zillow predicts that medium home values in Manhattan and Staten Island will also continue to decline over the next 12 months.
The luxury market in NYC has been hit hard over the past 12 months. According to the Olshan Luxury Report, the number of contracts signed above $4 million in Manhattan has declined by 16% compared to 2018. 935 contracts have been signed above the $4 million price mark in 2019, totaling $7.65 billion worth of real estate transactions. According to the report, this is the lowest dollar volume for luxury real estate priced above $4 million since 2012.