Is New York City’s Real Estate Falling Real?

If Paris still shows a rise in prices, the latest New York statistics are down 17.7%. And yet, they would be misleading.

It was one of the few positive consequences expected after the Coronavirus epidemic: perhaps this health crisis would eventually bring the overheating real estate markets to their senses? In Paris, the decline predicted by some specialists is still pending, but it is true that transactions take a long time to finalize and that it may be necessary to wait a few more months if the trend should really change. In New York, on the other hand, some statistics already point to a tumble.

A study by the famous New York network Douglas Elliman revealed that the median price of homes sold in Manhattan had fallen by 17.7% between the second quarter of 2020 and that of 2019. It did not take more to see the titles on the expected dropout of the Big Apple real estate market. However, many specialists remain skeptical about the value and significance of these figures. The authors of the study themselves stress that this decrease does not necessarily correspond to a “post-covid discount”.

A “statistical anomaly”

Indeed, in New York as elsewhere, the market was shut down for many weeks. As a result, home sales volume plunged 54.1% in one year, so it’s an understatement to say that the observed sample melted. And in these cases, there are often “structural effects”, that is to say that we compare elements that are not comparable. In 2019, many wealthy buyers rushed to evade the city’s new property tax on transactions over $ 1 million. Conversely, in the second quarter of 2020, the property tax was in place and many sellers of luxury goods preferred to suspend their project after the pandemic. As a result, the goods that were sold during this period were much less luxurious and therefore cheaper, hence the huge price difference.

“It’s more of a statistical anomaly than a sign that the Manhattan real estate market is collapsing or that homes are selling for less.”, writes the American real estate site Curbed. Moreover, like Paris, New York remains a market of scarcity where demand is growing faster than supply. The generalist real estate portal Zillow notes that sales jumped 74.4% month on month (although they remain well below normal) and that the median display prices at the end of June were in 2.7% annual increase. What makes some say that the fall in prices is a fantasy. One thing is certain: in New York as in Paris, it is the economic situation at the start of the school year and in the months that will follow that will make the difference. In the event of a severe economic crisis, it is difficult not to consider a price correction. And if our economies turn out to be stronger than expected, non-speculative real estate markets will continue at high rates.

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