how the coronavirus has changed suburban real estate
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via The New York Times
By Lisa Prevost | Published July 17, 2020 | Updated July 18, 2020
Thousands of New Yorkers left the city and headed to the suburbs during the pandemic, and real estate there hasn’t been the same since.
Shawna Padula and Keith Hymes, both 37, decided very shortly after the pandemic shutdown in New York that they would stop looking for a larger apartment in the city for their growing family and instead shop for a house in the suburbs.
It was late March when they headed out to Long Island’s North Shore to see a four-bedroom colonial with a big backyard in Manhasset. Real estate agents were then prohibited from giving in-person home tours, but the homeowner had agreed to personally show them around, provided they wore masks and gloves.
“It was the first and only house we looked at,” said Ms. Padula, who works in the apparel industry and is expecting the couple’s second child. “We really liked the area, and the house was move-in ready.”
They bought the house right away for $1.575 million and moved in late last month. Mr. Hymes had been reluctant to leave the city, but now they’re both relieved they bought when they did, as competition in the suburban commuter markets has grown fierce.
“I have a girlfriend who was looking to buy in Huntington,” Ms. Padula said. “In May she had scheduled to see five houses on a Saturday. She set them up on a Tuesday. By the time she went to look, there was only one left.”
The well-documented exodus from the city over the past few months is upending housing market dynamics in close-in suburbs in Long Island, Fairfield County, Conn., Westchester County, and northern New Jersey.
Areas that have seen declining values for years are suddenly attracting flocks of buyers. Multiple competing offers, a phenomenon last commonplace in the run-up to the housing market collapse, are the norm again for listings in turnkey condition, and especially if they’re priced under $1 million. Demand for single-family rentals is also unrelenting — and landlords are cashing in big-time.
Sales agents are fielding calls at all hours of the day and night, trying to keep pace with market conditions that seemingly changed overnight.
“Sellers are realizing the sudden new demand — it’s like catching lightning in a bottle,” said Jaime Sneddon, a broker with William Pitt Sotheby’s International Realty in New Canaan, Conn. “Who knows how long it’s going to last?”
No one has an answer to that question, largely because it begs so many other questions. Will the flow out of the city continue through the summer? What if there’s a second wave of the virus this fall? How many former city dwellers now renting in the suburbs will choose to become permanent residents? And of course, there’s the uncertain economy.
While the markets will settle down at some point, the suburbs might benefit for some time if the preference for urban living is significantly weakened by the virus’s brutal toll, said Jeffrey Otteau, president of the Otteau Group, a real estate valuation and consulting firm based in New Jersey.
“This was a life-altering series of events which likely made an indelible mark on everyone’s psyche, not unlike what happened after the Great Depression,” Mr. Otteau said. “That experience put an imprint on peoples’ minds that shaped their lives for decades to come. Possibly this is one of those events.”
Or not.
“When there is a vaccine, and let’s call it 2021, and this is resolved, does this thinking continue? My thinking is no,” said Jonathan Miller, the president and chief executive of Miller Samuel appraisers. “Only because we saw this after 9/11. We saw this outbound migration for three years and then it reversed.”
For now, here are five ways in which the flight from the city is currently disrupting suburban real estate.
It’s a Sellers’ Market
Courtney and Rob Silverstein began looking for a house on Long Island even before New York’s shutdown, as they began hearing about the virus’s impact in Asia and Europe. Then living in Long Island City with their infant son, the couple went to Rockville Centre in February for a Saturday open house at a three-bedroom, three-bath colonial. They returned Sunday for a second look.
“It was packed both days even though it was rainy and cold,” said Ms. Silverstein, 33, who oversees corporate social media marketing for Bloomberg. “On that Monday, we made an offer. There were other offers, so we did have to adjust our bid, but fortunately, they accepted ours.”
The simple laws of supply and demand have sent the pendulum swinging in sellers’ favor. The surge in demand from New Yorkers is heaped on top of pent-up demand from a spring market that was delayed by the pandemic ban on in-person showings. Add to that a reduced supply of listings and you have a market that is in no mood for lowball offers.
In Westchester, the number of signed contracts soared in the month prior to June 21, hitting a total that was 18 percent higher than the same period last year, according to data from William Pitt Sotheby’s.
“The scarcity of inventory has been fueling an already busy market,” said Owen Berkowitz, a co-principal of the Berkowitz Marrone team with Douglas Elliman, in Scarsdale. “Some potential listings fell by the wayside — people stopped readying their houses because everyone was shut down. I have clients waiting for more inventory.”
In Greenwich, Conn., closings of single-family homes were up 8 percent over last year during the second quarter, while inventory was down by nearly 18.5 percent, according to a Douglas Elliman market report. (Connecticut, unlike New York, never banned in-home showings.)
Jennifer Leahy, in Douglas Elliman’s Greenwich office, said she had received multiple bids on nearly all of her listings below $3 million in the past few months, including “houses that had been sitting on the market and weren’t turnkey.”
Above $4 million, buyers are still slow to pull the trigger, but below $3 million, “I don’t have enough inventory for my buyers,” she said.
The flurry of activity persuaded Nest Seekers International to add Greenwich to its network of brokerage locations. Eddie Shapiro, the company’s chief executive, said they had long thought about opening in Greenwich, “but the opportunity didn’t feel right until Covid happened. We’re just following our clients’ needs.”
In the inner-ring northern New Jersey suburbs in Bergen, Essex, Union and Middlesex counties, listings under contract were up 70 percent in May over April, as shutdown restrictions began to ease, Mr. Otteau said. The increased demand started in the entry-level tiers, between $400,000 and $600,000, but then spread through all of the other tiers, including the luxury sector above $2.5 million, he said.
“Now the largest increase in home-buying demand is in that luxury sector,” he said. “In Bergen County, we’re seeing a doubling in the sales pace year on year.”
Back Country Is Making a Comeback
For years, values in the so-called back-country areas — characterized by expansive homes on multiple-acre lots — have dropped off sharply, as buyer preferences shifted to in-town locations and more-manageable yard sizes. Inventory piled up. But with more buyers now looking for large outdoor spaces and swimming pools to help them ride out the pandemic, the backcountry is feeling the love again.
“I haven’t seen people looking for land in 12 to 15 years,” said Mr. Sneddon, in New Canaan, Conn., where the town’s four-acre zone has long lagged. “We just thawed a market that had been frozen over for a long time.”
In Greenwich, Conn., about 50 houses had sold on lots of two acres or more as of mid-June, compared with 40 at the same time last year, according to Mark Pruner, an agent with Berkshire Hathaway.
“The remarkable thing about that is the sales went up on those lots while we were having a pandemic,” Mr. Pruner said.
In Weston, Conn., long a sleepy market with minimum two-acre zoning and no downtown, more than 80 listings had accepted offers or were under contract as of June 22, at least triple the pace of last year at the same time, according to Cyd Hamer, an agent in William Pitt Sotheby’s Westport office.
In Westchester, where it “became vogue to live in the lower county,” where development is more dense, more buyers are now drifting north to large-lot towns like Bedford, North Salem and Pound Ridge, according to Mr. Berkowitz.
“After a great decline in interest in the big stuff, properties that were somewhat lagging on the market are now gaining interest,” he said.
“Dated” Is No Longer a Deal Killer
While move-in ready homes are still most in-demand, buyers are no longer turning up their noses at properties that need work. Limited inventory and shifting priorities have changed that.
“Younger-age buyers have really not wanted to take on renovation projects, so if a house wasn’t move-in ready, it would take longer to sell and would sell at a discount,” Mr. Otteau said. “It still has an effect on the selling price of a home, but the need for work is no longer an impediment to sale.”
For example, with swimming pools at the top of so many buyers’ wish lists, some are willing to put up with dated kitchens and baths to get that outdoor amenity, Ms. Hamer said.
“I joke that people are buying the pool and the house that goes with it,” she said.
In Manhasset, Ann Hance, an associate broker with Daniel Gale Sotheby’s International Realty, put a dated three-bedroom colonial on the market the weekend of June 12 for $1.599 million.
“It’s a house that needs work. It’s got a great backyard and nicely scaled rooms, but it needs updating,” Ms. Hance said. “I had seven offers that weekend. It’s going to close for substantially more than the list price, and it’s all cash. This wasn’t the case in 2019.”
Mr. Pruner said he was working with three couples looking for a home in Greenwich, and “two out of the three are looking for something that needs work because they think it will be a better price.”
Rents Are Through the Roof
The market for single-family rentals continues to be red hot in coastal Fairfield County (as well as Litchfield County to the north). Many homeowners who have somewhere else to go are putting their primary homes up for rent and collecting unprecedented sums. The inventory of summer rentals rose dramatically as owners decided to test the waters to see how much they could get, said Melodye Colucci, an agent with Coldwell Banker Residential Brokerage in Stamford.
“It has truly become the Wild West in Fairfield County,” Ms. Colucci said. “The Hamptons are pretty much sold out for summer rentals, hence the move here.”
Most renters are looking in the $4,000 to $7,000 a month range, which gets a modest-sized three or four-bedroom home, she said. But high-end rentals are extremely competitive, even as they command tens of thousands a month. Last year, between March 1 and June 26, about 50 single-family homes rented for $10,000 a month or more in Fairfield County — this year the number is almost 260, Ms. Colucci said. (The figures include both summer and yearly rentals.)
“Traditionally you would think these very well-to-do people who have these beautiful houses wouldn’t really need the money,” she said. “But if you can go to your vacation house and come back with $100,000 in the bank — well, there were a lot more families this year who decided that was a good idea.”
Ms. Hamer was contacted by a couple who live on Fifth Avenue — they wanted to rent for the summer but “didn’t like anything on the market, and said to me, ‘please find us something special.” She found a homeowner willing to rent them a waterfront property in Westport for $200,000 for 10 weeks — the couple was “thrilled.”
Emotions Rule
The rush to get into a house is causing many deals to be driven more by emotion than the usual business-minded pragmatism at the higher end, agents say.
“We do have the Wall Street crowd here and I have clients that still employ their spreadsheets,” comparing price per square foot and other metrics among listings, said Ms. Hance, in Long Island. “But there are people who clearly want to make the move and they’re going to do it regardless. Especially if the woman is pregnant or they have babies and there’s a strong emotional component to make a life change now. They want to close this summer.”
Many buyers in competitive price ranges aren’t even looking at comps — comparable properties that sold within the last six months — when deciding how much to offer on a home, said Ms. Hamer.
“They’re looking at the other active listings. They have their checkbook in hand and they’re saying, ‘what’s available in my range, and I’m going to pick one of those,’ ” she said. “It’s not something we’re used to at all.”
Fear can be highly motivating, said Ms. Colucci, in Stamford. She listed a $25,000 a month rental in Westport that received six offers in 36 hours; four of those offers were from people who hadn’t set foot in the house.
“One of the couples who lost out called right away and asked if I had anything else — they were in a co-op on Park Avenue and afraid of riding the elevator,” she said. “Fear is a huge driving emotion and people who can afford it will pay a huge premium to make that fear go away.”