New York: Lessons in time
New York appraiser, Jonathan Miller, who produces quarterly market reports for our US residential partners, Douglas Elliman, looks at how the Manhattan market has weathered previous crises to understand if it can offer any indicators as to what lies ahead.
3 minutes to read
It’s been a challenging time for all of us. I’ve been seeing and hearing a lot of comparisons of historic catastrophes in the past with the Coronavirus crisis. I hear things like “It’s worse than the aftermath of 9/11 or the “Lehman Moment” (the financial crisis as the housing bubble burst).
My initial observation of this crisis was the absence of a “light at the end of the tunnel” – the fact that many of us are “sheltering in place” and social-distancing but we have no idea when this will end.
Being an appraiser in Manhattan on September 11, 2001, and the “Lehman Moment” on September 15, 2008, I saw them as singular events and the further we moved from them in time, the sooner we would heal. As bad as 9/11 was, there was a 9/12, 9/13, 9/14 and so on. But we don’t have that with the Coronavirus yet.
It looks like I am going to have to update my January 11, 2006 Matrix post: In Good Times and Bad, Negative Milestones Often Define The Real Estate Market
Since there is limited real estate data at the moment (but there will be in April), I placed 9/11 and Lehman side by side as indices using three different metrics: median sales price, sales contracts and listing inventory and compare the trends from the event going forward by quarter.
For market-wide contract trends, I simply pulled the closing dates one quarter earlier to represent contract dates since no one has market-wide bulk historical data on contracts from back then (we do not have a traditional Multiple Listing Service (MLS) in Manhattan).
I looked at 9/11 as an abrupt external event that immediately inserted itself into our lives without warning. The Lehman moment was a multi-year journey that some of us could see that it would end badly. This Coronavirus crisis seems to be a combination of both. The threat of the Coronavirus didn’t interfere with everyday living for most of the U.S. population until March 15 when the second Fed rate made it real for everyone.
Here is what happened post-9/11 and Lehman to the Manhattan housing market:
- Median prices following 9/11 and Lehman’s collapse followed similar overall trajectories but prices proved more resilient after 9/11 than Lehman’s collapse. Post 9/11 median prices held firm and after two quarters increased strongly, within two years median prices across Manhattan were 25% higher. By comparison, after Lehman’s collapse, median prices declined 15% within two quarters before registering a steady increase, ending the two-year period 8% higher.
- Perhaps not surprisingly, there is some correlation between median prices and sales contracts after both crises with sales surging noticeably within one quarter of 9/11 whilst it took approximately four quarters for sales to return to pre-crisis levels after Lehman’s collapse in 2008.
For more information on the New York market, please contact Stacey Watson
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