StreetEasy Economist Nancy Wu joins The Final Round panel to discuss New York's housing market and how trends in the city compare to larger national real estate patterns.
- Welcome back to "The Final Round" here on Yahoo Finance. The housing market in some areas of the comp-- the country just simply cannot keep up with demand. And this, of course, comes as the coronavirus pandemic has prompted many city residents to relocate to the suburbs. So here to talk a little bit more about this, we have Nancy Wu. She's an economist at StreetEasy. And Nancy, I know you specialize in New York City, but what's your take just more broadly speaking on what we're seeing happen right now in the housing market, and the impact that we're seeing from people moving out of cities nationwide?
NANCY WU: Thanks for having me. And in general, we're seeing that there hasn't been a significant urban migration to the suburbs in the country as a whole, but it is the case that New York City, especially in Manhattan, and San Francisco tend to be just examples of this, where people are moving out of the city. And that's causing rents to fall significantly, especially in New York City. And it's a trend that we are watching to see how it will develop over time.
- And Nancy, just thinking a little bit more about New York City, I mean, I'm just looking at my own building right now. There are 10 units for rent out of 104. They're all listed for a little bit over what I'm paying, but they're all no fee. They've been reduced. Is there almost a sense right now, if I'm browsing StreetEasy, that these are like overinflated listings, and that, if you went to a broker, you could probably get 20% lower than what's listed, they just don't want to advertise that that's the kind of discount you might have to offer?
NANCY WU: That's definitely the case. We're seeing way more discounts happening off the market, in addition to discounts that are on the market. Already, just to give some context, rental prices have been falling because there has been so much less demand over time since COVID hit the city. Unemployment rates are over 20% in New York City, which is already twice the rate during the Great Recession. And high unemployment has led a lot of New Yorkers to move out.
As we see higher vacancy rates, rental prices will go down, because rentals are coming onto the market, and without that demand to take up the rental supply, then we're seeing a lot of rental declines happening on the market right now. Rent cuts and concessions have been at record highs right now, so landlords are really scrambling to find renters as soon as possible. And a lot of discounts are happening off the market in order to incentivize renters to come to these apartments.
- Nancy, how much of an increase are we seeing in the suburbs as a result-- you know, we keep hearing about the migration to the suburbs. If you're looking just outside of New York City, has that driven rents higher, while, you know, places like Manhattan go lower?
NANCY WU: We're seeing demand go into the suburbs, but for the most part, when it comes to people leaving from New York City, it's part of the general attrition rate of the city. So we're not seeing people who want to stay in New York move to the suburbs permanently. It's more so people who are planning on moving in a year or two years to start a family or to send their kids to school over there, that they're expediting their migration to the suburbs as a result of COVID to take advantage of record low mortgage rates. But it's not the case that people are just going to the suburbs because they don't want to be in the city anymore. And so we are seeing demand go up in the suburbs right now. And some of that is temporary, but others are permanent.
- And Nancy, real quick, how long do you think it's going to take for the New York City real estate market just to bounce back?
NANCY WU: I think we're in this for quite a while. So during the-- comparing to the Great Recession, we saw that rents fell by 10% over the course of the year after the stock market hit the bottom. And right now, we are seeing that, since the pandemic hit the city, rents have fallen by 3% year over year in Manhattan, which is the biggest drop since the Great Recession. This is going to go on for a while because more and more inventory is coming onto the market right now. It's peak renting season, so leases are expiring. People are not moving to the city because students and new hires are starting school and jobs remotely. So this is going to go on. We're going to see rent cuts happening into the future. And I wouldn't be surprised to see rents continue to fall at least a year after COVID, into March 2021.
- Still have a ways to go then. All right, Nancy Wu, economist at StreetEasy, thanks so much for joining us today.
NANCY WU: Thank you for having me.