We are certainly living in "interesting times" as the old proverb states. As a result, we are being told that the mortgage and real estate markets are facing conditions now that we have never seen before. But, is that really true? And if it is, wasn't it also true in the 1970s when "the Bronx was burning and interest rates were in the teens;" the 1980's during the AIDS crisis; the 1990's tech bubble; after the 9/11 attacks and in the housing meltdown and mortgage market upheaval of the mid 2000s? That is, in almost every decade in recent memory we faced unique challenges that affected real estate and mortgages in the Tri-State area.
So, is this time different? Yes, it is. But, only because its unique set of facts are not the same as the unique set of facts from recent decades. Currently, there is occurring what I think will be a relatively short-term, and not even that impactful increase in the number of people moving from Manhattan and Brooklyn to Westchester, Long Island, New Jersey and Connecticut. With interest rates in the upper 2s and low 3s, for anyone thinking about "moving out," it is definitely a great time to buy a house.
However, I think that most of the people who are leaving are people who have been planning to leave for some time but just needed the impetus to do so. Covid has certainly given them that. In addition, people who don't necessarily need to be in the City are taking this opportunity to move. And, as noted above, even without Covid with the lowest mortgage rates ever, if people were considering a move to the suburbs, they would be doing it now. The most common example of this are families with school-age children. Many outgrew their apartments and/or did not want to spend the money for remote learning at private schools in the City and/or continue to experience the "be careful what you wish for" too much/too close family time in an apartment.
So, currently, inventory in the suburbs is low and buyer's interest is high which on its face makes it appear as if there is a huge movement out of the City. But, this lack of inventory is not only because there are more buyers. It is also because there are fewer sellers. That is, many potential sellers are homeowners who are hunkering down during the pandemic before listing their homes. And, older people are staying in their homes during the pandemic since they don't want to move to smaller and often more crowded living situations if they are healthy enough to avoid it, especially after witnessing the nursing home debacle in March and April.
In the past few years, there were multiple articles written about the death of the suburbs. Stores were closing in malls as more people shopped online; suburban chain restaurants were out of favor by the hipster set who wanted unique food options and sprawling office parks were being vacated as younger workers wanted to live and work in cities. Overall, the demographics haven't changed. It's just that the current situation is so intense and so overwhelming that it appears we are facing a fundamental shift when we are really just seeing a finite period (albeit a longer than wanted one) of uncertainty and fear.
Regardless of Covid, the City to Suburban movement is all cyclical anyway often dictated by biology and demographics. Even without Covid, prices in the hottest areas of Brooklyn and Manhattan had already started to fall in 2019 and early 2020 since the unaffordability threshold for even the Upper Middle Class had long since passed. Covid just accelerated and exacerbated what was already occurring. Additionally, though many people can work at home, it remains to be seen if they will want to do that all the time. With workers already spending most of their work life behind a screen I think they will miss the social contacts that an office environment provides. And, even if they do work at home, they will still need to live someplace. I just don't see younger people permanently leaving New York City for surrounding areas or even smaller cities that offer lower home prices but also lesser numbers of restaurants, nightlife, concerts, sports, museums, etc.
Though they have a lot to offer, I don't recall anyone referring to Columbus, Ohio or Austin, TX (two of the fastest growing cities in the US) as the "cities that never sleep." Right now, without bars, restaurants, concerts, museums, etc., New York City is not really the "Big Apple" of legend. But, as it has reinvented itself so many times before, once it does again, it will be back. Betting against NYC is like betting against the Yankees. They may go through slumps and down years (or even a decade or so), they always find a way to eventually win unlike the Mets, who I follow, and unfortunately don't! It will be the same for NYC and articles will be written in 2022 and 2023 about the newest, hippest, hottest, trendiest new neighborhood that nobody would have suspected.
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