Today’s world is filled with opinions and scenarios on how quickly the economy will rebound—some economists go for the elongated U-type of recovery the U.S. experienced after the last recession, while most of them predict the faster-paced, V-shaped model. But nobody knows for sure.
Multi-Housing News talked to Brown Harris Stevens’ first CEO, Bess Freedman, about the luxury real estate market in the time of COVID-19. Freedman explained how agents and buyers are adapting to the new normal, and shared some tips on how to remain grounded in stressful times such as these.
How was New York City’s luxury real estate market before COVID-19?
Freedman: Before the coronavirus, we had been in a strong buyer’s market for three years. If you look at the data, we were shaping up to have a fantastic March. The price of an apartment in the first quarter averaged roughly $1.6 million, which was slightly higher than last year’s first-quarter average. When the governor instituted the PAUSE order in late March, things really slowed down, because in-person showings were not possible.
Right now, tighter lending restrictions, coupled with high unemployment rates, are posing a challenge—at least temporarily. However, deals are still happening as transactions can take place virtually. When things normalize, the hope is that demand will start to drive prices up.
Do you think the leading market sentiment will transform in the coming months?
Freedman: Most of the activity we are seeing is in the market under $1.5 million, and there are more rentals moving than anything else. I don’t believe we have hit the point where sellers are going to drastically reduce prices unless they have a real need to sell. I do believe there are opportunities now for qualified buyers, with interest rates as low as they are. This is not the time for sellers who want to achieve maximum value.
Will the softening on the buying side also affect the luxury rental market?
Freedman: No matter how good or bad the market is, there are people who have a need to sell, buy or rent. Of course, there is a lot of uncertainty—the stock market is volatile, lending restrictions are rising, unemployment numbers are up and there is a lot of confusion around the stimulus package.
I think right now people are prioritizing their health over anything else. The coronavirus has changed companies overnight and consumers have altered priorities. Once there is a treatment and tests are readily available, the uncertainty factor will greatly diminish health and economic implications.
How are New York brokerages readjusting their marketing strategies and selling methods?
Freedman: Health and safety come first. We are working with our agents to help them promote their listings through social media, and some are even working with their sellers to produce virtual walk-throughs for potential buyers over Zoom and FaceTime. We are investing more in digital advertising, since everyone is spending so much time on their phones and computers.
Thanks to technology, you can do everything—from search to signing—virtually in most cases. More importantly, we are encouraging our agents to pick up the phone and check in with clients on a human level, not as their real estate agent. Right now, people need kindness, assurance and information.
Is this the beginning of a new era in the real estate sales process?
Freedman: Virtual closings are happening. They may take longer, because virtual closings depend on the flexibility of banks, buildings and managing agents. In New York, we have a lot of co-op boards that require in-person interviews. Some have eased up on this procedure, but some very much still believe in it.
While I think the virtual process serves a need right now, I don’t believe that it will spell the end of in-person business as we know it. Real estate is a “people” business and when it comes to buying homes, most people like to get a look and feel of the space before they spend a significant amount of money.
What’s in store for New York’s segment of pied-à-terre units?
Freedman: New York is one of the great cities in the world and people will always want to have a place here. In the short term, we might see a drop-off as we did after Sept. 11 and Lehman Bros., but the market came back stronger each time. I think recent tax increases had a negative impact on pied-à-terre buyers before COVID-19 hit.
How has business changed in other markets where Brown Harris Stevens is active?
Freedman: The Miami market is doing quite well, and they are seeing increased buyer interest from the Northeast. Palm Beach is experiencing the same. The Hamptons saw a massive uptick in short-term rentals, with people fleeing New York in search of more space. People were willing to pay a lot of money in the off-season, but sellers weren’t necessarily willing to give up their homes. That created an inventory crunch as we head into peak summer season, so I expect demand will continue to be strong in the Hamptons.
Tell us your mid- to long-term predictions for the luxury real estate market.
Freedman: Until the economy is open in New York and around the country, the luxury market will continue to operate at a slower pace. The key to successful deals right now is the ability to control pricing. Properties will move if they are priced according to what the market commands. Luxury homeowners who aren’t under pressure to sell likely won’t keep their properties on the market, or they will wait it out.
How are you coping with the rising level of stress?
Freedman: It’s important to have a routine. Every morning I wake up, meditate and stay connected to my colleagues and loved ones, whether it’s through phone calls or video conferencing. I encourage everyone to step away from their computers and televisions to get some exercise, whether it’s a walk or yoga or something more intense. It’s important to take time to nurture your mind—whether that’s reading a book or diving into an online class or discovering a new hobby. The most successful people, agents included, stay grounded. You can’t allow yourself to live in extreme highs and lows, especially in times like these.