NYC's current housing market compared to its housing market in 2001 - Business Insider

Business Insider talked to several industry experts on the current downturn in New York City's current housing market — and they agreed it reminds them most of the housing market after 9/11.Each market was strong heading into each crisis, and significant uncertainty followed about how strongly they would bounce back.But the experts cautioned that the current economic downturn may yield a longer correction period — and that the housing downturn isn't limited to just New York City.Visit Business Insider's homepage for more stories.

The coronavirus pandemic is far from the first crisis to shake New York City's housing market. Although the city's property valuations have been ever-climbing in recent years, there have been a couple major shocks in recent decades. There were the near-bankruptcy years of the 1970s and the Great Recession in 2008-09 — to name just a few.But Business Insider found in conversations with industry professionals that the current state of the market is most like the one that followed the terrorist attacks of September 11, 2001. Industry leaders pointed out several similarities from the two periods, but also made note of the differences, predicting that the post-pandemic market correction will be like that of 2001 and 2002, but that it may be influenced by some moving factors, such as the dramatic economic downturn. Both markets were on the upswing before being brought to a sudden halt.New York City's housing market prior to 9/11 is remembered as relatively strong.

“Before 9/11, we had a good market. The market back then was steadily going up about 10% to 20% every year,” luxury broker Lisa Lippman, a 22-year industry veteran, told Business Insider. And Bonnie Chajet, a Warburg Realty broker with over 30 years of experience, recalled the market as a strong one on September 10, 2001. “Deals were being made, people were upgrading,”she said.Fast forward to the beginning of 2020, and the market was in a similar position. In fact, the city's total sales volume was up 14% for the first three months of year.“The market was doing very well,” Chajet said, referring to 2020. “I saw a little pick-up at that time. There started to be activity.” Chajet added that many brokers believed the uptick in activity had to do with sellers coming to the realization that in order to secure a deal, they had to adjust their prices to match the buyer's market.

“They got more realistic, they lowered their prices, brokers were able to make deals for them, and that's how the market picked back up,” she explained.Lippman agreed. “We had seen a pick-up in the real estate market, but at lower prices. So basically, we saw sellers rolling back prices to like 2013 levels, and deals were getting done,” she said.Fear caused hesitancy in both markets.On September 12, 2001, Lippman told Business Insider that she had a buyer back out of a $7 million apartment. She also had another person walk away from a million-dollar deposit on a $10 million apartment. “A lot of deals died,” she said. According to Chajet, there was uncertainty in the weeks and months that followed the attack. She told Business Insider that a seller she was representing at the time settled for 10% less than the the asking price because he didn't know if he would be able to find another buyer. The current housing market has faced a similar fate. On April 20, Mansion Global reported that for the fourth consecutive week, the city's high-end market saw just two contracts signed for properties over $4 million. According to a report by Yahoo Finance's Amanda Fung, prior to 2020, the last week that saw only two contracts signed was in August 2009. And that was just one week, not four in a row.

In addition, as sellers began to realize the severity of the current pandemic, they took their homes off the market.“Because everybody knew this [social distancing] was going to be through at least April 30, and now May 15, a lot of sellers have taken their apartments off the market, so there's not a big build-up of inventory and very little is coming on the market,” broker Michael Franco of Compass told Business Insider.It took NYC's housing market roughly three to five months to correct itself after 9/11.According to Chajet, the market's pick-up after 9/11 was faster than anyone expected. “Things were dead completely until the end of December,” Lippman told Business Insider. “By January, things started waking up a little bit. And by the spring, I don't remember if it was March or April, we had the best spring we had in a long time.”While data for the recovery in late 2001 and early 2002 is variable, The New York Times reported in March 2002 that sales and prices for co-ops and condominiums were both on the rise in January and February of that year. In addition, the last quarter of 2001 saw the price per room for three-bedroom apartments shoot up 15% compared to the year before, setting a record at $266,875.

There was a sense of pride in New York, Lippman explained. People wanted to be back in the city, they wanted to be together and show that New York was strong. “It went against what everybody assumed,” she added.Bullish predictions call for a soft market until fall 2020 — if the shutdown is lifted by June.Chajet predicted that sellers needing to sell, combined with investors looking for a deal, will help move the market forward.Like Chajet, Lippman agreed that for the first three months or so, there will be a lot of deals done at low prices.“I think for the first few months, June, July, and August, it's going to be soft and slow,” she said.

Given the state the market was in right before the pandemic struck, and the amount of money from financially sound buyers currently sitting on the sidelines, a market catch-up could happen sooner rather than later once the city is reopened, Franco explained.“January and February were good months, and I think that there's a really strong possibility that we'll have some upward movement toward the end of the year,” he added.Real estate mogul Barbara Corcoran, founder of The Corcoran Group, told Zack Guzman of Yahoo Finance that two key factors that will help determine, more than anything else, how the nation's housing market will weather the pandemic storm: how high the unemployment rate gets, and how well the government can roll out its $2.2 trillion stimulus plan.Based on those two big ifs, Corcoran said, the housing market could catch up to where it was headed before the outbreak, and fast. But you have to keep unemployment low and “get cash into people's hands” from the stimulus, she added. “That's the $1 million question.”A slow economic comeback and strict lender restrictions could prolong a market correction.The brokers told Business Insider that, for the most part, 9/11 impacted one market and one place, but the coronavirus pandemic is impacting the whole world and has led to an economic shutdown.

As Barbara Fox, the founder of Fox Residential Group, sees it, New York is a very fluid market, there are always going to be buyers and sellers. It's not a matter of if New York recovers to her, it's a matter of when.Recalling the aftermath of 9/11, Franco said the element of fear was much greater than the economic uncertainty was. “I feel like there was less focus on the economic impact and more focus on safety and well-being,” he added. The economy is in a much worse state now than in 2001, which could potentially prolong the market's correction phase. Franco explained that the month following 9/11 was filled with shock, but stores were still open and people were still out and still spending. On the contrary, now, stores are closed and people are mostly just spending money online.“Our economy didn't really shut down after 9/11. Things kept chugging along,” he said. “But there's also so much money being pumped into our economy this time around, and that could make for a quicker turnaround.”Franco added that another factor that may impact the market's correction are lender restrictions. While this may not directly impact New York, Franco said a reason for these restrictions may be because people are anticipating defaults because of the unemployment rate, which can cause a backup with the banks.

But, according to Franco, no one knows exactly how this novel virus is going to impact the industry and when and how it is going to end. It could linger for months to come, it could ease up by June. Only time can tell on this one, he explained.