Jury still out on long-term impact of pandemic and NY population decline
The pandemic’s crippling economic impact on New York, which caused the loss of billions in tax revenue and a record 631,000 in lost jobs (in addition to a huge death toll) has also contributed to an ongoing demographic shift towards neighboring states.
According to figures from the US Census Bureau, between July 2019 and July 2020, 126,335 people moved out of the Big Apple. In stark terms, New York state experienced year on year a 0.65% drop in population – that was more than any other state in the nation.
Guaranteed Rate’s vice president of mortgage lending Tim Martin (pictured) saw something similar happen almost 20 years ago, following the September 11 attacks, when there was a sudden outflow of people from Manhattan.
It took “a few years” for the Big Apple to bounce back, he said.
Fast forward to today and the jury is still out on the long-term effects of COVID on the housing market. “We still don’t know how much of it is temporary. Some people who left and moved in with family left their apartment empty back in the city with the intention of coming back. And some of them, after living up here (Connecticut) for six months, decided to buy,” he said.
With more than 19 years of residential lending experience, dealing solely with closing transactions in the state of Connecticut since 2010, Martin has become the top producing LO in the Northeast region for the company.
With his finger on the pulse, he said that after the initial “knee-jerk reaction” to COVID, the emphasis among homebuyers had now shifted to more practical considerations, prompted in no small part by having to work from home.
But home working has caused its own set of problems, Martin noted, citing the typical profile of a young couple living in a one-bedroom condo with an underage child while working from home. “It doesn’t work, it just isn’t feasible,” he said.
COVID has brought into sharp focus the difficulties faced by young couples with children, although in Martin’s view the pandemic has only fast-tracked their plans.
“They needed to get more space just to be able to function,” he said. “But a young couple with a young child was going to live in the city for only a couple more years before moving to the suburbs when the time came for that child to enrol in school.”
People who moved Upstate later were presented with a new dilemma, as the initial migratory wave had “scooped up” a lot of rental inventory. “Some people shifted their focus to purchasing just because of the lack of rentals and the desire to get out of the city,” he noted.
Similar anecdotal evidence regarding the purchase of homes by Californians in Arizona, and the knock-on effect of home-working, would suggest a nation-wide pattern. But whereas Californians have been enticed by cheaper property prices in Arizona, the same cannot be said of Connecticut.
“New York is very expensive and the suburbs immediately surrounding New York City, whether it be Fairfield County, Connecticut, Westchester or Northern New Jersey, are also very expensive communities,” he said.
Given the uncertainty over the long-term sustainability of remote working, potential homebuyers are still mulling over their options. “We’ve had a lot of talk of going towards some kind of hybrid model, where you don’t have to come to the office every day. A lot of (workers) just don’t know what they’re going to need, but they do know that they won’t be in five days a week.
“If you only have to go to the office once a week, or twice a month, would you buy a home that was an hour-and-a-half away, where you can get a larger home and a better purchase price?”
He said commuters would be more predisposed to undertake the “very tough” two-hour commute to New York if it was only once a month.
And it’s not only New York that has been affected, he said. “I’ve had multiple transactions of clients that have moved from California to here. Some of them were fleeing wildfires, so I do think some of these shifts are not just local.”
Interest rates, which Martin described as being “still incredibly low”, could also play a deciding factor when it comes to choosing between staying or returning to the city. “A lot of the people that bought a home aren’t going to go back - you don’t buy a house and then a year later sell it and move back to the city. If your plan was to go back, you’d probably rent,” he said.
Martin identified lack of inventory as the biggest problem, particularly for first-time buyers. “Sellers have their pick. The first-time buyer with 3%-5%, an FHA loan or a low-down payment probably can’t perform and will continue to struggle to compete in a market of such low inventory, even though they are ready, willing and able to purchase. Cash is king.”