Page 10 - CooperatorNews New York January 2022

10 COOPERATORNEWS — JANUARY 2022 COOPERATORNEWS.COM TRENDS Remember in 2020, when everyone was so excited for 2021, “when all of this instabil- ity and uncertainty will be over”? Right. Well, appraisal firm Miller Samuel, the urban exo- while there was some relief from pandemic dus brought about by the COVID-19 pan- pandemonium as Americans started to get demic was preceded by more of a trickling, vaccinated against COVID this past spring starting in 2018 when the Trump administra- and summer, the virulent delta variant threat- ened to override the country’s hard-won and local tax (SALT) deductions allowable on progress and untold sacrifices. And while the federal income tax returns. This legislation overall economy seems to be on an upswing inspired residents of high-tax states like New with businesses reopening and consumers York to take up residency in states like Florida more inclined to leave their bubbles to make with lower taxes, especially those from Man- purchases, the major economic shifts needed hattan, “because of the greater wealth and to make enduring investments in our infra- structure, institutions, and the future of our region,” says Miller. “During the lockdown, planet are just starting to emerge from a Con- gressional quagmire. What did all this mean for the multifam- ily market in 2021, and where do the pros see en by the SALT tax.” things heading in 2022? In a nutshell, it’s still a topsy-turvy world out there. Cities, which 2021, after the pandemic-driven abandon- some declared ‘dead’ when population density ment of (and arguably, elimination of the was thought to be a major driver of coronavi- rus contagion, have shown a strong homebuy- ing revival in recent months as lockdowns and commuting to a centrally located office was restrictions eased and vaccinations continue no longer a necessity for many workers, those to be administered. The bidding wars that sent who could decamped to second homes (what suburban home prices skyrocketing in 2020 Miller now terms “co-primary homes”), or to and early 2021 have resumed in the urban entirely new environs altogether. markets—even in the luxury sector, which dipped significantly when the pandemic might see more of an inward migration and a and other economic factors chilled high-end more robust outlook overall. Among the rea- homebuying. Adding to all this complexity is the reck- oning that has come in the wake of the tragic the SALT deduction cap, as well as the gen- collapse of the Champlain Towers South con- dominium in Surfside, Florida, this past June, of further reductions in COVID infections, which has prompted a wave of reforms and hospitalizations, and deaths. There’s also the a recognition of the advancing age of a large prospect of the easing of travel restrictions portion of the country’s housing stock, as well bringing foreign and out-of-state buyers back as the role that climate change plays on struc- tural integrity and the pitfalls of deferring building maintenance for the sake of short- term financial savings. It’s the Economy, Stupid Every bit as true as it was 20 years ago when attract first-time homebuyers and others us- campaign strategist James Carville made it a ing financing to make home purchases. With central theme of Bill Clinton’s successful bid interest rates falling to record lows over the for the presidency, the U.S. economy dictates past 18 months, along with rents rising con- the country’s direction. In terms of residential siderably in many areas, younger and newer real estate, overall economic conditions are buyers are entering the purchasing market at both a driver and a byproduct of transactions. a greater pace. A confluence of several economic factors played into the rollercoaster year that 2021 intense demand that has been fueled by record was, and is likely to keep 2022 dizzying as well. low rates,” says Miller. “Prior to the pandem- According to residential real estate expert Jonathan Miller, president of New York-based tion lowered the cap on the amount of state mobility \\\[there\\\] than any other market in the there was a tremendously significant pattern of outbound migration—not just to the sub- urbs, but anywhere in the United States, driv- The trend accelerated in 2020 and early need for) offices. Working remotely became the de facto norm in many fields. If regularly According to real estate experts, 2022 sons for their optimism, the pros cite remarks from the Biden administration about raising eral economic recovery, bolstered by hopes to urban markets. Yet another factor in play is the rise and fall of interest rates, which significantly af- fect sales volume. That’s particularly true in the co-op and condo market, which tends to “I don’t think enough credit is given to the ic, the 30-year fixed over two years fell from ing lasting changes to our built environments, around 5% to a little over 3%. And then after altering everything from ventilation systems the lockdown, because of the pandemic, rates to apartment layouts to structural material fell from the low to mid threes down to the choices. It has also accelerated the adoption mid twos.” And with the 2008 economic re- cession and foreclosure crisis as pretext, lend- ers have enacted stricter standards and tighter ness from anywhere—allowing for the inte- underwriting procedures to mitigate another gration of home and work like never before. housing bubble, which Miller contends bodes well for market recovery as we head into 2022, “and that relationship between work and especially if demand remains high. Miller goes on to say that inventory in the ing sorted out over the next couple of years.” co-op and condo sector has so far kept up That predicted early fall 2021 return to the with the demand. A pre-pandemic high-rise office environment keeps getting pushed construction boom, along with the urban further into the future, “firming up the rela- exodus earlier in the pandemic has kept up tionship between work and home,” as Miller a steady pace of listings. It’s also kept prices puts it. The further ensconced we get into the somewhat stable—which has not been the home-as-workplace set-up, he suggests, the case in the suburban and rural markets, where less likely it is we’ll ever go back to the pre- demand has overridden inventory and prices pandemic status quo, even when corporate have soared out of reach for many. This is vaccination and testing mandates come on- another reason why many younger and first- time home seekers have shifted their atten- tion back to co-ops and condos in cities. “As arrangements has certainly changed buying the suburban frenzy waned and the market and selling behavior from coast to coast. Our started to normalize, the city woke up,” says homes have had to play new roles in our lives, Miller. “Whether we’re talking about Boston, accommodating new activities, arrangements, New York, or Florida \\\[housing\\\] markets, they schedules, and number of residents. In a co- still display heavy volume with a return to op or condo, where adding another storey or normal seasonal patterns.” He adds that pric- ing is creeping up toward pre-COVID levels. It’s Also the Pandemic COVID’s initial wave made people leery space, whether private to the unit or shared of dense, crowded living and sent many seek- ing more space for incorporating work and are building with these parameters in mind, school (and gyms and media rooms…) into suggesting that there is a widely held assump- their homes. A year and a half later, with vax tion that housing needs and wants inspired by rates up and more awareness about the vi- rus and how it behaves, cities have made a comeback—but not without COVID mak- of both technologies and policies that make it possible to conduct much of the nation’s busi- “Remote work is here to stay,” says Miller, home is going to go through a process of be- line in 2022. The extended need for flexibility in living an in-law unit is not an option, the new ap- peal of “flex spaces” has entered the market, in addition to the always-coveted outdoor with other owners/shareholders. Developers COVID (if not the virus itself) are here to stay. continued on page 17 The Year in (P)Review Multifamily Trends in 2021—and Predictions for 2022 BY DARCEY GERSTEIN