Why Corona Virus Won't be the End of NYC..

You can't trust anyone on CNN.

The latest is that NYC public schools will NOT reopen in full in the fall, which will be a disaster for working parents. Meanwhile my kid is already in summer camp here far away from NYC. There's no social distancing, but whatever, it's better than having his mind rotting in front of a screen here at home. Failure of schools to reopen will be a disaster for middle-market NYC real estate... the working parents occupying $1-4M apartments cannot handle their kids being out of school in the fall.

https://www.nytimes.com/2020/07/06/nyregion/nyc-school-reopening-plan.html?action=click&module=Top%20Stories&pgtype=Homepage

Forgetting about sales prices, as far as I can tell there are over 50,000 units which will need to get rented over the next couple of months - which is usually NYC busy season for rentals. This doesn't include an equal or larger number of units which haven't paid rent and without some form of assistance will end up in L&T eviction process (and then they will need to get re-rented as well).

So far, as far as I can tell, most landlords are holding fairly firmly to current rent numbers and offering some concessions rather than reducing prices. But the market isn't biting at those numbers. I think they are hoping that now that showings are starting again everything will be fine. I do not believe there is anywhere close to the amount of demand necessary to meet the supply and I also think the unwillingness to meet market prices will result in a significant amount of potential tenants to either leave NYC or not to relocate here.

I think it's disingenuous to pretend what I'm saying is this will make these buildings evaporate or burn to the ground. But at some point these units can't all be carried vacant without some sort of repercussions. Add to this what has been a rocky environment in retail leasing for a few years (with some fairly drastic reductions in lease amounts) and what certainly looks like an upcoming tsunami of retail closures, and the financials of rental properties are looking somewhat grim.

As far as rentals go I think low floor/walkups might do better especially for the kids that want to avoid elevators.

I think we all accept the fact that this pandemic is having a severe negative, current impact on real estate. And in varying levels, this opinion has been well established on various threads on the site.

This article is about NYC as a whole, moving forward, surviving, how it will re-invent itself like so many times in the past. As so many great cities have over the centuries after war, social strife and pandemics...How the country and world for that matter will evolve due to the current social disruptions taking place?

Out of chaos, there is always a great opportunity for exponential growth and reinvention, when we are forced to evolve or be left behind. The important questions that this video asks are beyond real estate. No one has a crystal ball for making economic forecasts, if you did, you wouldn't be fiddling around on this forum for years . Real estate along with many other parts of the economy are down....they will come back, that I know. That is why you should be fiscally conservative with all your financial allocations, especially your home.

Hope everyone had a wonderful 4th of July!

Keith

Keith, I always wonder whether your buying clients post on this forum who by definition are neutral to bullish on NYC real estate. As far as I remember, this forum has been bearish with a few outliers. I am not bearish in general on NYC real estate but even I have been calling ultra-luxury down 30-40 percent from 2015 high mark (Nada has saved himself a bunch of money by renting some where near the price point of this segment).

True that, Keith. Even the earth recovered from the great asteroid.

Sadly, I think we’re looking at at least a lost decade for NYC. This isn’t merely a financial crisis. This is a whole shift in mindset about standard of living and overall lifestyle. Living space and nature are being reborn as priorities.

Layer on that progressive city administrations, and all bets are off.

Yep. Things come back. If not in the short run, in the long run. What what is John Maynard Keynes said?

George, Most private pre-schools are starting in person in Fall barring Covid situation in NYC becoming much worse but with very strict safety guidelines. And it seems that the city is trying hard to open normal schools.

@300 - I bought with Keith in the last year. Had a fairly long journey because I didn't think prices were at the right place in 2018 and spring of 2019. There some tendency to talk or even feel "your book" in that if you're on street easy looking to buy, you want prices to come down, and if you've bought and want prices to go up, you won't be as active here. I like to watch the market either way, along with other topics that come up here like renovations, local laws.

If we had known about the coming pandemic, we might have held off purchasing. so far, I haven't seen anything in the neighborhood (GV) that we would have preferred. So to the extent that there are currently deals to be had in our price point, we might have ended up in UWS or BK (ok maybe not BK...).

Breaking or not renewing a lease and decamping from NYC for 6 months to a year is a pragmatic choice for many. Selling a primary home coop is more of a panic (justified or not).

Makes sense. In addition, there are perma-bears on this board - but all healthy.
“There some tendency to talk or even feel "your book" in that if you're on street easy looking to buy, you want prices to come down, and if you've bought and want prices to go up, you won't be as active here. “

Everything has cycles.
I remember in the late 80s to thru the 90s, it seemed like there wouldnt be any need for brick and mortar bank branches going forward. The ATM took over like wildfire and indeed a lot of branches closed. But there had been a great resurgence of the bank branch after the new millennium, as branches served as functional advertisement , and offered/offers people something they have trouble or can no longer get by computer or phone.... a live person to talk to. And now the threat of pandemics may shrink the amount of branches going forward.

But what is real troublesome about COVID is the effect it had on public dining. Dining and bars and theater, etc really makes this city go round. Without that, there is no reason to pay more to live here. And if people dont need to live here and pay into property taxes which are fed by escalated rents, the city is in for a really rough time as nearly half of its revenue relies on such.

Of course there will be a rebound cycle. When and how is of course the big question.
I expect great changes to come in building code for ventilation systems. Retrofitting HVAC systems will be challenging. And tech to lessen touching things will be expensive and slow. But will be necessary before the future, more menacing pandemic.

So the end of NYC? I dont know, what does the end means. Certainly a change to NYC.
9-11 changed the city. It really hasn't been the same since.

If I may add, NYC seems much safer right now given the low number of cases vs Florida, Texas and CalIfornia which are more suburban than NYC. Is it antibodies or NYC residents having learnt the lesson earlier than others in taking better precautions to prevent spread. We do not know.
Also at a global level Tokyo and HK have controlled the spread despite the high density.
Lastly, I think the main point of Zakaria was city are places where people exchange ideas informally and in person. Hard to do that when every one is far away in suburbs.

I don't think 10 years is an unreasonable timeline for full recovery. But of course we will continue to see incremental changes month-over-month, year-over-year. If and when we get to a point where this virus is under control, I think we will then see an exponential move towards normalcy. It will be interesting to see how the city reinvents itself, what changes, what gets better, what gets worse...

We do 45 to 55 deals a year, probably submit a hundred plus offers, I'd say that every client I work with is scanning streeteasy for information. As far as I know the majority are not posting on streeteasy, and I don't ask. For instance I don't know who "likestocook" is. I also don't post or comment on other people's listings publicly, or make predictions or forecasts about the market. Though these types of conversations certainly take place between myself and my client, at least to some extent.

Since physical showings have begun, we've definitely seen a very strong uptick in showing activity, our calendar is starting to fill up again after 3 months of being virtually empty! Unfortunately two accepted offers recently fell through as inspections revealed serious issues. A couple of rental listings we had received incredible response, one of them was 139 skillman avenue in Williamsburg which we rented in less than a week. We have a new sales listing in Williamsburg, the initial response has been very strong, happy to say.

It's nice to see business resuming, although 30 likes to see his sales agents leveraged to the max, my frugality has proven very useful in these difficult times for real estate brokers : ) very little overhead, no debt, it's a recipe for happiness.

In our little world, business is starting to come back to life. Clients are being very selective, interestingly, some don't want to leave NYC, will work from home within the city. Over the last few weeks I have talked to clients that are leaving, no one in panic mode though. The three that I did talk to about selling or renting out their current home all said they were already thinking of leaving, and because of the virus are pushing their plans up.

Keith
TBG

I think discussion of the "end of nyc" needs to be quantified.

You could, for ex, see prices drop by 50% and the city filled up with young 20-somethings as prices reach their levels. In that world, the city may seem more vibrant and alive yet prices are half of what they were (I don't think it gets that extreme but anything is possible).

The last 20-30 yrs of NYC have seen a shift away from artists towards people in finance, law, white collar fields, etc. Interestingly, during that time period, I heard from many artist friends that NYC was, indeed, already dead.

So the issue here may be more about where do things reset price-wise than the "end of the city".

Also, there are many positive things that have happened since the beginning of covid for NYC:

1- We are ~20-30% (some neighborhoods more) covid exposed with antibodies, which means ~2 more similar waves would create herd immunity
2- Our hospitals are much, much better prepared, both in terms of decreasing the spread as well as treating the disease. Dexamethasone can reduce late stage mortalities by at least 1/3 to 1/2 and reduce length of stay.
3- NYC in general is fairly responsible. Maybe not at asian levels but significantly better than what I here is happening in the suburbs, rural areas, or even other cities, like Miami

My guess is the city will swing towards cheaper prices but that an influx of young people may happen concordantly, in which case, at least visually or emotionally, the city will not feel dead, even if apts are selling for $1,400/sq ft in Tribeca instead of $1,800.

I just took the train first time since lockdown. Three people in my car (#1 line) at 8:45 AM (weekday). Times square station almost empty. N/R train was fuller but plenty of seats.

I have been taking subway a couple of times a week. A month back, there were 5-7 people per compartment, not in off peak but not odd hours, 15-20 people per compartment. And it is cleaner than ever.

BK, Thank you for comments about NYC being far more prepared that many other places from a medical point of view.

Keith,
You really like to post lies about me by continually misrepresenting what I've said. It's ok - you can keep lying about me and I'll keep telling the truth about you.

So Keith, is it another great buying opportunity right now just like you said it was in the Fall in one of your non-predictions?

@30 you've been trying to get me to make predictions about the market for years. I never have. And I think you're going a little over the top with saying I'm telling lies about you. In fairness my comment was made in jest, however you did make a comment that you think it's better for sales people to essentially be in debt to make them work harder. If you wanted to know why that you can, in the big scheme of things either way it's really nothing.

And for the record I actually agree with you, it would certainly be an incentive for a salesperson to grind a little harder with a big mortgage overhang etc.

And although we certainly disagree when it comes to primary home residential real estate, I do appreciate your point of view and thoroughness. I apologize if you've taken some of my comments personally, this was not my intention.

Keith
TBG

"however you did make a comment that you think it's better for sales people to essentially be in debt to make them work harder."

No, what I said is that sales managers have long been trained to keep salespeople increasing their nut so they have no choice but to produce. This is just one example of how you twist what I say in an intentionally misrepresentative manner. And I think the "it was joke" excuse is well worn out. In addition you can twist telling people "it's a great time to buy" at the same time as posting threads about the market recovering as not making a prediction, but it's rather transparent.

Wanted to add a comment from my walk this evening in GV, West Village and Hudson River Park. It was truly heart warming to see happy faces of people dining outdoors and families/diverse groups picnicking on the waterfront. To me, it felt even better than pre-corona. No way a suburb can compete with that vibrancy.

Agree 300. I, for one, would not want to abandon NYC, even during what may be tougher times ahead. There are countless others who feel the same.

Thank you Bramstar. I somehow feel that things are only getting better and we have seen the worst of Corona in NYC which got compounded by looting for a few days. We are in phase 3 already and people were talking about how schools will not open. Private preschools are opening - perhaps private will be mostly open for all grades and public schools are opening with a split schedule which is much better that people thinking it will be only online instructions. Who knows even public schools may be in person every day if NYC corona number remain low - I know some spike is to be expected with increased mobility and cases spiking in the rest of the country.

And a sad day when 30yrs and Keith clash.
FWIW, +1 on those who believe NYC isn’t going anywhere in terms of being the best place on the planet to call home.

300 they're predicting another wave for this fall/winter, much worse than our spring. This is how Spanish flu panned out 100 years ago. On the bright side I'm seeing a lot more compliance. I think our local kids are looking at video and numbers in Florida in particular and coming around to a better way of thinking.

@stache I'd check on how well those people predicted the previous wave before putting too much stock into them. This has been a very challenging disease to forecast. The FL numbers are also nowhere near as bad as the mass media make it out to be. They are reason for caution, not panic. If upward trends in hospitalization and deaths continue for the next few weeks, then it will be time to panic.

And while COVID-19 will create some new challenges for the city, I'd say it's real impact is by exacerbating several longer term issues that NYC was already facing anyway: fiscal situation, housing, infrastructure, education, etc. On top of that, you might now be seeing a resurgence in crime. I can only hope the next mayor proves to be more competent than de Blasio.

I don't think the fall wave will be so deadly. Hospitals are learning how to handle the disease -- eg turning an intubated patient on their belly is better than on their back. And certain combinations of drugs are reasonably effective.

However, this disease is already behaving more like a seasonal flu than smallpox or polio. A vaccine eradicated those diseases. A vaccine hasn't eradicated flu, only reduced the death rate.

It's likely that we need to deal with this virus for years to come, possibly forever. +1 on next mayor being more competent than Blas.

My understanding is that there's never been a successful human coronavirus vaccine, so policymakers should be taking that into account and managing expectations accordingly. All this talk about vaccines being ready soon makes me cringe, because this is potentially setting people up to be disappointed in a very bad way.

This virus is acting nothing like seasonal flu. It takes several rounds usually to get to that point (usually about 2-3 yrs) even if it had the same characteristics as the flu.

The mortality rate is about 5-10x the flu right now. The R0 is much higher. The intubation rate is likely higher but hard to get data. Also the rate at which the hospitals fill up is 10-100x the flu! At one point city hospitals were almost all covid.

Additionally, it is not a simple respiratory disease at all. We deal with many cardiovascular complications & even those with neurological impairments. Lungs post-covid also often don't look like post-flu patients.

As far as the fall wave, no one knows what will happen. Most research on this shows that the first wave of a pandemic usually drops in the summer and is back in the fall - many believe this is due to schools shutting down in the summer-time btw, but as the sample size is small we won't know for sure.

This statement imo is why we are failing:

"If upward trends in hospitalization and deaths continue for the next few weeks, then it will be time to panic."

You always have to look at the latency period of a virus to understand timing sequence of actions. If symptoms are quick, then you can wait for hospital data to make decisions. If latency time is high, by the time you have made the decision, it is fairly late in the process & the risk is that mortality rates of every dz shoot through the roof if you run out of beds.

Thankfully we haven't seen that yet - in NYC mortality rates were 6x normal during peak compared to last year. If we filled up for ex and were off by 2 weeks in shutting down, mortality rates prob would get closer to 20x or more vs last year. Had we shut down a week earlier my rough guess is we would have less than 20k deaths by now.

Anyways optimistically - if NYC can quarantine people aggressively - we should be able to limit it's spread. Manhattan benefits from being an island - we need to use that moat to our advantage.

@anonymousbk what are your thoughts about sending kids back to school this fall?

@anonymous: The reason I called out waiting in FL before declaring panic is that while there were (and continues to be) sensational media headlines about FL's total case growth, there is little acknowledgement that the relationship between cases, hospitalizations, and deaths seems to have substantially changed in FL and other states.

I make no claims to be an expert, but I understand the mathematics of epidemics and have had the opportunity to speak directly to some experts who are working on COVID-19. I know the point you are making about lags and the need to take action in advance of the curve. But that’s the point, these relationships seem to have changed vs. what was experienced earlier this year. This virus has surprised us time and time again, and I believe caution is in order before the media issues definitive stories about what is or is not happening with regards to COVID-19. They are not doing anyone any favors by hyping trends with no context. What's particularly frustrating about all this is that there's plenty of data publicly available on all of these numbers, so any reporter should be digging into these numbers as part of the homework into their story. But instead, they seem to take the most eye-opening top line and run with it. Why talk about just cases and nothing about the changed relationships with hospitalizations and deaths? Why are they reporting deaths by date of reporting vs. date of onset? Why are cases also resurging in states with different levels of easing? They’ve fallen into this trap time and time again from the very beginning starting with the initial death forecasts. What harm is there to take some time to review sources, understand the data, and write more informed articles? Isn’t that their job anyway?

Thoth, Objective, well researched reporters without political bias. They do not exist any more due to being fired from their jobs. And perhaps, this virus impact is indeed too complex and we do not know enough. It has taken us (CDC, local govt, Federal govt included) forever to understand that any kind of masks reduce the spread but many people still do not want to follow.

@300 I know I'm being a bit naive about this, but I simply can't understand why every statement about COVID-19 has to be delivered with an air of certainty with so many known problems with the data, let alone "unknown unknowns". For example, comparing case count data is essentially meaningless unless you know the geography's testing strategy, whether they are de-duping tests on the same person, which tests (antigen/antibody/PCR) are included in the total number, etc.

As an aside, it bothers me to no end that we still don't have a standardized definition for what counts as a COVID-19 death. My favorite example was when someone found that WA had five people who died from gunshots recorded as COVID-19 deaths. I knew this virus had a lot of symptoms, but I never knew bullet holes were one of them.

Complexity and caveats do not make headlines. Ideally, I would like to see data by hospitalized patients and patients in critical care along with case/death data but not sure if there is a source by state for this.

Maybe we can get it down to a mild seasonal flu after all
https://www.israel21c.org/downgrading-covid-19s-threat-to-that-of-the-common-cold/

It will be amazing if it works. So people taking statins are at lower risk if healthy otherwise!!

It be pretty impressive that something simple just like Dex helps.

I'm an MD though not a cardiologist. That being said, fenofibrate is not a statin and is not as effective as statins for lowering cholesterol. It is therefore not widely used in this country. It also sounds like the research studies were only conducted in vitro so far, not in actual patients or even animal models. There are lots of promising avenues to treat coronavirus, including repurposing old medications, but I wouldn't hold my breath for this one to turn COVID19 into the common cold.

Alex, Thank you for clarifying.

Cannot find the article now, but near the beginning of this, someone at Harvard wrote an essay on prior pandemics and phases. One of the interesting points was that we don't actually know why viruses decrease in the summer time. One of the working theories is bc schools shut down during that time period (can be assessed as different countries have different schedules so you can do some amt of comparison). However, we don't know what it will be for covid.

I would say if the plan is to send kids back, there should be a plan in place for when the 1st teacher gets intubated or dies which also includes a way to minimize those odds.

Of course it is easy for me to say don't send kids back bc I have no skin-in-the-game (no kids), but a few of my MD friends with kids (anecdotal) have said they would prefer not to as they are concerned this will create a vector & recurrence. However, I don't know anyone that is really concerned about kids getting sick as much as kids getting adults sick.

As far as death rates changing - this is a combo of a few things, not exactly different info per se. We have dexa & better treatments. We are more prepared in terms of PPE. Also, the age of new covid patients is much younger than before so it should not be surprising to see a decrease in the mortality rate.

Anyways, my personal interest is less in mortality and more in terms of ICU utilization and intubations. I think too many people don't realize how horrible a 2 wk intubation is for even a healthy younger person. I say this bc the media tends to focus 100% on cases and deaths, neither of which really give us much useful actionable info.