It may be spring, but the real estate industry is facing a deep freeze the likes of which it has never seen as the coronavirus pandemic devastates a business more reliant than most on personal contact.
In-person showings are banned, part of the state-imposed lockdown to curb the spread of Covid-19. But even before Gov. Andrew Cuomo barred the practice in mid-March, most sellers weren’t allowing prospective buyers to walk through their homes.
While many agents have turned to virtual tours of properties, to some, they’re just not the same.
“If you were spending a million dollars on a home, would you buy it without seeing it?” said Frederick Warburg Peters, CEO of Warburg Realty. “There’s not a lot of that going on.”
But that hasn’t deterred agents from trying. Whether they’re using Zoom, FaceTime or an old-fashioned phone call, many of the city’s 26,000 licensed real estate agents are doing whatever it takes to try to generate business.
A recent pitch for Rose Hill, a 123-unit NoMad condo building under construction, illustrates the new normal.
“This is walking out onto the 37th floor, prime space that hosts some of our resident amenities,” according to an online tour narrated by John Harrison, a broker with CORE Real Estate.
Harrison was working from home, far from the luxury condo tower. The sales-office setting behind him was a backdrop superimposed by the video-chat app Zoom.
Confidence collapses
By March it was clear the industry had started to crater, according to a survey ofreal estate agents by the Real Estate Board of New York. Real estate brokers rated their confidence, on average, 3.72 out of 10, a 46% drop from the end of last year and the lowest since the survey began in 2012.
Market data confirms their concerns. New apartment leases fell 38% in Manhattan in March, compared with a year earlier, appraiser Miller Samuel and brokerage Douglas Elliman Real Estate reported. Brooklyn and Queens apartment leases sank 46% and 34%, respectively. New home sales listings fell 72% in the last weeks of March, StreetEasy found, as sellers decided to simply wait out the market.
Residential real estate firms, such as Compass, Warburg and Elliman, have cut administrative staff and marketing spending. Brokers and agents are independent contractors, not employees. While they won’t be laid off, their commission-driven income could fall to nearly nothing.
“We are essentially planning that we will have zero income,” said Ben Willig of Anchor Associates. “Anything else is a bonus, so we have to keep expenses as low as humanly possible without cutting off what you need to run a brokerage.”
The federal rescue package approved by Congress in March allows independent contractors to apply for unemployment benefits if they lose wages because of Covid-19. But real estate salespeople are struggling along with everyone else to get through to the state Labor Department amid a deluge of new claims.
Digital deals
The meaning of the term “virtual showing” varies by listing. The number of homes on StreetEasy with 3D self-guided tours has doubled since March, the company said. In some cases, agents walk through the apartment alone while their clients watch on FaceTime. But state guidance released at the beginning of April stressed that agents should conduct virtual showings from home instead.
To keep in touch with clients, the real estate industry has embraced Zoom just as the videoconferencing platform has spread rapidly into businesses and most homes during the crisis.
“The visual is so important in sales,” said Kristin Hurd, a broker with Brown Harris Stevens. “The face-to-face through Zoom has become absolutely essential.”
The Rose Hill condo tower, developed by Rockefeller Group, is supposed to open for occupancy in the fall, although construction is on pause.
Shaun Osher, the CEO of CORE, said it had become clear in late February that the sales team would need to prepare an online option if the office were forced to close.
In a digital sales market, Osher said, a new development has advantages over resale homes.
“You are already selling the dream,” he said. In a demo showing of Rose Hill, agents Harrison and Nicole Grandelli played short videos highlighting the lobby, fitness room and views of the Empire State, Chrysler and New York Life buildings from the upper level of the 600-foot tower.
Harrison showed the images and videos through screen share, with him and Grandelli set off in boxes to the side. They walk through floor plans and highlight nearby businesses.
“There is nothing that beats that in-person experience,” Harrison said. “But here we are at least able to tell the story we want, face-to-face.”
Whether that will be enough to land buyers is not yet clear. Osher said some virtual tours have led to negotiations, but nothing has closed yet.
Most closings during the Covid-19 shutdown have come through negotiations that started before the crisis, agents reported. The state has allowed many former pen-and-paper tasks to move online during the pandemic. They include conducting final walkthroughs, having board interviews and signing closing documents.
Neither buyers nor brokers have experience navigating these efforts online, however.
Allison Chiaramonte, an agent with Warburg Realty, said much of her time is spent “playing defense” to guide deals already in progress. “The sky is not falling, but it is a major slowdown,” Chiaramonte said. “Business is still getting done, just at a much slower pace than we are all used to.”
What’s next
Veteran city agents weathered real estate slowdowns following the Sept. 11 attacks and the 2008 financial crash. This crisis is particularly difficult because there is little sense of how the economy will fare once Covid-19 cases slow and social distancing measures end.
It’s hard for brokers to tell anxious clients when to expect a return to normal.
Some agents are keeping an eye on the market in China, which is further along in containing the virus than the U.S. A StreetEasy blog post at the start of this month noted that sales activity bounced back to normal in Hong Kong following the SARS outbreak in 2003.
“You can lean toward prices and activity eventually reaching levels before the pandemic,” said Eric Rosen, a broker with Halstead. “But one of the smarter things I’ve heard is that anyone who says they know what happens when this is over is lying. This is something no one has ever seen.”
Not all of the city’s agents are expected to survive the slowdown. Anchor’s Willig compared his work in the next few months to the famous scene in Forrest Gump in which a storm wipes out most of the shrimp boats and leaves Tom Hanks’ character in a position to cash in once the swells settle.
“There will be only a few shrimp fishermen able to keep going,” Willig said. “We need to be one of those boats.”