The Impact of the Coronavirus Pandemic on New York City Real Estate: First Evidence

TL;DR

This study examines how COVID-19 contagion and income effects impacted NYC real estate prices, revealing significant declines especially in affected neighborhoods, with disparities based on neighborhood affluence and density.

Contribution

It provides the first empirical evidence linking COVID infection rates and unemployment to declines in NYC residential property prices, highlighting differential impacts across neighborhoods.

Findings

Home sale prices decreased by about 8% due to COVID impacts.

Price discounts ranged from 1% to 50%, averaging 14%.

Contagion effects were stronger in affluent, less dense neighborhoods.

Abstract

We investigate whether pandemic-induced contagion disamenities and income effects arising due to COVID-related unemployment adversely affected real estate prices of one- or two-family owner-occupied properties across New York City (NYC). First, OLS hedonic results indicate that greater COVID case numbers are concentrated in neighborhoods with lower-valued properties. Second, we use a repeat-sales approach for the period 2003 to 2020, and we find that both the possibility of contagion and pandemic-induced income effects adversely impacted home sale prices. Estimates suggest sale prices fell by roughly $60,000 or around 8% in response to both of the following: 1,000 additional infections per 100,000 residents; and a 10-percentage point increase in unemployment in a given Modified Zip Code Tabulation Area (MODZCTA). These price effects were more pronounced during the second wave of infections. Based on cumulative MODZCTA infection rates through 2020, the estimated COVID-19 price discount ranged from approximately 1% to 50% in the most affected neighborhoods, and averaged 14%. The contagion effect intensified in the more affluent, but less densely populated NYC neighborhoods, while the income effect was more pronounced in the most densely populated neighborhoods with more rental properties and greater population shares of foreign-born residents. This disparity implies the pandemic may have been correlated with a wider gap in housing wealth in NYC between homeowners in lower-priced and higher-priced neighborhoods.