Preservation of Principal as the Primary Objective With Capital Appreciation as a Secondary Goal

How NYC’s Resiliency in the Face of Catastrophe Sets the Standard for the Golden Rule of Investing

On March 8, 2020, the first death from COVID-19 was reported. By the end of May, not surprisingly, demand¹ for NYC was down -78% from its pre-pandemic average².

But on June 1, 2020 the unexpected occurred. Demand began to recover. And, on July 19, 2020, the impossible happened. Demand recovered.

Why do we describe the dates associated with those events as “surprising” and “impossible”? Because the vaccine was but a hope at that point and did not become a reality until December 18, 2020.

_{Data Courtesy of Marketproof & UrbanDigs}

As the chart on the following page illustrates, NYC’s elasticity during the pandemic was not limited to demand. Examining the past few years with price/sf lenses, we see that NYC absorbed the devastating blow of COVID-19 and recovered decisively.

The COVID-19 pandemic has taught us that the NYC residential real estate market can take a devastating blow, only to land softly and stand back up quickly. Sadly, this “news” isn’t news at all. Nor should it come as a surprise. As New Yorkers remember all too well, the attacks on the World Trade Center occurred on September 11, 2001. As of year-end 2001, despite the trauma and fear that ensued, Manhattan’s average condo price per square foot had increased nearly +13% over the year prior. And even the Financial District (“FiDi”), which, of course, was the site of the terrible atrocity, had given back less than -11% of the prior year’s price/sf watermark. Over the next seven years, Manhattan's average price/sf doubled, while FiDi's average price/sf increased by +161%.

The data presented herein memorializes what local, national, and international investors have known all along: that NYC residential real estate exhibits one of the highest volatility capacities³ of any asset class. Said more potently, NYC’s residential real estate market has the catastrophe-hedging potential of heavy metals and the appreciation potential of stocks, yet it offers what no other asset class can — the ability to enjoy one of the world’s greatest cities.

1. Measured by the weekly number of contracts signed in Manhattan, Brooklyn & Queens
   
   
2. The period Jan 5, 2015, to Mar 1, 2020
   
   
3. The ability to withstand volatility without significant movement in price.