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

38 Pages Posted: 9 Nov 2021 Last revised: 2 Mar 2022

See all articles by Jeffrey Cohen

Jeffrey Cohen

University of Connecticut - School of Business; Federal Reserve Banks - Federal Reserve Bank of St. Louis

Felix Friedt

Macalester College - Department of Economics

Jackson Lautier

University of Connecticut - Department of Statistics

Date Written: October 1, 2021

Abstract

Concerns about the lingering novel Coronavirus may have led to long-term structural change in desired dwelling locations in some large U.S. cities, such as New York City. Densely concentrated neighborhoods may be at higher risk of virus contagion, giving more individuals incentives to move out. We investigate whether this pandemic-induced disamenity adversely affected real estate prices of one- or two-family owner-occupied properties across New York City. 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 fear 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 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%. Interestingly, the fear of 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 led to inequality between homeowners in lower-priced and higher-priced neighborhoods.

Keywords: COVID-19, Hedonic, Repeat Sales, Price Discount, Housing Wealth Inequality

JEL Classification: R31

Suggested Citation

Cohen, Jeffrey and Friedt, Felix and Lautier, Jackson, The Impact of the Coronavirus Pandemic on New York City Real Estate: First Evidence (October 1, 2021). University of Connecticut School of Business Research Paper No. 22-01, Available at SSRN: https://ssrn.com/abstract=3959105 or http://dx.doi.org/10.2139/ssrn.3959105

Jeffrey Cohen (Contact Author)

University of Connecticut - School of Business ( email )

368 Fairfield Road
Storrs, CT 06269-2041
United States

Federal Reserve Banks - Federal Reserve Bank of St. Louis

411 Locust St
Saint Louis, MO 63011
United States

Felix Friedt

Macalester College - Department of Economics ( email )

1600 Grand Ave.
Saint Paul, MN 55105
United States

HOME PAGE: http://https://www.macalester.edu/economics/facultystaff/felixfriedt/

Jackson Lautier

University of Connecticut - Department of Statistics ( email )

Room 323, Philip E. Austin Building
215 Glenbrook Rd. U-4120
Storrs, CT 06269-4120
United States

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