ITHACA, N.Y.—The anecdotal evidence was already here, but the hard numbers really drive the point home—if you can afford a home, that is. Residential sale prices spiked to all-time average and median highs in 2020.
According to numbers available from the Tompkins County Department of Assessment, the median home sale price at time of closing soared 10 percent in 2020, from $238,000 in 2019 to $258,500 last year. The average sales price jumped 7.5 percent, from $264,826 to $284,590. Average sales price tends to be a less accurate indicator, as the value is skewed by high-end lakefront lodges and mansions.
In contrast, the total number of residential sales dropped substantially from 2019 to 2020, from 949 residential sales in 2019, to 856 in 2020, a decrease of 9.8 percent. Some of that can be attributed to the pause on real estate showings in the spring as a result of the first wave of the COVID-19 pandemic.
Ostensibly, if you’re a seller this was a boon. If you’re a buyer, you were feeling the pain. In an area where affordability has been a major concern following the Great Recession a decade ago, rapidly rising for-sale housing prices are a major impediment to combating the local housing crunch. After all, many folks saw declines in income or job losses stemming from the pandemic’s impacts and the shutdowns. In a sense, those folks feel the pain more intensely than those whose incomes were unaffected, often those who could work from home.
On that note, one of the questions that has popped up in conjunction with COVID is Tompkins County’s status as a destination for those fleeing the cities, especially New York City—the Ithaca Times did a feature on this back in January. Folks from more affluent communities are liable to drive up home prices as they sought places to ride out COVID or adapt to a permanent work situation. For that, we have some hard evidence.
National real estate broker CBRE did a study on USPS address change filings in 2020, which can be found here. The attached map and table show the primary moves. Unsurprisingly, most changes are people moving within the same area. We do, however, see a jump in the number of relocations from the New York City metro to Tompkins County in 2020 vs 2019, of about 170 households. This suggests an uptick in relocations, likely but not definitively due to the pandemic. Most other major metropolitan areas are close to negligible. Meanwhile, the flow from other upstate cities slowed down a fair amount.
In comparison, households moving out to other zip codes were generally down across the board, though a few places like the Philadelphia MSA saw a modest jump (100 households moved from Ithaca to Philadelphia in 2020 vs. 69 households making that move in 2019).
These are approximations, but it shows that there is some evidence for an uptick of move-ins from the New York City area compared to modest gains from elsewhere and limited change in move-outs. Roughly 173 more households would be a sizable proportion of home sales—however, we have no concrete indications of what proportion of those households chose to buy vs. rent, so we can make any substantive conclusions beyond the fact that more New York City households moved into the area in 2020 when compared to 2019.
Turning back to our rising real estate values, it wasn’t just smaller residential properties that saw strong interest. According to Tompkins County Department of Assessment Director Jay Franklin, student-focused rentals saw intense interest from large financial firms wanting a slice of the student housing pie in Ithaca and Tompkins County—not for what it’s worth now, when the preferred annual rate of return is more like 8-10%, but on the assumption they rapidly increase in value while still commanding high rents.
“(W)e took multiple inquiries from large real estate investment trusts (REITs) looking into purchasing student housing in the county. On a net income of about $2 million (before taxes), this REIT was looking to purchase the property at a $40 million valuation. This would represent a loaded tax rate of 5 percent (with the tax component at 3.47 percent which leaves the cap rate (rate of investment return) at 1.53 percent). The potential buyer backed out of the deal when told the assessment was going to increase by $2 million to reflect a higher occupancy rate. The sales simply do not make any financial sense based upon the income the property can produce, but they make sense if one builds in an aggressive appreciation schedule.”
That said, Franklin did note there were anecdotal reports of higher vacancy rates in student rentals as more projects open their doors and Cornell works to open their 2,000-bed North Campus Residential Expansion. On the commercial side, retail and hotel properties saw major downturns due to the pandemic, and it may takes year to recover from the losses.
In sum, Tompkins County Real Estate in 2020 was a reflection of the national economy and how it was impacted by COVID. As we go through 2021, while vaccines work to put COVID behind us, high construction material costs and a continued strong demand for for-sale housing likely mean another expensive year ahead.