The scores of eager home buyers who’ve descended on Long Island City, Queens, in the months since Amazon announced its HQ2 plans got a bitter shock on Thursday when the retail giant abruptly canceled its New York City campus.
Amazon put out a 360-word statement citing irreconcilable differences with a cohort of state and local politicians who opposed it, and in a nanosecond, deflated the impetus for a frenzy of home buying that has gripped Long Island City since November. Amazon’s about-face highlights the folly of hinging a real estate investment decision on one variable.
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Back in November, buyers and sellers reacted almost instantaneously to news that Amazon would split its second headquarters between Arlington, Virginia, and Long Island City, bringing 25,000 high-paying jobs to each location over the course of five years.
Bidding wars erupted over apartments once languishing on the market; luxury condo developers discussed raising prices; and broker after broker reported jammed-packed open houses, Mansion Global reported at the time.
In the three months between Amazon’s HQ2 announcement in mid-November through Sunday, 138 buyers signed contracts for apartments in Long Island City, nearly triple the number of new contracts during the same period a year ago, according to data provided by Stribling & Associates.
"This was announced and people went out and bought just like they do in the stock market, based on this event in the news," said Donna Olshan, president of brokerage Olshan Realty.
"This is the ultimate real estate lesson: You can’t count on anything until it’s closed," she said, adding that anyone who bought speculatively now wait much longer to realize the super-charged value boost Amazon was expected to deliver within five years.
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"People who bought speculatively on the prospect that Amazon was coming in, they just have to sit a longer time and wait," Ms. Olshan said.
Despite the frenzy of activity, some Queens-based agents cautioned against expecting too much too fast. Among them was Patrick W. Smith, an agent with Stribling who said from the beginning that HQ2 was not yet a done deal.
"I’ve said to every single client, 'you better want to own in Long Island City irrespective of if Amazon comes here or not.' I saw this as a potential," Mr. Smith said.
Amazon isn’t the only news giving buyers and sellers whiplash in recent months.
A planned shutdown of the L train, a vital commuter line from Brooklyn, for major repairs caused rents prices and condo sales in trendy Williamsburg to suffer as the start of construction in April drew near. But in the first week of January, New York Gov. Andrew Cuomo shocked the city when he called off the total shutdown and triggered a flurry of excitement in the real estate industry.
Within hours of the news, the developer of a rental building near the Lorimer Street L-train stop said they’d shifted gears and would sell the units as condos; and inquiries came flooding in for apartments that had languished on the market for over a year, Mansion Global reported.
But details about the L train construction continue to emerge. This week, transit authorities said that even the new plan will be fairly disruptive and require train service to slow down as early at 8 p.m. on weeknights.
In California, Gov. Gavin Newsom this week killed a long-held plan for a bullet train stretching the 400 miles between Los Vegas and San Francisco, saying it would cost $77 billion and take too long to build.
"Anybody who bought land because of the California bullet train is feeling pretty bad," said Jon Woloshin, head of U.S. real estate at UBS Global Wealth Management's Chief Investment Office. "At the end of the day, the average person should not be making these speculative decisions."
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It’s one of the most common queries Mr. Woloshin hears from his private wealth clients: Is this a good time to buy a house?
"I always go back and ask them five questions because this is such a personal decision," he said. Some of those considerations include their time horizon—how long do they want to own the home. They also need to consider how much a new house will tie up their liquid assets. And would a shift in the market drastically change the homeowner’s financial position?
"There’s a difference between investing and speculating," he said. "Speculating should be done by people who have the financial firepower."
For now, homeowners in Long Island City can expect a near-term setback. Without the bump Amazon would have brought in the form of greater demand and rising prices, the neighborhood will be vulnerable to the same forces dampening activity across the city, namely tax reform and economic uncertainty.
Any speculative buyers who bet on a quick payoff will now have to weather the ongoing slowdown in New York City home sales.
"We’ll still see growth, but it will be slower," Mr. Woloshin said.
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Long Island City, which has been on the development fast-track since 2006 and benefits from a quick commute into Manhattan, is better positioned to handle Amazon’s pullout than were this to happen in Crystal City, Va., where HQ2 plans have already had a more dramatic effect on local home prices.
In Arlington County, median asking price has soared 18.2% to $757,000 since HQ2 news broke in November, according to data from realtor.com. Queens has seen no movement in that time in its median asking price, which hovers around $585,000.
"Investors who scooped up properties trying to get ahead of Amazon's arrival are in for some disappointment. But Long Island City had strong underlying dynamics before HQ2 and will continue to attract buyers," said Danielle Hale, chief economist at realtor.com, in a statement on Thursday.
Andrew Barrocas, founder and chief executive of New York City-based brokerage MNS, said Long Island City will continue the strong upward trajectory it’s been on for the past decade.
"It was already a great market before Amazon," he said. "I’m in the process of making an investment in Long Island City, and there wasn’t one second since the news that I’ve thought about not making that investment."
But he added: "You will definitely hear of deals wanting to be renegotiated because it."