When the COVID-19 pandemic hit New York City in the middle of March, the housing market was put on a prolonged pause while much of Manhattan emptied out and shelter-in-place orders were in effect. Now, with the city returning to some sense of normalcy, there are signals that Manhattan’s housing market is starting to function again — and the current dynamics clearly favor buyers over sellers.

Does this mean there are bargains to be had in Manhattan? It’s possible. But in a housing market with an unusual amount of uncertainty, it’s important to understand how the supply and demand are working to get a good sense of the conditions that could lead to those bargains. Right now, supply is coming back, and demand is a little depressed, which will generally put downward pressure on prices.

Housing markets across the country saw the total number of homes for sale drop when the pandemic hit, and, with a few exceptions, total active home listings remain down substantially compared to a year ago. According to Redfin data compiled by real-estate consultant Mike DelPrete, active listings in New York City are currently down 22 percent year over year.

But there’s now reason to think that number will improve in the near future. According to UrbanDigs, a real-estate-listings portal for New York, new listings in Manhattan have not only returned to normal levels but are starting to far exceed where they were a year ago. With new inventory coming to the Manhattan market at a torrid pace, the 22 percent gap will likely start to fade, although it’s unclear how long it will take for inventory overall to return to normal levels.

UrbanDigs

Supply nationwide was tight going into the pandemic, and the pandemic-induced drop only exacerbated that. When supply is low, it tends to favor homesellers over homebuyers. Buyers have relatively fewer choices when supply is low. That means more people are bidding on fewer houses, which drives prices higher. This is playing out in many other cities in the country that weren’t hit as hard as New York City. Pent-up spring demand was unleashed when lockdowns were lifted, and bidding wars drove prices up. According to CoreLogic’s Home Price Index, prices rose 4.9 percent in June year over year.

But in New York City, demand has been slower to come back relative to the rest of the country. For Manhattan, contracts signed rebounded dramatically in July but remains deflated, possibly as a result of there being less inventory; you can’t buy a house that’s not for sale. (Contracts signed is, along with pending sales, the best measure of demand, but both are lagging indicators.) But other signals point to repressed demand. One is that the number of homes taken off the market in July returned to normal levels, which could be the result of sellers not getting the price they want.

The combination of rising supply and depressed demand could tilt the market even more toward buyers. But it’s hard to read what the deflated demand means over the long-term. It could signal that Manhattan is in a transition period during which the market finds a new equilibrium as we come out of the worst of the pandemic in New York. It could also signal more dramatic changes are under way in the Manhattan market that will give buyers an advantage for the foreseeable future.

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