The federal tax overhaul appears to be affecting New York real estate already. Namely, New Yorkers aren’t buying—the past three months marked Manhattan’s lowest sales quarter total in more than six years as well as the largest annual decline in nine years according to the newly released market reports for the first quarter of 2018.
Douglas Elliman’s report shows that despite a strong local economy, “unease regarding effects from the federal tax law and an uptick in mortgage rates may have resulted in a slowdown among buyers and sellers.” There’s also a chance the decline in sales was overstated, the report says, as the number of closed new development sales fell by half while the “legacy” contract pipeline emptied.
Jonathan Miller, author of the reports, is hesitant to say there’s uncertainty in the market—it “makes the market feel weaker than it actually is,” he says. “The concept to consider here is ‘price discovery’ where it will take the next year or two for buyers and sellers to get reacquainted with what the right values are,” he notes. “The new tax law has been the catalyst for this change in sentiment about the market.”
Now, onto the numbers. The median sales price in Manhattan slipped from last year, a slight two percent to $1,077,500. Price per square foot declined much more, 18.6 percent to $1,697. Manhattan co-ops sold this quarter at a median price of $810,000, 4.5 percent higher than last year. The median for condos was $1,628,279, 1.3 percent lower than a year ago. Miller notes that this quarter many buyers were paying in cash—it was the highest all cash market share in the four years of tracking the metric.
There’s plenty of luxury real estate to go around in 2018: luxury inventory rose at more than twice the rate of the overall market, while the market share of luxury resales was at its highest level in two-and-a-half years. The median sales price for luxury real estate was $5.9 million, a number that declined 15 percent from a year ago. But there were 1,494 listings on the market, 15 percent more than last year.
Corcoran released its report, too, and found sales activity was “somewhat quiet in January and February but heated up in March as buyers perceived value in the market.” As for reasons why, they credited volatility in the financial markets, continued uncertainty regarding tax reform, fewer new developments and the long wait for prices to decrease.
The brokerage found that resale co-ops had a two percent increase in sales from last year, as a 14 percent quarterly increase in co-op inventory provided more buying opportunities. And, of course, the median co-op price of $820,000 comes in 25 percent below the overall Manhattan median price. Over the entire market, inventory rose 10 percent—the ninth consecutive quarter of increased inventory.
As for where the sales activity is, Corcoran found that Downtown Manhattan “maintained its position as buyers’ favored neighborhood” with 32 percent more closed sales than the Upper East Side, which claimed the second highest number of first-quarter sales. Halstead’s report focused on resale activity, noting that the highest percentage of resales in Manhattan was on the East Side at 22.9 percent, followed by Downtown at 20.7 percent.
Halstead Property Development Marketing, which tracks new development, saw inventory dip in Manhattan and rise in Brooklyn, “while absorption slowed year-over-year as buyers hit pause to educate themselves on the impact of the tax code changes on their real estate decisions,” according to Stephen Kliegerman, president of HPDM.
The report found that available inventory in Manhattan declined quarter-over-quarter for the first time since 2016—“a pause in what has been a two-year rising trend.” But in Brooklyn, available inventory jumped significantly, rising 100 percent due almost entirely to the addition of 458 new units at Brooklyn Point in Downtown Brooklyn.
Pricing for Manhattan new development entering contract looked flat, falling one percent quarter-over-quarter and 1.5 percent year-over-year to $2,185 per-square-foot. In Brooklyn, new development entering into contract averaged $1,413 per-square-foot, remaining above $1,400 per-square-foot for the fourth consecutive quarter and up 3.82 percent year-over-year.