Even before there was signature ink on the new tax bill, the proposed tax bill affected home re-sales in New York City. Let’s take a look at what happened in Manhattan’s housing market in Q4 2017.
According to a just released joint report from appraiser Miller Samuel and brokerage Douglas Elliman Real Estate, the Manhattan re-sale condo/co-op market dropped in Q4 2017 by 11% compared to Q4 2016 and to the lowest level since Q4 2011. 88% of sold units did so either at or below asking prices. Resellers dropped their list prices by an average of 5.7%. Last year, resellers dropped their list prices by an average of 4.5%.
Elliman’s New York division CEO Steven James said, “The buyer is very concerned about overpaying…the fourth quarter was when it absolutely just caught in their throat, when the said, ‘No, I’m not going to do it.’”
Brown Harris Stevens’ co-president Hall Willkie put it a little differently. “The (proposed at that time) tax bill makes homeownership more costly and that weighs on shoppers’ minds. Willkie continued, “It (the proposed tax bill) increases (buyers’) price sensitivity a great deal. They want to know the price they’re paying is justified…” since caps on mortgage interest and state/local/property deductions will likely be (and are) less incentivizing.
In a separate joint report from Brown Harris Stevens and Halstead brokerages, prices for three bedroom apartments fell in Q4 fell everywhere in Manhattan except for Midtown. (Midtown is home to what is known as Billionaire’s Row at 432 Park Avenue and prices there “saved” median sales prices to comparable 2016 levels for that specific neighborhood.)
The Corcoran Group reported the fewest re-sales of condominiums in Q4 2017 since Q4 2011. Though the number of closed deals remained unchanged, purchase contracts fell by 14% from Q4 2016.
On the Upper West Side, three bedroom homes sold for a median price of $2.35M, a drop of -19% from Q4 2016. Units between 14th and 34th streets were the hardest hit in this neighborhood with median sales prices down by -23% at $3.26M
The luxury market (considered to be the 10% most expensive or $3.895M and more) fared poorly as well. The number of purchases within the luxury segment, according to the Miller Samuel – Douglas Elliman joint report, dwindled by -13% to 252 units. Conversely, inventory of luxury properties, both re-sales and new, climbed by 13% to 1,439 units listed at December’s end.
Now that the new tax bill is the law of the land and goes into effect as of January 1 2017, real estate agents, brokers and consumers are anxiously awaiting the “true” effects of the new tax bill on both sales numbers and sale prices of homes available for purchase.
Congressional Representative Leonard Lance from New Jersey isn’t waiting. He is now looking to “review and redo” caps on state/local/property tax deductions. “These original deductions have been on the books since 1913. The new tax bill is simply too restrictive…too punitive to homeowners.”
How would Congressman Lance replace the income to be generated by the new 10% cap? He would revise and raise the corporate tax rate to 25% rather than the now 21%. “This would be a reasonable compromise and do well for both corporate interests and homeowner interest.” And, by the way, Lance says that tax laws can be changed, just like any other law.
