A new report from Douglas Elliman and Miller Samuel Real Estate Appraisers and Consultants tells us that both sales prices and sales volumes in New York City are down, -7.5% to an average $1.1M sales price and -17% y/y in terms of sales volume.
NYC’s resale market was down -12% during Q2 2018 from last year. Units spent 103 DOM or +7% longer this year compared to last. Just 352 new apartments sold in Q2 2018, almost -37% less than Q2 2017. New condominiums on the Upper East Side had a median sale price of $1.8M, down 9% from last year. Co-op sales in the same area were the only bright spot…the median price for co-ops was $1.1M, up +10% from last year.
What’s going on?
Brokers claim the down market is due to rising mortgage interest rates and uncertainty around new tax law revamps. Economic analysts claim a huge pipeline of new condominiums, a volatile stock market, a dwindling number of foreign investors and the new tax revamps, particularly the limit of $10,000 deductions for both local and state taxes) that have made high-tax states such as New York much less attractive to buyers.
Taking each element one at a time, the inventory of new luxury condominiums jumped +10 – 11% to 6,985 units in Q2 to its highest levels since Q2 2011. The Elliman/Miller Report indicates that these new luxury condos are sitting on the market for +6 months and that there is now a 16-month supply of luxury units available.
Anyone who owns stocks knows that 2018 stock market volatility hasn’t been as “wild ride” conspicuous since 2008. Still… Ryan Detrick, an LPL Financial, told CNBC that due to the prospect of resurgent inflation and trade-policy uncertainty have translated into a 40% volatility presence of S&P movement by at least 1% in either direction so far this year. Nick Colas with Data Trek Research also weighed in to CNBC by saying that consumer spending and consumer confidence are beginning to scale back due to this volatility.
The Ellimann/Miller Report found that foreign buyers, a huge force in NYC’s housing market from 2014-2017, dropped -40% y/y in Q2 2018. A -40% drop in any category of buyers is huge…last year, according to the National Association of Realtors®, foreign buyers represented 10% of the overall US residential market. That overall percentage will most likely drop by year’s end if this exodus continues.
Let’s not forget last year’s new tax bill and its new $10,000 limit on combined local and state property tax deductions. Being that New York State is one of four or five highest tax states, owning residential property in the Big Apple is less appealing than it was last year.
And let’s also not forget that a 1% mortgage interest rate increase can translate into 10% higher monthly costs for buyers. Even the +50% of cash buying investors might hesitate to buy because those rising interest rates limit their ability to refinance the deal after closing the sale.
Putting a most optimistic spin on the NYC housing market, Jonathan Miller, CEO of the Miller Samuel appraisal firm, said, “The market is resettling (from the high-flying 2015-2016 sales prices and volumes) to a lower, more long-term level of activity.” Does that mean that the NYC housing market is becoming a buyer’s market?