Westchester County in New York State has the nation’s highest property taxes. Think $35,000, $50,000 and more and you’ll easily understand why sales in Westchester County as a whole plunged -18% in Q2 2018.
Prices in the county fell as well. Scarsdale’s median prices dropped -5% in just the first half of this year. Mamaroneck’s median home prices dropped -13%. The most vulnerable homes to such price decreases fell within a price range of $1.5M-$3M.
Everyone agrees (agents, brokers, consultants, attorneys, etc.) that the major culprit in these sales and price drops is the cap placed on property taxes by the 2017 tax law that went into effect this year. Everyone also agrees that things will likely worsen next year.
“We all think that next year is going to be a tough year for real estate sales,” said Mathew Roach, a property attorney in Yorktown Heights. “Just the fact of filing 2018 tax returns and seeing the new realities of a $10,000 limit on deductions for combined property and state and local taxes will do it.”
Some of Roach’s clients have already cashed out of their long-standing Westchester family homes, moved and are now renting in Brooklyn or So Ho. “Those individuals are telling me they’ll never own a house again because it just makes more sense to rent an apartment for $10,000/month rather than be on the hook for a hefty tax burden as well as home upkeep costs…they’re making their moves to get away from it.”
Westchester’s overall home inventory has already jumped nearly +5% from last year while specific inventories within the $2M-$2.49M price range have jumped a whopping +26%.
Rather than bidding wars, the new normal consists of “…dramatic price reductions every single day…every hour…” said Angela Reteling, broker with Compass. “…(buyers) are not going to pay more than $35,000 in taxes.”
Meanwhile, in efforts to help New York residents compensate for the new tax law, the State has developed newly established charitable organizations to which residents can make donations in exchange for tax credits that can be deducted on federal income taxes. The State enabled all municipalities to utilize these charitable organizations but so far, as an example, just $105,000 of an expected $40M in charitable donations has come into Scarsdale.
The IRS is currently “reviewing” whether or not the State’s efforts will pass muster.
Either way, Owen Berkowitz, an agent with Douglas Elliman Real Estate in Scarsdale, is quite circumspect about this “new market.” Berkowitz said, “We’re in a time of what I’m calling a healthy reticence in the market place. So many people prior to this moment have been involved in bidding wars…and I don’t think anything that has the word ‘war’ in it is healthy.”