Many of you have reached out to us with questions about where the Manhattan real estate market is headed. With lots of rumbling about the state of the economy, looming recession and rate cuts—all commingled with the uncertainty of an upcoming election year—there are a lot of moving parts to contend with. The good news is that buyers continue to demonstrate interest; an indication that reduced prices and favorable interest rates are loosening up the strings on pent-up demand. This will help with the absorption of older inventory and price stabilization.
The current market climate is particularly challenging for sellers, but with proper pricing and a solid marketing plan, we are making deals. It’s not all doom and gloom, but it is time for sellers to listen carefully to what the market is saying.
We’ve included some important findings from Douglas Elliman’s Third Quarter Report to shed greater light on all the recent chatter about the state of the market.
Mansion Tax Deadline
New York City’s new Mansion Tax went into effect on July 1, which progressively raises the tax costs of owning a home in the city that is worth $2 million or more. It also added a .25% transfer tax on these properties, which goes on top of the existing statewide .4% transfer tax.
With this deadline looming, luxury home buyers rushed to close purchases before the June 30 deadline. That sent Second Quarter sales and home prices significantly up. This skewed the numbers we normally expect in the Second Quarter, and it also dramatically affected the Third Quarter sales numbers for Manhattan co-ops and condos.
A Look at the Numbers
Here are some of the facts and figures worth looking at, pertaining specifically to the Manhattan co-op and condo market from the Q3 Elliman Report produced by our real estate firm, Douglas Elliman Real Estate.
• Average Sales Price – $1,656,395
(Down 21.0% from Q2 2019 and down 14.1% from Q3 2018)
• Number of Sales Closed – 2,562
(Down 13.4% from Q2 2019 and down 14.2% from Q3 2018)
• Total Listing Inventory – 7,352
(Down 2.7% from Q2 2019 and up 6.2% from Q3 2018)
• Average Days on the Market – 91
(Down 20.2% from Q2 2019 and down one day from Q3 2018)
What this data shows is how much the Mansion Tax affected sales and prices from Q2 to Q3, but also how different the numbers are in a year-over-year Q3 comparison between 2018 and 2019. None of this is a surprise to us in the New York City luxury real estate market. We expected the Mansion tax to have this kind of effect. At the same time, we expect things to eventually level back out over time. Buyers were in a rush to close before the Mansion Tax went into effect. Now that the tax is here to stay, the market will eventually correct itself.
Fourth Quarter Outlook
It’s a buyer’s market heading into the Fourth Quarter of 2019. One of the interesting things to note from the data above is that the average days a home spent on the market actually decreased in Q3 compared to Q2. That’s because inventory and prices are lower, which puts the buyers back in the power position. Low mortgage rates are also working in the buyers’ favor right now.
Throughout Manhattan, we’re certainly feeling the effects of the updated Mansion Tax, along with the tax deduction limitations that were implemented last year. However, New York City will always be one of the most desirable and active real estate markets in the world. Local buyers and international investors will always be in high demand, and smart sellers will know when to make their moves.
Tom Postilio and Mickey Conlon are two of New York City’s leading luxury real estate brokers. When you need to buy or sell in Manhattan, they are the team to turn to for the best in New York real estate representation. Contact Tom & Mickey today!