New York City's housing market was already struggling with a historic mismatch involving a flood of luxury inventory and a shortage of buyers looking for housing in that price-range (instead, the city has continued to suffer from a shortage of housing affordable to its workforce), when the city adopted a new transfer tax on properties valued over $2 million.
It's believed the new 'mansion' tax (which comes on top of President Trump's tax-reform plan that eliminated the SALT deduction) pushed sales forward earlier this summer.
Instead, the market is growing accustomed to more sobering data points like this one: Sales on previously owned coops and condos in Manhattan continued what has become a multiyear slump during the third quarter. Prices on apartments sold slumped 8%, the largest YoY decline since 2011, Bloomberg reports.
According to another set of data from Douglas Elliman and Miller Samuel, the drop was even larger: The average sales price declined by 14% during Q3, which would make it the biggest drop since the financial crisis, according to a story from CNBC.
It's just the latest sign that buyers are demanding more concessions - not that they have a choice. NYC is one of the most unaffordable cities in the world, where the median income is just $50,711, and even a small condo can fetch at least $600,000.
Since the housing market peaked in 2014, sellers have apparently accepted the fact that the best way to cement a sale in what has become a buyer's market. Which is perhaps why during Q3 2019, 93.6% of all condo and coop purchases were finalized at, or below, the last asking price, the second-highest share since the end of 2011.
And much of the inventory had already been marked down at least once.
Still, a report from the brokerage Core revealed that the average home sold during the quarter spent 192 days on the market. Moreover, there's still a significant mismatch between the inventory available and what buyers want: 29% of Manhattan’s inventory is priced over $3 million, yet during the last quarter, only 9.7% of closings were in that range.
Bottom line: the number of apartments for sale climbed for an 8th straight quarter to 7,352 as of the end of September, or 6.2% more than a year earlier, according to Miller Samuel and Douglas Elliman, which suggests the decline in prices will continue.
Fortunately, the Manhattan market has benefited from one important buffer: Low interest rates. During Q3, only 44% of deals were done with cash, which means that more buyers are taking out mortgages.
Just imagine what would happen if interest rates were to rise?