Tax Plan Jitters Cause Sudden Collapse In Manhattan Apartment Prices In 4Q

Apparently the combination of a massive flood of excess supply in the form of new luxury developments and a Trump tax plan that penalizes people living in expensive cities by capping SALT, mortgage interest and property tax deductions was simply too much for the Manhattan real estate market to ignore in 4Q 2017.  After reaching an all-time high of nearly $1.2 million in 2Q 2017 (chart per Douglas Elliman)...

...the Wall Street Journal this morning notes that median Manhattan apartment prices have dropped to $1.08 million in 4Q 2017, down 9.8% compared to the peak set earlier this year.

Not surprisingly, Pamela Liebman, the president of New York real estate broker The Corcoran Group, attributed the pause by Manhattan buyers to the tax bill and said that folks are increasingly convinced that prices peaked in 2017 and may continue to be under pressure.

“We lost a lot of deals in the fourth quarter, while people waited to see the outcome of the tax bill," she said. “Now that the uncertainty is gone they will be able to make a decision.”

 

She said buyers were active but “focused on value and reasonable pricing.”

 

“The good news is there are a lot of buyers who are ready to purchase next year,” Ms. Liebman said. “Sellers who don’t overshoot the mark should do well.”

Apartment

Of course, the New York real estate market wasn't universally rosy during the first half of the year as another broker, Donna Olshan, who produces a weekly report on contract signings above $4 million, said there were worrying signs in the luxury market, including an increase in the average time a listing spent on the market of nearly four months, from about 10 months in 2016 to 14 months this year.  As the following chart from Douglas Elliman highlights, luxury prices in Manhattan peaked 2 quarters before overall prices and have been plummeting ever since.

Meanwhile, new development prices have also been on the decline as the market contends with a steady stream of new buildings coming online.

Of course, the fact that Manhattan real estate prices are coming under pressure should come as little surprise as we noted the following interactive maps from ATTOM Data Solutions last week which perfectly illustrated just how concentrated mortgages over $750,000 are in a handful of expensive cities like New York and San Francisco.

Among 2,022 counties included in this analysis and at least 50 home purchase loans so far in 2017, those with the highest share of loan originations above $750,000 were New York County (Manhattan), New York (63.8 percent); San Francisco County, California (58.0 percent); Nantucket County, Massachusetts (57.3 percent); San Mateo County, California (55.2 percent); and Marin County, California (50.o percent). Among those same 2,022 counties, those with the highest number of purchase home loan originations above $750,000 so far in 2017 were Los Angeles County, California (9,197); Santa Clara County, California (5,543); Orange County, California (4,450); Maricopa County, Arizona (3,723); and King County, Washington (3,715).

Meanwhile, the second proposed change in the GOP tax plan involved a cap on the deductibility of property taxes at $10,000.  And, much like the impact of mortgage interest above, the map of who's most impacted looks eerily similar to the 2016 electoral college map.

The county-level heat map below shows the share of single family homes and condos in each county where the most recent property tax bill available was more than $10,000.

 

Among the 1,731 counties analyzed, those with the highest share of homes with property taxes above $10,000 were Westchester County, New York (73.4 percent); Luna County, New Mexico (68.7 percent); Rockland County, New York (60.0 percent); Mathews County, Virginia (54.4 percent); and New York County (Manhattan), New York (52.5 percent). Among those same counties those with the highest volume of homes with property taxes above $10,000 were Nassau County (Long Island), New York (176,946); Los Angeles County, California (165,078); Suffolk County (Long Island), New York (155,592); Bergen County, New Jersey (126,096); and Harris County (Houston), Texas (125,792).

Conclusion: Low-tax, cheap cost of living states (i.e. "Red States") are suddenly starting to look a lot more attractive to liberal "millionaire, billionaire, private jet owners" in New York who aren't so keen on "spreading their wealth around" as their rhetoric would have you believe.

Comments

Snaffew Dec 27, 2017 3:40 PM Permalink

ummm....i don't care about hyper inflated boxes in a city building...surely they will be the first to die in an attack on American soil...good riddance!

Scanderbeg Snaffew Dec 27, 2017 4:23 PM Permalink

The libfags should be happy since they love paying taxes so much.After all it's just "their fair share" and a "patriotic duty" to do so.As for the rest a drop in RE prices will help the working class in those states. No average person is buying million dollar homes in NY or CA. And if you are making a middle class salary in those places you are just treading water and ought to leave anyway. Between the taxes, cost of living and RE inflation it is impossible to get ahead. This bill hits the left where it hurts and will accelerate white flight to swing states. I approve.

In reply to by Snaffew

ted41776 Dec 27, 2017 3:45 PM Permalink

Manhattan real estate prices have nothing to do with US tax rate and everything to do with how much a wealthy Chinese "Communist" is willing to pay. last time i checked, suitcases of cash being placed on some real estate broker's desk aren't exactly taxable transactions http://www.crainsnewyork.com/article/20160619/CUSTOM/160619955/cash-is-… But my bank will freeze my account and report me to DHS and FBI if i make several large cash withdrawals... yeah, gotta love this "Capitalism" we're living in nowadays

rf80412 847328_3527 Dec 27, 2017 4:11 PM Permalink

They're not just going to disperse randomly.  My guess would be that second and third tier cities, college towns, and destination resort towns - all of which already have some of the atmosphere and "scene" - are going to see a major uptick in sales, starts, and prices.  Escaping high state taxes is probably going to be harder, but still won't be random.

In reply to by 847328_3527

Snaffew Dec 27, 2017 3:42 PM Permalink

you'd think for all that money you would get a glass elevator insteas of stairs that take up about 15 percent of the usable square footage.

all-priced-in Dec 27, 2017 3:56 PM Permalink

"Trump tax plan that penalizes people living in expensive cities by capping SALT, mortgage interest and property tax deductions" Not giving them a break is not the same as punishing them. They are just treating them like everyone else. Two people living in different states but making the same income should pay the same federal tax.     

Omen IV PointofVue Dec 27, 2017 7:31 PM Permalink

time to join with Paulson and buy out Puerto Rico - send all the PR's packing - the island doesnt need them - existing Fed tax exemption plus set up of  minimal sales tax with no income tax and no public education and therefore low property taxes with professional white management.Buy out the foreclosures in PR and then institute eminent domain for the balance make it the place for the best private schools in the USA and lowest taxes

In reply to by PointofVue

you enjoy myself all-priced-in Dec 27, 2017 5:28 PM Permalink

I just scrolled down to try and post the exact same thing.  No one is being "punished" because SALT is not the natural order of things.  It was a subsidy crafted on behalf of blue-staters that never should have existed in the first place.Abolishing a hand-out that saw NY residents pay lower federal rates than WY residents is anything but a punishment.  It's simply leveling the playing field.  An actual punishment would entail blue-staters paying a greater federal rate.  And of course, that's not the case. 

In reply to by all-priced-in

Anteater you enjoy myself Dec 27, 2017 6:31 PM Permalink

Numerous economic and tax studies by banks and economistscontinue to demonstrate Blue States pay an excess of Fed taxesto keep the Red States in Welfare Status, taking in more Fed aidthan they pay out in Fed taxes. Knowing how Red States believe in 'tough love' and 'bootstrapping', even though they are clearlyWelfare Queens, we invite all Red States to push away from the bar, get a real job, and pair their fair share of Fed taxes. Failingthat, they should light their tiki torches and burn their EBT cardsas a sign, even if a weak sister one, of American worker solidarity.Now go back to your catfish wrangling.

In reply to by you enjoy myself

all-priced-in Anteater Dec 27, 2017 8:12 PM Permalink

Stupid fuck - Federal income taxes are not collected by state - individual people and companies file based on their income and allowable dedutions. Plus a big part of the crybaby talk about red states getting more federal money has to do with national parks, military bases and miles of highway. A small population state like say SD has miles and miles of highway - a military base and a huge national park. So of course if you look at federal spending per capita it looks out of wack VS a state like NY. How can anyone think a guy making $200K in NCY should pay less federal taxes than a guy making $190K in South Dakota?     

In reply to by Anteater

wmbz Dec 27, 2017 4:09 PM Permalink

“The good news is there are a lot of buyers who are ready to purchase next year,” Ms. Liebman said. “Sellers who don’t overshoot the mark should do well.”~ Well according to Ms.Liebman, all one needs do is not "overshoot the mark".See how easy it is, just give this libtard a call she'll walk you through it.

Robert A. Heinlein Dec 27, 2017 4:46 PM Permalink

Yep, elections do have consequences.  Love it that ny and ca are getting hit by this. Works out better for the middle class.  And, those that own these expensive homes in high tax states need to pay their fail share. Right all you libtards. You got what you wanted. LMAO 

csmith Dec 27, 2017 5:05 PM Permalink

Map of losing Trump counties overlaid on map of most expensive/highest taxed counties in America is the most beautiful "overlay" ever.

sarz Dec 29, 2017 7:49 AM Permalink

Now that vote down or up arrows are back, the new setup is looking like a real improvement. The website's security certificate is still out of whack, though.