The Tax Law Hits Manhattan Home Sales

Updated on
  • Apartment shoppers hold firm on prices as gains moderate
  • Owners offered average discounts of 5.7% in the fourth quarter
Jonathan Miller, Miller Samuel president and CEO, discusses the impact of tax reform on real estate.

Manhattan home resales fell in the fourth quarter as buyers wavered ahead of the expected tax overhaul and stood firm in their refusal to overpay.

Sales of previously owned condos and co-ops dropped 11 percent from a year earlier to 2,127, appraiser Miller Samuel Inc. and brokerage Douglas Elliman Real Estate said in a report Wednesday. That was the lowest for a fourth quarter since 2011.

Buyers who did commit to a purchase held out for the best deal. More than 88 percent of homes that changed hands in the quarter did so at or below the asking price, the firms said. Resellers offered discounts of 5.7 percent on average, compared with 4.5 percent a year earlier. The median price for resales was $916,425, up 1.8 percent.

“The buyer is very worried about overpaying,” Steven James, chief executive officer of Douglas Elliman’s New York City division, said in an interview. “The fourth quarter was when it absolutely just caught in their throat, where they said ‘No, I’m not going to do it.’”

Manhattan home prices aren’t rising as sharply -- or briskly -- as they were just two years ago, and buyers have taken notice of the new measured pace of growth. Plans to pass a federal tax law that limits deductions for state and local levies, and would make homeownership more costly, also weighed on shoppers’ minds, said Hall Willkie, co-president of Brown Harris Stevens.

Slower Growing

Manhattan resale prices aren't rising as sharply as they used to

Source: Miller Samuel Inc. and Douglas Elliman Real Estate

“In times of uncertainty, if buyers can delay a decision, they do,” Willkie said. “It also increases their price sensitivity a great deal. They want to know the price they’re paying is justified.”

Other Reports

Corcoran Group, in its own quarterly report Wednesday, said while the number of closed deals was little changed, purchase contracts declined 14 percent from a year earlier, to 2,469. “Lingering high prices” pushed condo resales down to 929 transactions, the fewest since the end of 2011, the brokerage said.

Brown Harris Stevens, in a joint report with Halstead, said prices for three-bedroom apartments fell everywhere except Midtown, where closings at the Billionaires’ Row tower 432 Park Ave. kept the median elevated. On the Upper West Side, previously owned three-bedroom homes sold for a median of $2.35 million, down 19 percent from a year earlier. Between 14th and 34th streets, the median for price for a three-bedroom previously owned home fell 23 percent to $3.26 million.

A newly married couple asked Brown Harris Stevens broker Militza Van Doren in October to help find them a two-bedroom home for less than $2 million. They quickly zeroed in on a high-floor unit at an East 85th Street tower with unobstructed views of the city and the East River, and more than 1,200 square feet. The asking price was $1.925 million, or 3.5 percent less than what the owners sought when they first listed it in September.

Meeting in the Middle

Then the negotiating began. The couple suggested an initial bid of $1.695 million, which Van Doren feared would be too low. But the sellers countered the offer, and after some back and forth, agreed to part with the property for a little more than $1.8 million. The deal, signed in November, will probably be completed next month.

“In the end, both parties were pleased,” Van Doren said. “And they wanted to meet each other. That very rarely happens.”

In the luxury market -- the priciest 10 percent of deals, defined in the quarter as $3.895 million or more -- purchases tumbled 13 percent to 252, Miller Samuel and Douglas Elliman said. Inventory in the category, including resales and newly built units, climbed 13 percent, with 1,439 luxury homes listed for sale at the end of December.

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