As a regular reader of real estate news, you probably read somewhere about the New York real estate market rapidly descending into a free fall. That’s an extreme observation and is far from what’s really happening.
What’s true is that Manhattan real estate prices have seen some decline in recent years. Note that those prices started out a lot higher as compared to other boroughs, so the drop would appear more significant.
As 2015 drew to a close, it was clear that a correction at the top end of the New York real estate market was forthcoming. The continuously surging prices of the past six years, compounded by an increasing number of unsold inventory, not just in the luxury condo market but also creeping into the other price ranges of the co-op and condo markets, eventually led to buyer cautiousness. And this triggered a chain reaction where more inventory entered the market while sales slowed, which resulted in a further increase in housing inventory.
The 2016 presidential election year and the sharp reduction of the state and local taxes (SALT) deduction in 2017 had a massive impact on New Yorkers. But while buyers became even more cautious, sellers still wouldn’t budge. Many sellers stubbornly insisted on standing firm on their impractical prices. When the sellers finally lowered their price, it was often too late, and the amount not enough to attract buyers.
With the market decline in 2017 and 2018, sellers became increasingly frustrated while buyers became increasingly cautious. When the number of real estate transactions became alarmingly few at the end of last year and the beginning of this year, that’s when sellers eventually reduced their prices. Thus, transaction volume slowly picking up again.
At the end of March, the new Mansion Tax was passed, increasing the cost of properties in the luxury market. The second quarter of 2019 saw a surge in real estate transactions because people rushed to buy multi-million dollar properties by June 30, before the new tax took effect. So the third quarter numbers were way below compared to both the previous quarter, and the third quarter of 2018. And that’s apparently where the idea of a market free-fall came from.
Right now, the market continues to suffer, but it is stabilizing. Buyers are seeing good opportunities in the current lower real estate prices. With that, transaction volume is seen to steadily rise in the remaining months of 2019 and in 2020.
You can’t put New York real estate down. For many, it remains to be a good long term investment.