- The pace of condo and co-op sales in Manhattan slowed in the first quarter to an almost nine-year low, according to the real-estate appraiser Miller Samuel and Douglas Elliman Real Estate.
- Buyers got more aggressive about negotiating discounts amid rising mortgage rates and uncertainty about the new tax law’s effects.
Manhattan home sales slowed to the lowest levels in nearly a decade last quarter as buyers more forcefully negotiated discounts.
In the first quarter, condo and co-op sales fell by 25%, the most since the second quarter of 2009, according to data compiled by the real-estate appraiser Miller Samuel and Douglas Elliman Real Estate. The total number of sales, at 2,180, was the lowest in more than six years.
About one-third of the year-on-year decline last quarter was attributable to the boom in construction of units that started many years ago but closed over the past two or three years, said Jonathan Miller, the CEO of Miller Samuel.
Aside from that pipeline running dry, the recent slowdown also reflects what’s happening right now – mainly that buyers are pushing hard for bigger discounts from listed prices.
Miller estimates that the remaining two-thirds of the decline can be explained by reluctant buyers and an evaluation of what the new tax law means for home values in Manhattan.
“The market is resetting,” Miller told Business Insider. “It’s still brisk as you skew lower in price, but it’s not as robust as it’s been.”
Another sign that buyers were more aggressive about negotiating lower prices was a smaller number of bidding wars. About 9% of closings in the first quarter were above the asking price – the lowest share since Q4 2012, according to Miller. As recently as Q3 2015, buyers scrambled to outbid one another on a record 31% of units.
They have more to consider now, including rising mortgage rates and tax changes.
The new tax law caps the deduction for state and local property taxes at $10,000. And homeowners who deduct mortgage interest are limited to the amount they pay on $750,000 worth of their mortgages, down from $1 million. This change would affect only the most expensive markets in the country, including Manhattan, where the median sales price is $1.08 million.
“The federal government is in the process of extracting itself from the homeownership promotion business,” Miller said. “There’s things to offset that, like doubling the standard deduction for single and multiple households. But it’s still change, and there’s uncertainty.”