The past year has not been too kind for property sellers in the Big Apple as they have had to deal with a lukewarm real estate market for most of 2018. CNBC reported in October that the market had cooled down to levels that hadn’t been seen since 2009. This unprecedented cool down has seen many homes continue to go up for sale, and stay up for sale far longer than usual amid fewer transactions.
The same CNBC report, citing data from Warburg Realty, reveals that homes priced at $1 million or more stay on the market for about 100 days. Those priced between $8 million and $12 million, on the other hand, stay on the market even longer, often taking as many as 175 days before being bought — should a transaction ever materialize. Moreover, sellers have had to accept radically reduced offers, lest their properties remain on the market, untouched.
Hardest hit so far have been those selling properties in Manhattan, where real estate sales have suffered a double-digit decline over the course of four consecutive quarters. NBC New York reports that real estate sales in the borough “fell by 11 percent from the third quarter of 2017 to the third quarter of 2018.” Resales of existing apartments declined during that period as well — the first time this has happened since the financial crisis of 2011.
Unlike in the aforementioned financial crisis, no single factor is causing this market downtrend. Instead, a confluence of factors is causing a trickle-down effect that has considerably altered the New York real estate market. An oversupply of luxury units is one factor, as is the decline in foreign buyers. Taxes are making it doubly difficult for sellers to close deals as well, especially in light of the tax bill passed last year, which capped the federal deduction for state and local taxes at $10,000.
That, of course, is on top of the already existing real estate-related taxes in New York that have collectively made it more expensive to buy property in the Big Apple. A prime example is the transfer tax, which is non-negotiable and should be paid as part of a property’s so-called closing cost. ‘Everything You Need to Know About NYC Seller Closing Costs’ by Yoreevo explains that both city and state charge transfer taxes on almost every transaction, and that means an additional 1.4% for homes listed under $500,000 or 1.825% for properties over that threshold. Therefore, a home worth $500,000 will yield an additional $7,000 in transfer tax, while a home worth $1 million will be taxed $18,250. Add to that other taxes, like the property tax, and the total cost of buying a living space in the Big Apple increases considerably. Small wonder then why buyers are holding fire when it comes to buying properties in New York.
With winter fast approaching and 2018 soon to give way to 2019, there remains a palpable trepidation among property sellers as regards the future of the New York real estate market. Experts, though, are in somewhat of an agreement that there are plenty of deals to be had even with this market cool down. It will, however, take a combination of motivated sellers and savvy buyers crossing paths to make such transactions possible, and perhaps cause an upturn once more.
For now, though, the New York real estate landscape remains quite cold. And it may take quite a while before it thaws well enough for both sellers and buyers to be active once again. Until then, expect more properties to stay for sale for quite some time.
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