Like the end of 2016, 2017 wrapped with significant political uncertainty and how, exactly, it would affect New York City's real estate market. The underlying theme through the fourth quarter market reports were questions regarding the latest tax bill.
"I’m not forecasting the price impact of the tax bill yet,” Jonathan Miller, the author of Douglas Elliman’s market report said, but he noted that “it has more of an effect on the higher end.”
He continued, "I expect that in the near future, buyers will come in lower on offers initially and sellers will resist, a repeat of what we have been seeing."
One constant throughout the various reports compiled by New York brokerages: sales slowed as buyers waited to see how the bill would shake out, and prices fell.
For the first time in seven quarters, the average sales price fell below $2 million, according to the Elliman report. That's because the pipeline of legacy contracts—which often come from new luxury development—has cleared out. But the median sales price edged higher for the third consecutive quarter, driven by re-sales, to $1.06 million. Elliman's report also points out that through the quarter, smaller apartments continued to see more bidding wars than larger apartments. Remarkably, 90 percent of the highest-priced sales (at or above $5 million) were all cash transactions.
It was a similar story with Corcoran’s report: Signed contracts fell 14 percent year-over-year—another result of the tax bill—and while the median price rose five percent to $1.068 million, the the average price dropped to $1.879 million. The takeaway: Rising supply continues to put downward pressure on prices at the higher end of the market, where discounts and price negotiations remain prevalent.
Halstead tracked fourth-quarter price averages for apartment types. The firm found the average price for all co-ops rose two percent from the fourth quarter of 2016 to $1,252,100. Condos also saw a dip; the average price of one ($2,689,147) was 11 percent lower than in 2016’s fourth quarter. And the average price for resale apartments fell two percent over the past year to $1,482,721. Buyers favored smaller apartments more than a year ago, which contributed to the dip.
Compass put it most bluntly in its report: "The disconnect between luxury inventory and the demands of the market continues to widen." Condo inventory priced above $3 million made up 38 percent of condo inventory, but only 25 percent of contracts signed. Co-ops, which tend to be less expensive, became more popular with buyers, who also started negotiating more aggressively.
While Manhattan's high-end condo market continues to correct itself, the one in a Brooklyn is growing. Halstead Property Development Marketing—which only tracks new condo development—found that in Brooklyn, closings ranging in price from $2 million to $3 million jumped to 17 percent from 9 percent in 2016. Nearly 400 units went into contract in 2017, an 11 percent increase from 2016. Median contract-signed pricing for one bedrooms in the borough rose 8.3 percent, to $995,000.
Frederick W. Peters, CEO of Warburg Realty, offered his outlook on 2017, noting that despite an entire year of downward price pressure in both the sales and rental markets, the market stayed active and saw a number of high profile sales. "The most reliable markets throughout 2017 occurred in boroughs other than Manhattan," he noted, pointing out growth throughout Brooklyn and in neighborhoods like Long Island City, Astoria—which just won the Curbed Cup—and the South Bronx.
He expects the significant changes brought on by the tax bill will offer both "burdens and benefits for most of the constituencies we deal with." He adds, "But with a strong stock market and lower prices (2017 was one of those interesting years in which these two markets traversed opposite paths), opportunities for serious buyers abound."