GOP Tax Law a Drag on Manhattan Home Sales

The median Manhattan home sale price took a 4.5 percent annual dip during the third quarter of this year, partially in response to the new GOP tax law, Crain’s reports.

The median Manhattan home sold for around $1.1 million during the third quarter, according to a report prepared by Douglas Elliman Real Estate. 

Nearly 3,000 homes traded hands between July and the end of September, which is roughly 11 percent fewer than the same period last year. In a double-whammy, as prices and sales volume continue to decline, more homes hit the market. That pushed inventory to nearly 7,000 units, or about 13 percent more than 2017. 

The market's strength is likely being sapped by uncertainty regarding the new federal tax law, which hit high-tax states like New York hardest by limiting the amount of property taxes that can be deducted on federal tax returns. The luxury and new development sectors were hit hardest, as median prices fell a whopping 9 percent and units sat on the market for roughly twice as long as more modest offerings. Rising interest rates are also making it more expensive to purchase, especially for lower-priced units, as prospective buyers are more likely to take out a mortgage. More generally, wage growth has not kept up with rising housing prices, especially in New York City, creating a disconnect between rosy top-line economic figures and the real estate market, which is still correcting itself after a white-hot run that peaked in 2014. Call it a correction, call it a soft market, but it’s now sellers, not buyers, who need to beware. 

"You throw that all in a cauldron," said Jonathan Miller, head of appraisal firm Miller Samuel, which prepared the report for Douglas Elliman, "and it is putting a drag on the pace of the market."