Co-op and Condo Sales Worst Since the Great Recession

If there were any lingering doubts about New York City real estate now being a buyer’s market, they have been formally laid to rest. CNN reports that the average sale price for condos and co-ops in Manhattan was $1.66 million during the third quarter of this year, down 14 percent from last year, according to a report from Douglas Elliman Real Estate. The number of sales fell by an identical 14 percent year-over-year, marking the lowest third-quarter sales total since the financial crisis. 

"This is the worst real estate market we've seen since 2008 – the worst for sellers," says Shaun Osher, founder and broker at Core Real Estate. "We are fully in a buyer's market. Now is one of the most opportune times to buy that I've seen in 30 years in real estate." 

One reason sales dropped so dramatically was because many buyers rushed to the market during the second quarter in order to avoid a pair of tax increases that went into effect July 1. The so-called “mansion tax” has cost homebuyers paying at least $1 million an extra 1 percent on the purchase price, but now the rate grows incrementally and tops out at 3.9 percent for homes selling for $25 million or more. The transfer tax starts at 1.4 percent for homes costing less than $500,000 and peaks at a bit more than 2 percent for dwellings reaching the $25 million mark. 

Jonathan Miller of appraisal and consulting firm Miller Samuel and the author of the Douglas Elliman report says that the drop in prices could have been even greater if it weren't for low interest rates, which increased the number of homebuyers purchasing with a mortgage. 

Ironically, the higher the price of the apartment, the lower the reliance on financing. In the past, 80 percent of home sales of more than $5 million were bought with cash. But in this past quarter, a little less than half of the buyers making purchases of $5 million or more were paying all cash, suggesting that deep-pocketed investors and foreign buyers are making up less of the market now than they used to. Miller says the belief that there was “an endless supply of billionaires” has not panned out. “This,” he adds, “is the correction.”