It's Now a Buyers' Market in Manhattan Real Estate

Both the volume of sales and the price of co-ops and condos in Manhattan fell sharply in the third quarter, thanks in large part to higher transfer-tax rates for luxury apartments that went into effect in July, according to several new market reports.

But the decline was not limited to high-end sales, reaffirming that the balance of power has shifted to buyers.

There were 2,562 sales in the third quarter, down 14.2% compared with the same period last year, and the median sales price fell 8.2% to $1,025,000, according to a Douglas Elliman report.

Compass, another real estate brokerage, said that properties in the third quarter spent an average of 152 days on the market, the longest period since 2012.

While much of the slowdown has occurred at the top of the market, especially in new development, the pullback has been widespread. Resale apartments sold for an average of $1,359,654, the lowest in nearly five years, according to the brokerage Halstead.

“The report is finally showing what the market is,” said Diane Ramirez, the company’s chief executive. “I think we’re at the bottom, or at least very close to it.”

One of the biggest reasons for poor sales in the third quarter was that many buyers rushed to close in the spring, before changes to the so-called “mansion tax” took effect, said Jonathan Miller, the president of Miller Samuel Real Estate Appraisers & Consultants, and author of the Elliman report.

In July, a flat 1% tax on sales above $1 million was changed to a staggered rate starting at 1.25% for $2 million sales, and up to 3.9% above $25 million.

Compared to the same period last year, sales were down in every price tier except for apartments below $500,000, which rose 4.8% to 352, according to the Elliman report. There were 757 sales between $1 million and $2 million, a decline of 4.7% over the same period last year, while the percent of sales at all higher prices was down by double digits.

The revised mansion tax was the latest in a string of obstacles for the flagging luxury market. Last year, limits were placed on local, state and property tax deductions that disproportionately affect high-cost markets like New York. And a steady stream of international investment from countries like China has declined in recent years, in part because of closer scrutiny of anonymous shell-company buyers, but also the strengthening dollar.

The cooling investor market, both domestic and international, was apparent in other ways: 42.8% of sales were all-cash deals in the third quarter, down from an average of about 50% and the lowest share since 2014.

“This is one of those moments where we’re starting to see the market pivot,” said Miller, adding that the decline in sales could have been worse, if not for very low mortgage rates attracting both those who need financing, and more affluent buyers taking advantage of cheap lending.

There is, of course, no shortage of people seeking to buy in Manhattan, and deals continue to close, when sellers are realistic — though some are more willing than others to lower their prices.

“This market is a bloodbath for some,” said Frances Katzen, an agent with Douglas Elliman, who said that buyers who bought at peak prices a few years ago are unwilling to lower their prices further, because they would lose money on the deal. But with a glut of new inventory clogging the market, she said more clients are coming around.

“It’s a horrible market to be a seller,” she said. “It’s absolutely fantastic to be a buyer.”

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