Manhattan's spring market offered sellers few bright spots

New York

SPRINGTIME in Manhattan was far from sunny for home sellers, as inventory increased, prices continued to decline and sales volume dropped to its lowest level in nine years, according to new market reports.

Real estate agents pointed to rising mortgage interest rates and uncertainty surrounding the federal tax overhaul that went into effect late last year. The result was a widening gap between buyers and sellers, who often hit an impasse on price.

There were 2,629 closed sales in the second quarter - a nearly 17 per cent drop from the same period last year, according to a new Douglas Elliman report. That is the lowest number of spring sales since 2009, when the market was stifled by the recession, said Jonathan Miller, the real estate appraiser who prepared the report.

Overall, the median Manhattan sales price in the quarter fell to US$1.1 million, down 7.5 per cent from the same quarter last year. Part of that decline reflected a shift away from pricier new-development sales. There were just 352 new apartment sales in the quarter, down almost 37 per cent from the same quarter last year, Mr Miller said, and the units that did sell were less expensive.

And that does not account for sluggishness in the resale market, in which sales fell 12 per cent compared to a year ago, Mr Miller said.

"This is an affordability issue," said Richard Grossman, president of Halstead Real Estate. Resale apartments spent an average of 103 days on the market, or 7 per cent longer than the same period last year, he said, and that was due, in part, to listing prices that did not reflect the higher mortgage interest costs for buyers.

A mortgage rate increase of 1 per cent could mean a 10 per cent higher monthly cost for buyers, he said, adding that while more than half of the sales in New York City are all-cash transactions, those buyers might also hesitate because rising rates limit their ability to refinance after closing.

The federal tax overhaul, which limits state, local and property tax deductions to US$10,000, was predicted to disproportionately affect homeowners in high-priced housing markets such as New York. Homeowners likely won't notice the changes until 2019 taxes are filed, but the policy is already putting downward pressure on home prices, as the after-tax cost of living is expected to rise, Mr Miller said.

"It's negative or less negative - there is no positive" scenario for New York homeowners who will be affected by the changes, he said.

"We're getting into more of a buyer's market," said Garrett Derderian, director of data and reporting for Stribling & Associates, whose firm found similar declines in sales prices and activity.

One of the few bright spots in the quarter was co-op sales on the Upper East Side, Mr Derderian said, where the median price for contracts signed was US$1.1 million, up 10 per cent from last year. But the median price for contracts signed on condos in the area, which are generally newer and more expensive, fell 9 per cent, to US$1.8 million.

The surfeit of inventory is dulling buyers' sense of urgency, Mr Miller said, noting that there were 6,985 units for sale in the quarter, an increase of almost 11 per cent over last year - the largest supply in the second quarter since 2011.

That oversupply has also meant fewer bidding wars this quarter. Only 9 per cent of apartments sold above asking price in the quarter, the lowest share since the end of 2012. But that does not mean that the market is in full retreat, just that it's in the midst of a price correction.

Even so, in a normal market, one could expect between 5 and 7 per cent of units to see bidding wars, well below the current rate, he noted: "This is not all gloom and doom - there's still tightness." NYTIMES