While Manhattan is still a prime market with plenty of demand, the cooling sales suggest that the sky-high prices of 2015 and 2016 still have further to fall to meet today’s more price-conscious buyers.
“The market is resetting to a lower, more long-term level of activity,” said Jonathan Miller, CEO of the appraisal firm Miller Samuel.
One of the biggest problems is the glut of new condos under construction, especially in the luxury segment. The inventory of luxury apartments for sale jumped 10 percent to its highest level for a second quarter in seven years. There is now a 16-month supply of luxury units, according to the report, and luxury apartments are sitting on the market an average of more than six months.
Uncertainty around the economy and new tax law is also crimping sales. The tax revamp limits federal deductions for state and local taxes and makes high-tax states like New York less attractive. While some forecasts say the change could slice 10 percent off the value of New York real estate, the ultimate impact is still unknown, Miller said.
“Everyone is just dancing around the impacts right now,” he said. “I don’t think it will really be clear to people until they write that (tax) check next April.”
Finally, foreign buyers are less of a force than they were in 2014 and 2015. With overseas economies slowing, and the U.S. and other countries cracking down on the use of real estate for money laundering or offshoring, the share of apartments being sold to foreign buyers has fallen by about 40 percent, Miller said.
All those factors will continue to weigh on prices and sales this year.
“I think the market is just moving sideways,” he said.