A continued drop in foreign buyers, changes in the federal tax laws that make it more expensive to live in high-tax states and a glut of high-priced condos have all converged to create the worst real estate market in Manhattan in a decade.
Some of the decline was due to the timing of a new tax on high-priced Manhattan real estate. The so-called mansion tax on apartments over $2 million took effect July 1, so many buyers rushed to close on deals before the tax, effectively stealing demand from the third quarter.
Yet the number of apartments coming onto the market suggests a continued oversupply and softening prices — especially at the high end. The supply of luxury listings — or those in the top 10% by price — hit the highest level since data started being recorded 15 years ago, Miller said, with nearly 2,000 apartments listed for over $3 million. There is now nearly a two-year supply of luxury apartments.
One bright spot: lower mortgage rates. Typically, Manhattan doesn't benefit much from lower rates since more than half of all purchases are done with cash. But in the third quarter, as mortgage rates fell, only 44% of deals were done with cash.
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