The signs of a housing slowdown are starting to reach across New York City and the metro area. For instance, a new Bloomberg article talks about a home in Long Island that recently sat idly on the market until its taxes and its price were both moved lower. As we have already written about earlier this year, buyers in places like Connecticut are looking to rent houses – sometimes even for $10,000 a month – before buying them. Real estate brokers in the metro area and places like Hoboken are noticing business slow down.
Greg Heym, chief economist of Terra Holdings, told Bloomberg:
“Brokers ask me, ‘When is it going to get better? ‘Better’ for this market, in this area, is lower prices.”
It doesn’t matter whether it’s high-rises in the city or homes in the suburbs: years of price appreciation, combined with caps on property tax deductions and rising rates are all guiding prices lower and slowing the market down.
And this is indicative of a broader slowdown that’s occurring across the country. While home prices in other parts of the country haven’t slowed down tremendously, the rate of appreciation is starting to slip, especially in the metro New York area. Prices in the 12 counties including and surrounding New York City grew at only 4% in the third quarter compared to an overall price increase of 4.8% across the United States.
The $10,000 limit on deductions for state and local taxes could be one of the reasons that New York is worse off than the rest of the country. 9 of the 10 US counties with the highest tax obligations are in New York, New Jersey or Connecticut.
Daren Blomquist, Attom’s senior vice president stated:
“Housing in general has quite a few headwinds right now, but the New York area is feeling the brunt of the headwinds. Counties with the slowest appreciation are the ones that tend to have the highest prices and the highest taxes.”
Westchester County is number one on the list of high tax areas. In that county, single-family home sales were down for the fifth quarter in a row. Purchases in the Long Island suburbs were down for two of the last three quarters, including in Nassau County. Bergen County, New Jersey, which has the fourth highest tax burden in the country, showed a 6% drop in third-quarter sales contracts. Buyers used to be OK with paying the higher taxes as a result of having better school districts, but now they are starting to second-guess the extra expense.
Matthew Lenner, a broker with Keller Williams in Long Island, told Bloomberg:
“One of the first questions buyers ask is, ‘Have the owners grieved their taxes?”’
It’s a question that refers to an appeals process with the county’s assessment office that will sometimes allow property taxes to be lowered.
Last month for example, a four bedroom home in Plainview that was listed since June 2017 saw its price cut nearly $100,000 to $899,999 and also had its taxes reworked to try to lower the $28,500 annual tax bill. As they were able to lower the taxes about 20%, interest in the property has increased.
In New Jersey, the new tax law didn’t seem to be a problem – at least until mortgage rates started to creep higher. At that point, it became obvious that “sellers were getting greedy” and that prices would have to adjust.
Jeffrey Otteau, who runs a property valuation firm, stated:
“Sellers have gotten greedy. It’s easier to say ‘blame tax reform’ than to say ‘we need to take an honest look at the price you expect to get for your house.’ Sellers don’t get it.”
Buyers who now believe themselves to have the upper hand are getting creative with deals, including asking for concessions that even ask some sellers to rent homes before they buy them. Three buyers in the New Canaan area set up lease arrangements with sellers, putting down 10% and paying the rest off in a rent-to-own style arrangement that would allow them to duck out of the purchase at any point.
Sharon Shahinian, a Halstead broker in Hoboken summed it up:
“All the agents are saying to each other, ‘Are you busy?’ Someone will say, ‘Oh my God, it’s so slow, and someone else will say, ‘I’m glad it’s not just me.”
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