Second quarter reports and experts argue that the real estate market has paused amidst the uncertain impact of rising interest rates and the new federal tax law.
BOND New York and Douglas Elliman released their second quarter reports recently, both of which show overall decreases compared to last year’s second quarter, but also slight improvements from 2018’s first quarter.
According to BOND’s report, they’ve seen the largest gain in active listings for sale since 2010 leading to a saturated market.
For Noah Freedman, partner at BOND, the increase in inventory means that buyers and sellers have to adjust their behavior.
“The dramatic increase in inventory means buyers are feeling less urgency and are assessing their options,” Freedman wrote. “Sellers need to be patient, and their homes need to be competitively priced.”
Adding to Freedman’s points, the BOND report shows that their “spring selling season” is underperforming compared to last year’s same timeframe. 2018’s Q2 saw 2,648 properties sold, representing an 11 percent decrease from last year’s Q2 with 2,997 properties sold, according to the report. But the report added that this year’s second quarter did outperform its first quarter’s 2,200 properties sold.
Similar trends are apparent with price points and number of days on the market.
The BOND report showed that 2018’s second quarter median sales price of $1.1 million was a seven percent decrease from last year’s second quarter of nearly $1.2 million. Price per square foot also showed a decline with this year’s second quarter at $1,533 compared to last year’s second quarter of $1,585. The report added that properties spent a median of 64 days on the market for 2018’s second quarter, which is 16 percent greater than 2017’s Q2 55 days on the market.
And according to the Douglas Elliman report, the year-over-year sales showed its third consecutive quarterly decline. The report added that it’s the most second quarter inventory they’ve seen in seven years and the lowest amount of second-quarter sales in nine years.
While the reports show a failure to match last year’s quarters, the numbers point to a healthier second quarter with some momentum coming off a sluggish first quarter this year.
According to experts, the relatively stable numbers points to a “pause” in the real estate market due to outstanding factors.
“Overall, the key market issue continues to be consumer uncertainty as they process rising rates, the new federal tax law, and some confusion about whether the economy will sustain its current strength,” Jonathan Miller, the president and CEO of Miller Samuel and author of the Elliman report, said. “Everything has paused.”
In March, the Federal Open Market Committee increased interest rates a quarter point from 1.5 percent to 1.75 percent. People are also still waiting to see how the new federal tax law that was passed in December will impact the market.
“The impact of the tax bill provisions is still uncertain and we will see in the coming months if that uncertainty will cause any disruptions to the New York real estate market,” BOND’s partner Noah Freedman wrote in the report.
Although, others consider the downward trends as a sign of Manhattan’s overall market strength.
“Even though we are seeing some weakness, there is a tremendous resilience in the Manhattan residential market,” said Steven James, Chief Executive Officer, New York City, Douglas Elliman. “Never count Manhattan out. Astute buyers will find opportunity in this market.”