2 Big Changes That Will Impact The NYC Real Estate Market
The good, the bad, and the impact.
Understanding two big changes to the NYC real estate landscape.
Last week, news broke on some impactful changes that are going to effect our real estate market – some good, some not so good. I want to first share the news with you and then share what sort of impact it could have on the market
We saw a historic dip in interest rates after The Fed indicated that no more rate hikes would be coming in 2019. This announcement came just 3 months after the central bank said we would see at least 2 hikes in 2019. According to Freddie Mac, the average rate on a 30 year fixed rate loan was 4.06% down from 4.28% from the prior week and the single biggest weekly drop in over 10 years.
In the early hours of this past Sunday, the government put into effect new rate changes to both the NYS transfer tax and the Mansion Tax (paid on any purchase over $1mm). The changes are as follows:
In many ways the good news is now immediately offset by the bad news. The low interest rates are of course helpful to any buyers but given the news about higher taxes on higher purchase prices, buyers in the sub $2mm market have an amazing opportunity to take advantage of both a softer market and historically low rates. Usually, one is offset by the other, meaning, with low interest rates comes higher prices.
Opportunity for First Home Buyers
For anyone considering a first home, it’s an unprecedented time to purchase one. There are good home available that are cheaper to purchase than rent and that is always a great sign for buyers.
Luxury Market to Slow, But Eventually Stabilize
Given the big increase in mansion tax in luxury price points, I think we see an immediate impact in the market with increased negotiability and slower sales. Eventually the market will stabilize as it always does when the shock factor wears off and people adapt to the higher closing costs.
Sellers Should Be Mindful of Buyers' Expectations
But there is going to be buyers in the market whose upfront cash outlay is a big component of the purchase for them who will either not purchase, reduce their price point, or try to negotiate more favorable deals. Sellers need to be mindful of this in the near future and adjust to buyers’ expectations.
Transfer Tax Won't Move The Needle For Sellers
While there is a change in the transfer tax, I do not see an increase of 0.25% making a huge impact on sellers’ decision-making. While meaningful over time to the city’s coffers, it is not a needle mover, in my opinion.
Some will benefit more than others here but ultimately these are two important changes that will have a big ripple in the 2019 market. Wondering how these changes may impact you? Reach out to us and we’ll happily discuss with you.