Residential Realities February 2, 2019
It's Chilly Out There...
A couple of days ago, I happened across a Crain’s Business piece that, citing a Douglas Elliman report, noted that co-op and condo sales had their fourth down year in the past five. In fact, 2018 was the worst year over year decline since the financial melt down. Tumble weeds aren’t exactly blowing down Third Avenue, but the hyper sales market of a year or so ago, is definitely on hiatus. There are a number of factors.
The reality of the changes brought on by the tax bill are finally kicking in. Right after the bill was passed last year, limiting deductibility of property taxes and mortgage interest, a broker friend was insisting that the changes would have very little impact on the market. “New York is just too resilient and buyers are too emotional to be impacted by a few less tax deductions.” Wow, that was wrong. Actually, there are a number of factors impacting the market, but the tax changes are huge. While we’re at it, throw into the stew, excessive inventory, chaos in Washington, marginally higher interest rates and other intangibles. Once you mix all that up, you find a whole lot of buyers sitting on the sidelines waiting for things to shake out.
Nobody who does this for a living likes it when things slow down, but it was definitely time for a pause. At the peak of the market frenzy, I had a few deals come across my desk that were downright scary. It was mindboggling that folks who were otherwise intelligent in the other parts of their life, would consider buying real estate with the worst metrics imaginable. Horrible financials, terrible management, costly infrastructure repairs ahead, illegal alterations, questionable construction. No matter how bad the facts, buyers found a way to justify their purchase. My stock line was “you know there’s a lot of real estate out there to choose from”. Invariably, I got the same response, “but we’ve been looking for so long…” Oh well, I tried.
So walk away from marginal real estate. You will be glad you did so, when you need to sell down the road and the tumble weeds start rolling.
