Over the past 6 months, the number of luxury home sales North of NYC experienced a decline of 33%. Westchester County (sales $2M and higher) suffered the steepest drop - down 38%. Greenwich (sales $3M and higher) and Darien/New Canaan(sales $2M and higher) were on average down 28%. There is no isolated incident that accounts for losses, but rather a confluence of events that negatively impact our markets and effectively shrinks the number of luxury buyers north of NYC.
The real estate market in NYC has softened resulting in fewer buyers leaving the city to head north because their apartments remain unsold. This important feeder market was robust just 18 months ago. Condos, coops and townhomes appreciated in value, sold quickly, and reliably drove buyers leaving the city to our area. Now listings are sitting on the market longer as inventory grows, selling for less than expected. As the market leader, Houlihan Lawrence tracks where buyers come from and our data indicates a 40% decline this year in the number of NYC buyers moving to the suburbs compared to same period last year.
As NYC finds its footing in a changing real estate market, this April marks the first tax season with new tax laws. Homeownership is now more costly without property tax deductibility, especially in NY which has among the highest property taxes in the country. Consequently, many would-be move-up buyers – another important segment for the luxury market - are now more likely to stay in their current home than trade-up to a bigger and more expensive property. Instead, they may add an extra bedroom or renovate their kitchen rather than assume higher property taxes, a larger mortgage and increased maintenance costs. Tax reform has also pushed some residents of NY and CT to strategically relocate to more tax-friendly states. Low-tax states such as Florida, Texas and North Carolina gained the most population in 2018.
Sharp declines in the market represent an opportunity for savvy buyers. Deals are coming together albeit at lower prices with sellers who meet the market. Luxury buyers have high standards - they want a turnkey property that represents value. Razor sharp pricing and impeccable presentation are the best tools a seller has to attract buyers actively in the market. Houlihan Lawrence participated in 71% of all luxury transactions in the first quarter and our pulse on the market is reliable. We are anticipating deals will come together at a faster pace in the second quarter than these past six months.
Continued confidence in the economy is evident in the rebounding stock market and stable interest rate environment. The spring market had a late start and the next eight weeks will be pivotal during this important selling season.