A recent second quarter report from Douglas Elliman for Manhattan real estate sounds ominous: sale prices were down 17.7% year over year. However, upon a closer look, New York city real estate isn’t a market with plunging prices or inherent weakness like the recession in 2008.
When the state shut down in March, many real estate brokerages stopped all sales activity, so the price numbers are only a snapshot of a very small segment of home sales. Additionally, two other unusual factors contributed to an ostensibly huge drop in sale prices.
A one time “mansion tax” on homes sold over $1 million in New York for the second quarter of 2019 inflated that quarter’s average sale price, when homebuyers rushed to purchase higher end homes before the tax went into effect. Also, more luxury homes were taken off the market during the second quarter of 2020 as wealthier owners rode out the pandemic, which unnaturally depressed the average Q2 2020 sale price.
Taken together, these events caused an unusually large drop in Q2 sale prices from last year to this year. As New York city continues to weather the pandemic well, real estate sales are expected to show stronger price growth than the Q2 data would seem to indicate. Record low mortgage rates are expected to provide continuing tailwinds for price growth and real estate sales in New York and beyond.