Manhattan’s home sales in the first three months of the year dropped to Great Recession levels, with uncertainty around the new tax law driving most of the slowdown, the city’s real estate brokerages said in reports Tuesday.
The borough recorded 2,180 sales in the first quarter, a 24.6% decline over the same period last year, according to Douglas Elliman’s quarterly report. It was the lowest number of home sales since 2012 and the steepest year-over-year decline since 2009, according to Jonathan Miller, president of appraisal firm Miller Samuel.
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"All segments saw large sales declines," said Mr. Miller, author of the Douglas Elliman report. "This was a market-wide phenomenon, not just a luxury phenomenon."
Manhattan’s luxury apartment market—or the top 10% of condo and co-op sales—echoed the general sales slump. In the first quarter, the number of luxury home closings dropped 24% over this time last year to 220, according to the Douglas Elliman report.
In December, the federal government overhauled the U.S. tax law, including limiting the amount homeowners can deduct in mortgage interest. That has effectively lowered the value on homes in expensive coastal regions like New York City—but by how much, the market has yet to decide, Mr. Miller said.
"The consumers will do this dance that I call ‘price discovery’," Mr. Miller said. Buyers will try to leverage the reduced tax deductions to negotiate a lower price, while sellers will resist making concessions. He estimated it would take into next year before prices settled.
As a result of slowed activity, luxury inventory jumped 15%.
Luxury listings underscored an ongoing disconnect in pricing at the high end, Corcoran noted in its report Tuesday. The top 10% of sales in the first quarter started at a price point of $3.95 million, while the top 10% of listings started at $6.995 million—a difference of 77%, according to the brokerage.
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Meanwhile, a dearth of new development offerings exacerbated the slowdown in the luxury market, according to the city’s brokerages.
The boom in luxury condo projects, ranging from One57 towering over Central Park to 30 Park Place in Tribeca, created a swell of very expensive closings over the past two years that has finally calmed.
The median luxury apartment in Manhattan cost $5.925 million in the first quarter, a 15% decline from a year ago, according to Douglas Elliman data. Price per square foot also plunged as pricey new developments took a back seat to high-end re-sales. The average luxury apartment cost $2,653 per square foot, a 20.6% decline from a year ago.
Downtown, including the Financial District and Battery Park City, is a prime example of the effects of the new development slowdown, according to Garrett Derderian, director of data and reporting at Stribling.
"In past quarters, one or two buildings with a substantial number of closings pushed the median, average and (price per square foot) prices higher than they otherwise would have been," he said. "Now, absent the wave of high-profile development closings, we are seeing a more realistic picture of market prices."
Mr. Derderian also attributed the market-wide slowdown to a mixture of local and international economic influences.
"Locally, we had the implementation of the new tax policy, a 3,000-point swing in the stock market, and mortgage rates rising," he said. "Globally, we saw new tariffs, concerns over trade wars, and political uncertainties in the E.U. and Asia. These external forces affect real estate buying patterns."
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A smattering of new development on the Upper West Side caused the neighborhood to buck the general slowdown, according to a report Tuesday from Halstead Property Development Marketing.
The Upper West Side, home to the American Museum of Natural History and stars ranging from Amy Schumer to Yoko Ono, saw a 16.2% increase in the price per square foot for new developments, rising to $2,270, according to Halstead’s report. It was "the largest rise in average price per square foot for sold units in Manhattan due to a few high-quality projects coming to market," said Stephen Kliegerman, president of Halstead Property Development Marketing, in the news release.
Those new projects include 250 West 81st St., Waterline Square, and 101 West 78th St., according to the brokerage.