We at The LevinKong Team would like to extend our most sincere wishes for a joy-filled holiday season and we wish you all the best for a healthy, happy and prosperous 2018. We would also like to thank our past and present clients for trusting us with such important endeavors.
While our team doubled in size and our sales volume increased exponentially in 2017, some of our proudest moments were found in the opportunities we had to give back. Both as a team and a company, we were proud to be part of the relief efforts for Houston, Puerto Rico and Sonoma County. We also cherished the opportunity to help feed less fortunate families here in New York City and to provide assistance to individuals and families who have had difficulty finding adequate housing.
Through all the difficulties that our nation faced in 2017, our economy continued to grow, the stock market soared to record highs, unemployment declined, and the housing market across the country outperformed all expectations. Locally, the market as a whole was characterized by increased sales volume, higher median sales price, and lower levels of inventory. This was most prolific in Manhattan, Brooklyn and Queens.
Resale inventory did not meet demand across most of the city. This was most profoundly felt in the Brooklyn resale market, where inventory fell approximately 30% from the prior year. This led to hyper-competition and a blisteringly fast sales pace. The Queens market also saw a significant uptick in activity as days on market decreased by more than 25% and median sales price saw an increase of approximately 10%. In Manhattan, prime neighborhoods, unique properties and lower priced inventory moved while higher priced inventory and new developments often saw large price reductions in order to spur activity.
In 2017, the continuation of historically low mortgage interest rates helped keep buyers active. This was especially true for first time home buyers, who relied on attractive rates to make home ownership possible. However, earlier this month the Federal Reserve raised interest rates for the third time in 2017 and many economists are predicting three or four more bumps in 2018. The average for the benchmark 30-year fixed-rate mortgage recently rose to nearly 4.2%. Many experts believe the rate will surpass 4.5% but remain below 5% in 2018. Despite the rising interest rate environment, Zillow’s Chief Economist, Dr. Svenja Gudell, believes that potential buyers will not typically exit the market until the rate approaches 6%.
And finally, our 2017 wrap up would not be complete without looking forward to the 2018 market. The biggest piece of that puzzle is the new tax law and how this will influence the city’s residential real estate market. The mortgage interest deduction change from a maximum $1,000,000 ($100,000 deduction on interest from home equity loans) to $750,000 (no deductions on interest from equity loans), while not a welcome addition for homeowners, should only have a marginal impact. Fortunately, there is no change to residency requirements for capital gains deductions as was originally proposed. This will keep inventory and demand for home ownership at stronger levels than if the original proposal prevailed.
The thorn in our side in NYC will be the State and Local Tax (SALT) deduction cap of $10,000. This will obviously hurt many New Yorkers, first and foremost in their take home income. This cap of $10,000 is on state and city tax as well as property tax. Condo owners will no longer be able to write off their entire property tax, which will hurt the net benefit of home ownership. Because of this, we should see many would-be condo buyers purchase co-ops, which are corporations, or ultimately decide to rent.
This could create more interest in the co-op market, which would lead to price increases. New development condos with large tax abatements could see a benefit as well. The luxury condo market could be hit the hardest by the removal of the SALT deductions since those buyers will be hit disproportionately by the loss of these deductions. On the other hand, since investors retain all of their deductions and many would-be buyers will decide to rent, the new tax law will have a positive impact for investors and on the rental market. Now is the time to understand these nuances and how and where to best take advantage of opportunities and how best to shield yourselves from potential negative impacts.
We will continue to keep you up to date on recent happenings and trends in the market. We hope that you find this informative and useful and, please, as always, reach out with any questions on how you can take advantage of these current trends or how to protect your real estate assets. Also, feel free to reach out with any questions regarding a specific trend or segment of the market. The LevinKong Team is available to serve all your New York City real estate needs and those of your friends, family and colleagues. Happy and healthy new year!!