After many years of expansion and growth nationwide, most co-op and condominium markets saw both turbulence and some overall decline in 2018. The market has turned from one favoring sellers to one more hospitable to buyers. Markets like stability – and 2018 was a year marked by uncertainty. This uncertainty can be pegged to several trends, the most prominent of which were fluctuations in interest rates; changes in tax laws thanks to the 2017 tax bill depressing the tax benefits of home ownership; overbuilding (and potential overbuilding); and – despite the generally good employment figures – an undercurrent of declining confidence in the overall economic picture.
According to Eugene Cordano, Executive Director of Sales for Halstead in New Jersey: “2018 was a correction. It was not a crash, but it was a correction. We had an expansion cycle after 2008, and everything pointed to real estate as a flight to quality. It was so beaten down by the economic downturn that with low prices and low interest rates, prices were bid up over 10 years. The old losses were wiped out for almost all categories. Then you had the  election. After that, the stock market took off, and many investors put their money there, which siphoned off potential buyers.” The change in the tax situation with the reduction of the SALT [state and local taxes] deductions on federal income taxes has also had a chilling effect on sales. “SALT played a contributing role” in the slowing of the market, says Cordano, explaining that ‘discretionary buyers’ who don’t necessarily need to buy – or for that matter sell – are not the major factor they were in the market previously. Buyers in particular are now more deliberate and purposeful, and the market is most definitely a buyer’s market. “The dynamics of why people buy has changed.
“2019,” Cordano continues, “has started off strong. Sellers have become more realistic about their pricing. Yes, prices are a little lower than before, and that will spur the market. Buyers are looking for ‘a deal,’ at all price points.” He says he believes the market will pick up at the end of tax season. Unlike 2018, this year will give a more accurate picture of the current reality of the tax situation offered by ownership. In the end, he observes that the lower, under $500,000 end of the market is still quite competitive, and can be expected to continue as such. He believes the rest of the market will follow suit in the coming months.
According to Corcoran’s 2018 fourth quarter report: “Market-wide closed sales declined as potential buyers grappled with a confluence of factors that created uncertainty in the market. Buyers’ concerns included rising mortgage interest rates, tax-law reform, volatility in the financial markets, foreign capital restrictions, and political distractions. As a consequence, many prospective buyers are choosing to wait on the sidelines until prices adjust to a more accessible level and other market factors calm.”
Joanna Mayfield Marks, a broker with the New York-based firm Halstead, describes the market this way: “In 2018, there were a couple ends of the market that were less impacted. We saw a number of buyers competing in the $700,000-to-$1.5 million segment. There was competition, and even some bidding wars. In the lower and luxury segments, though, we saw fewer buyers, and no bidding wars. What I’m seeing right now is that competition is beginning to return. I’m seeing positive reports about the economy, consumer confidence is better, and interest rates were down at the beginning of the year. So even at the lower end of the market, things appear to be picking up. The truth is that interest rates – even small increments like a quarter point – affect the market. Two-bedroom units seem to be the most competitive right now. There are even multiple bidding situations. Essentially, things look positive.”