Westchester Realtors Hit Back on Reports of Troubled Market
John Jordan | August 2018
WHITE PLAINS—Westchester residential brokerage executives and industry analysts responding to multiple trade press reports of a troubled Westchester housing market caused by the impacts of the cap on state and local taxes, hit back saying demand is still high and prices are rising.
Relying on the second quarter home sales market statistics released by the Hudson Gateway Multiple Listing Service last month, they stress that homeowners are not rushing to put their homes on the market, nor are they cutting their asking prices, as the trade newspaper and digital news outlet reports suggested. While the $10,000 SALT cap imposed by the federal tax reform law passed earlier this year may have a greater effect down the road, all agree that the new law’s present impact has been minimal and has not cut into the intense demand that exists for housing in Westchester, particularly for homes in the mid-price range that are in short supply. In fact, the chief culprit for declining home sales has been the dearth of quality for-sale inventory, they charge.
The multiple trade press outlets cited a non-MLS report that indicated home sales in Westchester fell 18% in the second quarter. HGMLS officials told Real Estate In-Depth the statistics cited in the trade and digital press reports were not based on the final second quarter report released by HGMLS.
The second quarter HGMLS statistics show that single-family home sales in Westchester County fell 4.8%, while the median sale price for a single-family home rose 6.1% to $710,800. While single-family inventory rose 4.8%, the report, published in the July edition of Real Estate In-Depth indicated that inventory was still low and that market dynamic was causing home prices to rise countywide.
E.J. McMahon, founder and research director for the Albany-based non-profit think tank Empire Center for Public Policy, in a July 17 blog entitled “A SALT Cap Surprise (So Far)” noted that in high-taxed areas such as Westchester, Nassau and Suffolk counties, home prices are rising and inventory continues to be low, which would be counter to some press reports that many homeowners are putting their properties on the market and in some cases slashing their asking prices in response to the federal tax law.
McMahon, in an interview with Real Estate In-Depth, said his opinions on the Westchester housing market are based on statistics and analysis released by the HGMLS.
In his blog, McMahon stated a recent press report that suggested Westchester’s lower sales in the second quarter was due to the new tax law “simply makes no sense.”
“The homeowners most likely to be looking at higher federal taxes under the TCJA are childless couples in the highest-taxed downstate suburban communities. Why would anyone in such a position delay listing their house in what’s clearly a seller’s market characterized by rising prices? If anything, you’d expect such homeowners to be rushing to the exits. But it just isn’t happening—not yet, anyway,” he stated.
McMahon said that based on HGMLS reports, the luxury home sales market was soft prior to the enactment of the federal tax law. In fact, homeowners in the high-end (multi-million-dollar homes) will likely benefit from all the provisions of the federal tax law.
If the federal tax law was having a significant impact on the Westchester housing market, the inventory of the move-up and mid-priced market, prized by millennials, would be plentiful. That is not the case, McMahon noted, according to HGMLS reports.
McMahon said there could be a host of factors why existing homeowners are not taking advantage of today’s heady residential sales environment. He believes that despite the SALT cap and other factors, many homeowners have decided to stay in their homes and at least at the moment do not see moving to a high-priced condo or rental as a viable option.
“You know mortgage rates are going to go up. You know that right now the values down there (Westchester) are as high as they are going to be in a decade probably,” McMahon said in a telephone interview. “But, they are not moving. So, the bottom line is that if the SALT cap was having a negative effect you would expect the market to have a lot of inventory. You would expect a lot of people to be selling and you would expect a buyer’s market, not a seller’s market.”
McMahon did not rule out the SALT cap having a greater impact down the road, for example, next spring during tax season. However, even if more homes are put on the market at that point, other market forces could also be at play, such as higher mortgage rates for example.
Joseph Rand, managing partner, Better Homes and Gardens Rand Realty, said that despite the trade press reports, the Westchester residential market is still a seller’s market and that although there has been a recent uptick in inventory, demand still far outpaces supply in most housing categories, with the exception of luxury housing.
Rand said, “The federal tax law is impacting the market on the margins. I think that the market would be even stronger without the tax cap.” He explained that the SALT cap is impacting some prospective homebuyers who are on the borderline of qualifying for mortgage financing and also some homeowners who may not use their residences 12 months out of the year and do not want to incur higher carrying costs on that residence.
“The fundamentals of the market are very strong,” Rand stressed. “There is still a lot of buyer demand. It is still a good economy. Prices are still going up. The other metrics are still indicating a seller’s market.”
He added that days on the market are going down, the seller retention rate is still going up, which indicates sellers still have negotiating power in the transaction.
“None of this is consistent with the Tax Reform Act having a significant impact on Westchester housing,” Rand said. “It is having a marginal impact, but the market is so strong it is shrugging it off.”
Rand said that current market data clearly indicates that at this point the federal tax reform law is not having a major impact on the market as yet. For example, if the federal tax cap was having a major impact, sales demand would be falling, and at present demand is still high; sale prices would be declining instead of going up; the listing retention rate would go down, but in fact it is still going up; the days on market would be going up, but at present they are still falling; and inventory would rise, but at present it is flattening and is down for the year as compared to 2017.
He added that if the SALT cap was so harmful to the market, the lower-priced cooperative market would see higher sales, but in fact saw a much larger sales decline in the second quarter than single-family homes, falling 10.6% as compared to a year earlier.
Leah Caro, president, principal broker of Park Sterling Realty of Bronxville, said the chief cause for lower sales in Westchester County is the lack of inventory rather than the SALT cap.
“In the mid-priced range, inventory is so tight and demand is so high that the number of transactions is down, but the median sale price is up,” Caro said. “The inventory numbers are the lowest we have seen in a decade or more for single-family homes, for co-ops, condos and multi-family homes.”
She noted, however, that in Bronxville and particularly for high-priced homes, inventory has been high, but that dates back prior to the passage of the SALT cap. Caro noted that recently there has been some contraction in inventory in Bronxville, due to both sales activity as well as some homeowners taking their homes off the market.
Caro said that if prospective sellers cannot secure the sale price they were seeking, they are taking their homes off the market rather than lower their sale expectations.
“If this was a true panicked situation, they would be reducing, reducing and reducing until it is sold,” she said. “That is not happening.”
While there has been some downward pressure on luxury sale prices in Bronxville, she attributes that to high inventory for luxury homes and slower demand.
“There does not seem to be any high-end seller panic mode at all,” Caro noted. “With that said, buyers are not flocking to high-taxed properties.”
She noted that the ultra-luxury market ($5 million and above) has been active.
Caro said that the SALT cap is an issue and has some buyers expressing frustration that New York and Westchester in particular are paying more than their fair share in taxes. Caro said she supports Gov. Andrew Cuomo’s efforts to overturn the federal tax law, as well as some of the measures he has enacted to work around the SALT cap.
She complained that New York State continues to lose residents who are relocating due to the high tax burden here. However, that trend is not new and she noted that she does not see an increase in resident flight to Southern locales or elsewhere due to the federal tax reform law.
Caro stressed that in the mid-priced range, demand for housing in Westchester outpaces supply. The decrease in home sales in the second quarter was due to the lack of inventory, not due to the federal tax law, she added.
She said the main impact of the federal tax law has been mainly with empty nesters deciding to put their homes on the market now, rather than in a few years.
Caro said that at present it is mostly speculation as to the true impact the SALT cap will have on home buyers and sellers in Westchester County now and in 2019.
“I think that come April when people truly know how their taxes were truly effected and are either cutting their checks or not getting their refunds, then there might be some fallout come April 16, we will have to wait and see.”