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On Monday, New Yorker City increased its mansion tax – a progressive tax that applies to home sales of more than $1 million – to a maximum of 3.9 percent, up from a flat-rate of 1 percent. The tax rates vary from 1.25 percent for $2 million sales, to 3.9 percent for sales of $25 million and higher.
In addition to the increase in the mansion tax, the city will increased a one-time charge on properties worth more than $2 million – known as the transfer tax. That fee, typically paid by a seller, varies from 0.4 percent for transactions under $3 million, to 0.65 percent for anything above $3 million.
Surprisingly, apartment sales still weakened in the second quarter, despite an expected rush from buyers to close on deals before those new rates took effect.
According to a new report from real estate giant Brown Harris Stevens, the average resale apartment price fell 5 percent from one year ago, to $1.64 million. Sellers of these apartments offered their biggest discounts in 9 years – since around the time of the market crash.
New development prices fell 9 percent in the second quarter, which reflected a dip in closings at the highest end of the market, research showed.
As previously reported by FOX Business, home prices in Manhattan have been falling at the fastest rate since the financial crisis. In 2019, prices are down about 5 percent year over year. Sales in the first quarter were down 2.7 percent year over year, according to research from Douglas Elliman.
Pricey homes in the luxurious Hamptons areas are also starting to lose value.
Falling real estate prices come as concerns mount over the new tax law’s impact on high-tax states – particularly a $10,000 cap on state and local tax (SALT) deductions. Some people have begun fleeing states like New York and New Jersey, headed for lower-tax areas like Florida and Texas.
A recent note from experts at Deutsche Bank Research questioned whether a slowdown in the housing market was due to changes to SALT deductions.
Coincidentally, single-family home sales plummeted in the West, and dropped significantly in the Northeast during the month of May.
Research from St. Louis Federal Reserve economist William R. Emmons warned that weakness in housing markets across the country could point to a possible recession later this year, or in early 2020.
Meanwhile, on Monday, President Trump took aim at New York and Gov. Andrew Cuomo for the state’s “ridiculously high taxes” and for creating a hostile business environment. He said it was no surprise people were fleeing the state "in record numbers."