Giovanni Gonzalez | April 2019

Ever since December 2017 when the Tax Cuts and Jobs Act of 2017 (TCJA) was signed into law, I have been thinking that April 2019 would be a breaking point.

I would venture to say that for most of the Country, Tax Day 2019 brought a mixed bag. Some got a bigger tax refund; some got a smaller tax refund. For a large number of Westchester County residents, the new so-called SALT (State and Local Tax) deduction of $10,000 actually became a net tax increase.

By the end of the first quarter of the year our real estate market has reacted in different ways according to my observation:

1. For properties listed under the $800,000 number, the market is still a seller’s market. There are plenty of residual buyers out there trying to capitalize on the low interest rate and the inventory is still low. We are still seeing multiple-offer situations in some cases.

2. For properties listed between $800,000 to $2,000,000 the market is flat. There are buyers for these properties, but they don’t have a sense of urgency. They are being more careful, especially those buyers above the $1,000,000 (these properties are subject to a mansion tax). Of course, these properties are selling but their marketability is now more a function of their real value.

3. Properties Listed above $2,000,000 are struggling, some sources indicate sales falling 30% to 40%. There are several reasons for this decline but in my mind the impact of the Tax Cuts and Jobs Act of 2017 is the main reason.

It is important to note that the real estate market in NYC has been faltering for the last 18 months. Westchester is suffering the consequences of the softening of the NYC market because we feed from those buyers. Those NYC residents that had hopes to move to suburbia looking for more space to raise their families are not going to be able to do so until their properties go into contract. Meanwhile their properties sit on the market and their values go down as NYC also assimilates the changes of the new tax law. Some of them now will have to worry about another law. You guessed it, the NYS Transfer and Mansion Tax.

At some point the effect of the SALT cap will be assimilated into the pricing, in the mean time we can only wait and hope for the best.