2019 ended with a 16% decrease over 2018 in the number of contracts signed at $4 million and above in Manhattan. Year-to-date, 935 contracts have been signed, totaling $7.65 billion, the lowest dollar volume since 2012. A decline in deals has been a trend since January 2018, when a change in the Federal tax law capped state, local, and real estate tax deductions at a total of $10,000. In addition, buyers can now only deduct interest on new mortgages below $750,000. Fueling the down cycle: a bloat in overpriced inventory, and a 2019 state law that raised the mansion and transfer taxes. In addition, onerous rent laws that passed in June discouraged investors from purchasing properties as a rental investment.

To recap the year: This year's dismal 1st quarter saw a 19% decrease in the number of contracts signed over the same period in 2018, the likely result of the December 2018 stock market plunge, the worst since 1931 when the Great Depression kicked into high gear. The 2nd quarter saw a slight improvement—but still registered 13% fewer signed contracts over 2Q 2018, as buyers rushed to close before the July 1 deadline when mansion and transfer taxes would go into effect. This rush to close poached sales from the 3rd quarter, the worst of the year: Signed contracts plummeted 24% over the same period in 2018. The current 4th quarter has so far seen healthy activity in November and December, most likely due to price cutting, though the quarter is still tracking 7% fewer contracts signed over the same period in 2018.

One submarket that was desperately trying to hang on to its lofty prices was new development, as sponsors seemed locked into models that are no longer sustainable. And they paid the price (no pun intended): a whopping 35% decline in new development condo contracts signed in 2019 over 2018.

Other notable trends: The condo market recorded a 18% decline in the number of contracts signed. The average $/sq.ft. condo asking price fell to $2,802/sq.ft. from $2,932/sq.ft. in 2018. And there was a 11% decline in the number of contracts signed for all properties asking $10 million or more.

One bright spot was the townhouse market: 114 houses had contracts signed compared to 119 houses in 2018 and 100 in 2017. The average asking price of $1,801/sq.ft. was about the same as 2018 ($1,797/sq.ft.).

Drilling down through the numbers, a couple of things stand out: The length of time on the market stretched to 496 days, up from 447 days in 2018, and up from 433 days in 2017 and 318 days in 2016. This worrisome trend reflected an overpriced market in which a typical property dropped its asking price by 10% before it found a buyer. The luxury market showed clear signs of strong buyer resistance, prompting ongoing price corrections that ignited more activity in the final 2 months of the year. It's a fragile market by any measure, and it seems obvious that a sustained uptick in sales can not be realized until the market resets its prices.

Happy Holidays to all, and to all a healthy and peaceful 2020.

CLICK HERE To View the Olshan Luxury Report for the week of December 16-22, 2019.