New York City Mayor’s “De Blasio Effect” is Driving High End Sales in Greenwich

I.       $250,000,000 of High-End Houses Go to Contract in Greenwich After de Blasio Takes Lead – More Than Whole Prior Year

 Mayor-Elect Bill de Blasio’s rhetoric on income redistribution and increasing taxes on New York City families with incomes over $500,000 has helped high-end sales in Greenwich, CT and, the higher the price range, the more he has helped increase sales. Sales of houses over $5 million were down about one third in the second half of 2013. In the over $10 million category, we only had one sale over $10 million prior to the beginning of August when candidate de Blasio hit the magic 40% level to guarantee at least a runoff.

Starting in August, contracts on high end houses in Greenwich have done much better, corresponding to Bill de Blasio’s increase in standing in the polls (see charts at bottom) and his election. In Greenwich, sales normally peak in June for all price ranges, but contracts for houses over $5 million took off in August.

 Over5MMvsAvg.111613

  • The blue line in the chart shows average sales contracts by month for 2010 – 2012. Contract dates are a better indicator of market sentiment than closing dates, since the lag between contract and closing, particularly at the high end, can vary greatly. The red line shows non-contingent contracts for 2013 through the end of October. Not included in the 2013 numbers are three contingent contracts, two non-continent November contracts and a private sale – all over $5 million.

The jump in August was followed by an equally sudden drop in September, but only back to the average sales of the three previous years, as the pending U.S. government shutdown created buyer indecision. The September drop in contracts was followed by a huge jump up in October in executed contracts. The sales activity has continued in November with five contracts so far this month. In addition, we had a private sale for $25 million.

The total value of 30 sales in the first seven months of 2013 was $202,450,000 while the 15 sales and non-contingent contracts just in the next three months had a list price total of $174,700,000 showing the skew towards the higher end of market as a result of the de Blasio effect on sales.

 Over10MMvsAvg.111913

  • The de Blasio’s effect on sales is greater at the ultra-high end market. As the blue line indicates, on average over the last three years, only one or two houses over $10 million went to contract in any given month, but this number has been much greater in August and October.

In August 2013, we had 5 contracts on houses over $10 million (as many contracts in one month as we had for the whole prior year and the most for any one month in the three previous years). This record month was followed by the same drop in September, as the government shutdown loomed. Then, in October, we had four houses over $10 million go to contract. This occurred in one month, when the average for the 3 prior years was only 0.3 houses. In November, we already have one private sale for $25 million.

II.    Is the de Blasio effect Driving Increased Sales in Greenwich?

The question is: “Is Bill de Blasio’s standing in the polls and subsequent election the real driving force behind all of this high end activity?”

  1. Talk of the De Blasio Effect in the Financial Community

Many people in the financial community are talking about what a New York City run by Mayor de Blasio will look like, particularly after 12 years of New York City being run by billionaire Mayor Michael Bloomberg. Many of them are very concerned that Mayor-elect de Blasio’s talk of redistributing income means it is their income that is going to be redistributed (this in a state where the combined New State and New York City income tax rates are already very high).

Some people have argued that Bill de Blasio’s proposed 2% tax increase is small, but high net worth individuals, particularly those in the financial community, are extraordinarily sensitive to expected changes in tax rates. As can be seen by the unprecedented number of sales in December 2012, the increase in the Obamacare tax and an expected capital gains tax increase resulted in record sales (see chart).

  1. De Blasio Polling Results Correspond with Increased High End Greenwich Sales

Bill de Blasio’s polling numbers were in the teens for much of the year until July when de Blasio’s polling numbers took a big jump upward. By August, he was at the 40% level which assured no run-off and that he would be elected, given the overwhelming number of Democratic voters in New York City compared to Republicans.

Then, in September, we had the government shutdown and sales slowed at all levels. The shutdown was the talk of press for the whole month. The actual federal government shutdown ran from October 1st to October 16th but the deal making impact was mostly in September as the uncertainty impacted the market more than the actual reality of the shutdown.

Sales.SFH.2012-Oct2013Fnl.mp.112113

  • Sales of all Greenwich homes did better in 2013 than in 2012, starting in April. The first quarter sales in 2013 were greatly impacted by the shift of sales into December 2012 to avoid the Obamacare tax and the expected increase in the capital gains tax on higher income families. After the first quarter, sales did much better until the federal government shutdown in October.

C. The de Blasio Sandinista article

The New York Times on September 23, 2013, had a front page article about Mr. de Blasio’s admiration for the socialist Sandinista government in Nicaragua during the Contra rebellion and his honeymoon in Cuba. This story got a lot of buzz (a Google search for “de Blasio Sandinista” returned 81,000 links). This revelation of just how liberal Mayor de Blasio might be appears to have encouraged people who had been contemplating a move to Greenwich to finally go to contract, even in the midst of a federal government shutdown.

D. Taxes, Union Problems and Other Issues

Candidate de Blasio has strongly advocated universal pre-school to be paid by a tax on those with incomes over $500,000. Mayor de Blasio’s emphasis on reducing inequality may also mean that he will address the wide disparities in property tax amounts compared to market values.

Many New Yorkers in the financial community are also concerned about the union contracts that de Blasio will negotiate with hundreds of thousands of municipal employees who have been working without contracts under the Bloomberg administration. The general belief is that Mayor de Blasio will be much more generous with the unions, resulting in even higher taxes on top income brackets.

 

III. What Can Be Expected in the Coming Months

In this price range, tax considerations drive not only where people buy houses, but also when they buy. Year end deals are common, so we should see a number of contracts mature into sales and several quick sales as people try to close before year end.

We also will probably see more interest in the backcountry, as New York City residents look for weekend retreats, a market that had just started to come back. Weekend houses can also help when a New York City property owner is trying to stay below the 183 days of New York City residency that will make them subject to New York City taxes. Greenwich is a lot closer than the Hamptons and also adds to your non-New York State residency days, unlike the Hamptons.

We should also see months of supply come down quickly as these contracts become sales. In the over $10 million category, we only have 47 listings, so a dozen sales will have a big impact on market perception and sellers’ willingness to concede on price. As always, the early movers will have the advantage of greater inventory choice and lower prices.

One thought on “New York City Mayor’s “De Blasio Effect” is Driving High End Sales in Greenwich

  1. Pingback: All 14 Greenwich Open Houses – November Greenwich Market Report | greenwichstreets.com

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