Bloomberg reports Manhattan’s Flood of New Condos Could Take Six Years to Sell.
Manhattan is glutted with even more luxury condos than most apartment-shoppers realize. The borough has 7,050 unsold, newly built units, according to a report by Halstead Development Marketing. The bulk of those — almost 6,000 — haven’t been formally listed for sale, creating an under-the-radar “shadow inventory.”
The secret supply is a heavy weight on a market in which sales, especially of higher-end properties, have slowed to a crawl. It would take take 74 months — more than 6 years — to clear all of Manhattan’s unsold units at the pace of contracts in 2019, the report shows.
Despite the allegedly booming economy, there is little interest in moving to Manhattan. Rather, people have had enough of taxes.
This is not at all surprising. New York, California, Illinois, and New Jersey are in the same boat. Those are the top four states with domestic out migration.
Tax the Rich, the Rich Leave
The Washington Times reports Wealthy Americans Flee High-Tax States, Take Billions with Them.
“Tax the rich. Tax the rich. Tax the rich. The rich leave,” New York Gov. Andrew M. Cuomo, a Democrat, lamented in February as he announced an anticipated revenue plunge in the Empire State. “And now what do you do?”
The $10,000 limit has left governors in high-tax states steaming and has sent Democratic politicians scrambling to try to offer breaks to the same wealthy Americans they usually demand pay their fair share.
“It is having a big impact,” said Chris Edwards, tax policy director at the Cato Institute. “There was migration before, but there has always been disputes about the causes with the data. Now I suspect a lot of people are just getting fed up.”
Exodus Just Beginning
Please consider New York, California High-Tax State Exodus Just Beginning
The cap on state and local tax (SALT) deductions has already begun to drive some residents away from high-tax states like New York and New Jersey, but experts say that trend is only going to intensify.
“It took a few months for taxpayers to realize the dollar implications – until they actually filed their tax returns this year,” Alan Goldenberg, a principal at Friedman LLP, told FOX Business. “It quantified the impact of the loss of the SALT deduction when people saw it in front of their eyes on their tax return.”
The Tax Cuts and Jobs Act introduced a number of reforms, including the notorious $10,000 cap on state and local tax deductions, which has caused Americans to look into establishing legal primary residences in states where they can limit their liabilities.
Great Hit Tax Exodus
Please note More People Are Leaving NYC Daily Than Any Other U.S. City.
New York leads all U.S. metro areas as the largest net loser with 277 people moving every day — more than double the exodus of 132 just one year ago. Los Angeles and Chicago were next with triple digit daily losses of 201 and 161 residents, respectively.
In 10 of the top 100 metros, deaths exceed births. Thus, without migration these cities would be shrinking. Half of the 10 are located in Florida. In 11 more cities, mostly in Utah and Texas, there are more than twice as many births as deaths. Provo, which ranks first in births and last in deaths, had a 5-1 ratio.
Illinoisans Leave State in Record Numbers, and So Are We
I commented on the great exodus four days ago in Illinoisans Leave State in Record Numbers, and So Are We
Here is one of the key charts.
You Say Goodbye, I say Hello
- Goodbye NY, CA, IL, MA
- Hello FL, TX, AZ, NC, SC
Hello, hello, I know just why you say goodbye and say Hello.
Escape Illinois: Get The Hell Out Now, We Are
On October 5, I announced Escape Illinois: Get The Hell Out Now, We Are
We are moving to Southern Utah this year. Going house hunting in February (will rent for a year) and we will sell this one rather than trying to rent it.
Property taxes are too much of a killer to keep it (as in ~$15,000 a year on a ~$400K home).
Yikes. Had enough.
Falling Home Prices Won’t Stem the Tide
Meanwhile, property prices in Illinois and New York are falling. California will soon follow. Falling prices will not stem the tide. People have had enough.
Illinois Solution
In case you were wondering, Illinois has a solution: Raise taxes.
Let’s see what California and New York come up with, but I have a suspicion it will be the same.
Mike “Mish” Shedlock
According to this it is young people that are leaving New York and California. The AGI is won’t get you far even in places like Texas these days.
Also notable in California’s case is that it experienced net inflows from about half the states, including New York and Illinois. It’s losing residents in huge numbers to nearby states, but still attracting people from the Northeast and Midwest.
The adjusted gross income of Illinois taxpayers who didn’t migrate averaged $78,959. Illinois has been losing high-income residents (a lot of them retirees, one imagines) to Florida, middle-income residents to the South and West, and those with lower incomes to neighboring states. Also, the top two destinations for Illinois migrants are the top two for the nation as a whole, with Florida first, Texas second.
Domestic migration statistics are frequently cited as evidence of the failures of blue-state governance, in particular the higher taxes imposed by states that are losing lots of residents. There’s something to that — income-tax-free Florida sure is attracting a lot of affluent people from Illinois and New York, and a recent study of high-income California taxpayers concluded that a 2012 income tax increase there did in fact drive some away. But California, Illinois and New York have all experienced bigger per capita personal income gains than the nation as a whole since the beginning of 2010, and all saw taxpayers with incomes below $50,000 overrepresented among the leavers from 2011 through 2018. These departures may indicate failures of governance as well, but it’s a different set of governance failures, presumably related more to housing costs, commutes and job opportunities than taxes per se.
There also isn’t much evidence in the IRS data — yet — of an exodus of high-income taxpayers hit by the state-and-local-tax-deduction limits imposed by the 2017 tax bill. That is, the number of taxpayers with adjusted gross incomes of $200,000 or more leaving for other states actually fell in high-tax California, Connecticut, Illinois, New Jersey and New York from 2017 to 2018, the year the cap went into effect. Those who ended up with higher tax bills due to the change generally didn’t find out exactly how much higher until 2019, though, so it may just be too early to tell.
One last thing I checked was which counties in New York have been sending the most migrants to other states. My fellow Bloomberg Opinion columnist Conor Sen argued this week that in congressional-redistricting terms the most important population shifts of recent years have been from rural areas to large metropolitan areas, not from state to state. Indeed, thanks to babies and immigrants, New York City and most of its suburbs have gained population over the past decade as the rest of the state has shrunk. That may be changing, though, as the city in particular has been seeing accelerating migration to other states. Of those who left New York state from 2011 to 2012, 49.1% were from the city. From 2017 to 2018, 68.4% were. A lot of those people are just moving to New Jersey. But it’s not a great sign.
Problem is that people were leaving long before SALT was implemented. The state of NY has lost almost 1.4 million people over the past 10 years. People are sick and tired of taxes, especially retirees. Just ask my in-laws selling their property in upstate NY for greener pastures in Georgia. NY, California, they are loosing congressional seats and electoral college votes. https://gothamist.com/news/census-report-new-york-losing-new-yorkers
The truth is the states like New York and California had rampant growth for decades while the south and midwest suffered. I have lived in all parts of the country and notice a smoothing trend across the country. I recently visited my home state of Texas where I grew up and it feels more like Los Angeles. Texas and other southern states will have to get use to more traffic, pollution and everything else that comes with more people – both good and bad. Quality of life is difficult to find in most places now.
There’s no doubt high taxes matter (even for me and my $15k prop tax bill). But what I also think matters is the hollowing out of the middle class. These people could have moved south a long time ago, but they stayed cause their families were in Illinois, etc., and good jobs meant you could tolerate the cold for an average wage. Now, people are so mad at their situation, their loss of personal dignity that comes from a middle class job that they lost, that they are saying “What the heck … theres nothing to stay for here anymore.”
I came to California from flyover for the money… and if you don’t plonk down 1.5 million for a McMansion, it turns out that you can bank a LOT of cash. Will return to flyover when I’m all moneyed up, and hear the people who just sat and festered for 20 years complain about the rich Californian invasion.
Ha! You ain’t going to get much of a McMansion around here for $1.5 million. Most will be under 1500 sq ft.
Mish you that is usually a paragon of virtue when it comes to statistics — got to say that to say that people are leaving NYC because of taxes…well it sounds rather simplistic.
I suggest that yes taxes are high, but its only a small part of the story since rents and housing is ridiculously expensive (compare lets say to some areas of Texas). Taxes are not everything and “billionaires leaving NYC is, as you know, complete BS” sure they will be residents elsewhere but they will keep their condo on 5th avenue.
How about the number of people moving to those expensively crowded states? It’s surprisingly high. The people moving away created a price and availability surge that locals hate, prices going up so fast they can’t move or move up. In NV, ID. prices are going up 50k yr. but will stablize. Some counties in TX have shockingly high property taxes equal or more to NJ. My state Ca. sucks I’m waiting to move in semi retirement soon. Where? Not sure.
Where is the challenge 🙂
I don’t want to move away from friends and family, so will probably stay in CA if I can afford it in retirement. Property taxes are at least predictable in CA and many counties allow you to maintain your current level one time if you downsize to another house in the same county as an incentive to move empty nesters out of large family houses. The cost of gas and groceries, and plumbers and painters, seem to be much higher in the Bay Area than the rest of California, which itself seems to be more expensive (especially gas) than the rest of the country – so there is a high cost of living tax to be taking into consideration as well.
I know many people who I work with who could afford to retire in NM, AZ, TX, etc. but will have to wait much longer if they want to retire where they currently live. It is a set of compromises that each person has to weigh for themselves.
The situation in Illinois, California and New York are sufficiently different that lumping them together produces an over-simplistic story line.
CA is not a particularly high tax state (according to the links Mish posted a few days ago, which came as somewhat of a surprise to me), even with the SALT change.
Even looking at CA as a single state is too simplistic. The Bay Area and L.A. are two of the World’s largest economic areas, however the poverty in the Central Valley is worse than many other places in the rest of the U.S. The reasons for moving from SF to Austin or Portland, OR could be very different for somebody moving from Bakersfield to Dallas.
Focusing on the SF Bay Area, the property prices have gone up. But then, in many areas the quality of the schools has gone up – one of the interesting things about the Bay Area is watching the quality of the some towns improve. Dublin, CA was pretty seedy in 2000, but now is booming and its local high school has gone from a dud to a top performer as a new tax base has moved in. This gentrification has pushed the long-time residents of Dublin out to Tracy and beyond in many cases – teachers and plumbers and other non-tech pay level occupations get squeezed out. This is not a new story, and the changes in the last decade haven’t significantly changed the story line.
The reasons for somebody moving out of Bakersfield are likely to be very different. Bakersfield has one of the lowest quality of air in the United States and parents are getting concerned about bringing their kids up and exposing them to the pollution for 2+ decades. Bakersfield also experiences more volatility in the business cycle – getting hit harder in downturns than the Bay Area, etc. The weather is pretty brutal in Bakersfield compared to the relatively moderate Bay Area, etc. So somebody’s decision to move to a new job in Texas from Bakersfield is more likely than for somebody to move from Bakersfield to the Bay Area. Also, culturally Bakersfield is more like Texas than SF.
There are many different reasons to stay put or move, and a simple story line is unlikely to expose any valuable insights.
Thanks for injecting moderation into the discussion. I would also add that California’s climate makes it a perpetual winner in this game compared to Illinois and New York. Frankly, I am mystified how in this modern age of mobility anyone still lives north of the 40th parallel.
“Focusing on the SF Bay Area, the property prices have gone up. But then, in many areas the quality of the schools has gone up – one of the interesting things about the Bay Area is watching the quality of the some towns improve. Dublin, CA was pretty seedy in 2000, but now is booming and its local high school has gone from a dud to a top performer as a new tax base has moved in.”
Good comment and very true. I live on the Peninsula and the town I live in now while never exactly “seedy”, was considered a bit backwaterish with a too small tax base in the early 2000’s. Since then and especially after 2010, the town has been swamped with Chinese moving in, a good number supposedly with the proverbial “suitcases of cash” if you believe local scuttlebutt, causing housing prices to increase a lot. This process causes improve in schools but also in local businesses. Food prices have also increased and we have a much larger selection of Asian restaurants to choose from! [lol].
Great thread. I’ve lived in NH, MA, OH, TX and CA. I think trend is still moving south and west due to better weather. Chinese wealth is also holding up CA and Western north America overall. I have relatives in Connecticut and the exodus there seems much worse than NY.
Speaking of the Chinese, I think you will find this interesting:
How Chinese Financing is Fueling Megaprojects Around the World
January 7, 2020
https://www.visualcapitalist.com/global-chinese-financing-is-fueling-megaprojects/
Not really interesting.
Before the SALT cap, people in high tax states didn’t have to pay for the Federal Government at the same rate as people in low tax states. Now everyone pays the the same percentage to the Federal Government, and that is completely fair. What they don’t like is that they also have to pay their state, which gets expensive.
Dude, the SALT states already paid more into the Fed than they got out, and this rule exacerbated that.
It amuses me when the same people that go into overdrive protecting the wealthiest Americans by pointing out the share of the Federal tax they pay in comparison to the “others” pivot 180 when it comes to the same argument at the State level.
Unless I misunderstand your point, you’re saying that the wealthy pay too much tax, and if they live in a high local tax state, they need to be protected from having to pay Federal taxes, too?
My point is simple. We are all members of the US, and we should all pay to run the Federal government, and regardless of where we live, we should all pay the same because we are all eligible for the same benefits and have the same obligations. Separately, we are each members of a state, and we should pay those taxes as well, and the same for out local community. I see no reason why the amount that we pay for state services and local services should have any bearing on whether we also support the Federal Government.
I also have no problem with people moving to escape taxes. They will still owe the same Federal taxes regardless of what state they live in, but presumably states with lower tax rates will have lower levels of services. People are should be free to choose states with high taxes and high services, or states with low taxes and low services.
The problem with your simplistic view is that not all states get back 100% of what they contribute.
What does that have to do with anything? If this were the Euro, and States were separate countries, that would matter, but it’s not. The Federal government applies equal tax rates everywhere, and spends it where needed, and when needed. Does that mean poor states get more in benefits than they pay in? Of course. Does it mean that richer states pay in more than the get back? Obviously.
Does any of the above have anything to do with the state’s levels of state and local taxes? Of course not. Some states choose to have very high taxes so that they can provide more local services (or more corruption, in some cases). That’s fine. That’s their choice. If the people vote for governments that enact such taxes, more power to them. I see no reason, however, to use that as a reason to reduce their Federal tax obligations.
Federal tax obligations arent as simple as you state. In fact most federal programs are just state programs with sheep’s clothing on.
The big thing here in my area of KS is rural expansion. I hate it. I can’t even wiz in the front yard anymore without someone driving by. Everyone wants to move out of the city then end up out here in huge houses with pristine yards. They turn it into what left. People are willing to drive farther commutes to live here. I drive 38 miles to work one way and the nearest store is 15 miles away. It’s funny to listen to people in town cry about having to drive acoss town for work. My favorite invaders are the ones that immediately fence everything with no trespassing signs splattered everywhere, wont talk to anyone and look at you crazy when you call them neighbor. They probably have a sawed off shotgun as well lmao.
Sadly, as people flee NY, IL, CA, they bring their politics with them wherever they go. It’s like a locust plague.
Correct … there’s no more certain way to turn a red state blue than by flooding it with people. Once population density hits about 1,000/sq. mi. it will be blue forever.
Everyone seems to forget that conservatives are even more likely to flee from a “blue” state than the liberals who created the mess there.
,,, alter followed by the liberals that have no host to feed on, starting the cycle all over again. Basicaly the same cycle of move to the suburbs, then farther out later in the game. !950’s-present.
Yes, Greggg! However, I believe the “liberal/big gov” crowd is also latent in the native population and manifests as the cities grow larger along with the concomitant public sector.
What I see is the flow of boomer retirees headed to warmer weather. It’s funny that Mish is among that demographic but doesn’t recognize it because he’s so eager to blame taxes and push his worldview.
I do think that limiting deductions was the right thing to do . The Fed Gov should not subsidize state and local taxes and encourage people to buy expensive homes . Yes a deduction for a median house, taxes ok but no to expensive properties over whatever the median cost of normal house would be . It will be interesting see how this affects different areas as time goes by . Living in NC and seeing the cost of communities being built that require HOA , Local property taxes plus Insurance cost and all these will rise as time goes by, I just don’t see the jobs that can support it long term.
They should get rid of the capital gains tax exclusion when selling a home next. Houses should not be investment vehicles. Doing this would likely result in lower housing prices.
It happened to Detroit, which was a high tax island in a middle tax state. Confiscatory tax islands in high tax states are doomed.
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Despite everyone complaining about not enough housing in Calif., there are thousands upon thousands of vacant homes in the SF Bay Area and in many other parts of the country! Who woulda thunk it?
How many vacant houses are there really in the Bay Area?
Estimates vary widely but census data suggests there are thousands
January 6, 2020
If there were enough tennis socks in the world, they wouldn’t sell, nor rent, for a few million a pair. Despite costing only a fraction of that to produce.
Why are they vacant?
It may be because the previous owner died and the property is going through a legal process. It may be because the owner wants the place as a second home.
How many of those vacant homes are up for sell, have been for a long time? Not many I suspect, and for those that are in that group, then I would suggest the price is too high.
Yeah, yeah, yeah, whatever. Some towns are talking about assessing penalties for houses or land that is held vacant too long. I like this idea and hope it comes to fruition. I have seen too many commercial properties turn into eyesores as they sit vacant for 5, 10 or more years.
They are vacant because of way too much speculation in the market. A news story recently came out that indicated that the population growth is not there either, but the housing crazyness remains.
Would these vacant houses happen to have owners from China? They did the same thing in Vancouver prompting the city to impose a 15% tax on vacant housing. Also, the FBI monitors pending sales in Miami and in San Francisco. If there is no person named as the new owner the sale is not allowed to close… it’s a response to shell companies buying up real estate.
This is because of prop13. People are paying such low property tax they dont even bother to sell the properties they dont use.