Jonathan Miller,
president/CEO, Miller Samuel
Q: What do you think will happen with the residential market in New York City in 2011?
A: I don’t know if there is much to get excited about. I think in 2011 we may see a market that moves sideways, with certain possibilities for some price erosion. It really depends on where employment levels go and where credit goes. Hopefully we will see meaningful improvement. But unless we do, it’s hard to see housing lead us out of this. … [Also], it would likely vary borough by borough because some boroughs have a heavy concentration of foreclosures, which are anticipated to continue rising.
Q: After a massive falloff in early 2009, residential sales in Manhattan bounced back somewhat in 2010. Do you expect that to continue in 2011?
A: What is impressive about the market is how quickly we saw activity rebound from the dire levels of the first half of 2009. But the activity of 2010 was either partially stimulus, low interest rates, first-time tax credits or pent-up demand from 2009. Going into 2011 we don’t have much changing. That’s why I view it as more leveling off and possibly some slippage in some markets. Hopefully [there will be improvement] sooner than later, but as it stands right now it’s unrealistic to expect any kind of robust activity [this] year.
Q: Which price range of the residential market do you expect to do best in New York over the next year?
A: I would say the middle of the market that relies on conforming mortgage financing — a $729,000-to-$750,000 mortgage cap — which would mean under a million or low millions.
Q: What do you expect the biggest challenges to be in the coming year in the New York residential market?
A: No. 1 is what happens with municipal taxes; the budget shortfall for the city is a local concern. The other is interest rates as they begin to trend higher, because they have been manipulated and are artificially low. What happens when that pressure is removed would be another significant worry. The next is shadow inventory. Lenders are still in full pretend-and-extend mode. Lenders are doing everything they can to delay the inevitable. Inventory, aside from shadow inventory, is consistent with historic norms right now. So is sales activity, in general. The most important thing people can do in 2011 is to stop looking at 2003 to 2007. That was the anomaly.
Q: New development condos were obviously hit hard during the recession. How do you expect new development condos to perform in the coming year?
A: I think the days of new condo development are going to be on hiatus, at least for the next couple of years. The majority of the new product coming out is going to be rental, and even then it will be nowhere near the scale of new market entries that we saw. Ultimately a lot of the shadow will be converted to rental or sold over the next three to five years.
Q: What do you think will happen with lending in 2011?
A: It will probably get easier, but it won’t ease as quickly as we need to keep housing from seeing more weakness. If you think about where we are right now, no matter what you are being told, lenders are looking for reasons not to lend. We truly are building a triple-A mortgage portfolio with these banks because all of the new product is clean as a whistle; now triple A actually means something. From a long-term perspective it feels like we are going in the right direction, but it’s at a crawl.