The New York City residential market continues to outpace the rest of the nation, and the gap may grow.
In a Q & A with The Real Deal, experts from a variety of disciplines — including appraisal, brokerage and development — said they expect the city’s market to fare better than the rest of the nation’s for the next six months to a year. While some think the national market has not yet hit bottom, predictions on where New York City prices are headed range from flat to accelerated growth.
Interest rates may be the big variable. A continued rise in rates could lead to a decline in home purchases. Higher interest rates could also weaken the outlook for finance, the main driver of the city’s currently strong economy, which would in turn affect real estate.
Steven Kohn
president and principal, Sonnenblick Goldman
Where do you expect the residential market to be in New York six months or a year from now? How about nationally?
Unless interest rates continue to rise significantly — and we certainly hope that is not the case — I do not expect conditions to change meaningfully over the next six to 12 months in New York. Nationally, it may take a year or more for certain markets to recover.
Phillip Gesue
acquisitions and development director, Time Equities
Is a slowdown going to happen in New York like we’ve seen in the rest of the country?
It is unlikely for a few reasons. Although there are a large number of foreign investors who are buying here, and large currency fluctuations could cause them to pull back simultaneously, they are of diverse nationalities and currencies, and [represent] a much smaller percentage of total demand than in places like Las Vegas and Phoenix that have fallen. Also, the rent-versus-own economics, which would enable condo units to be profitably rented if the market fell, is strong in New York versus most other areas of the country with inflated housing markets.
Jonathan Miller
president and CEO, Miller Samuel
What would cause New York City to see a slowdown in the residential market like the rest of the nation?
I think it would be a combination of things. A spike in mortgage rates would hurt demand, and a strong dollar would dampen demand from abroad. Even with those two scenarios, we still would be in a better place from a housing perspective than certain parts of the country. The real caveat here is what interest rates are going to do. The recent increase surprised many, and it’s not fully understood.
Is a slowdown going to happen here?
No. It’s early to tell, but the preliminary feedback coming out of the financial services sector is that bonuses are going to be equal to or exceed last year’s record. Other economic fundamentals, like low unemployment and the government running a surplus, mean a fairly resilient environment for real estate.
Where do you expect the residential market in New York to be six months or a year from now? How about nationally?
The disparity between New York and the rest of the country will expand a year from now. I am not convinced that the national housing market has hit bottom. There is tightening credit initiated by the fallout from the subprime and prime [mortgage] markets, and as a result it is going to help exaggerate weakness in markets that are currently experiencing problems. In New York, I would expect a fairly high level of sales to continue and a fairly accelerated pace of price appreciation six months from now.
Frederick Peters
president, Warburg Realty
What would cause New York City to see a slowdown in the residential market like the rest of the nation?
Nothing. I think that in this globalized age it makes more sense to compare the New York market to the markets in London, Paris or Shanghai than to cities like St. Louis or Tampa. It has more to do with what is going on in the other global financial centers in the rest of the world than what is going on in the rest of the country.
What surprises you most about the New York City residential market compared to the national market?
Even though I understand the reasons for it, it’s still surprising that in suburban Westchester and New Jersey, only 30 miles outside the city, conditions are very different than what is happening here — never mind the Midwest or West.
Jeffrey Jackson
chairman, Mitchell, Maxwell & Jackson
Is a slowdown going to happen in New York like we’ve seen in the rest of the country?
Increasing interest rates are starting to cool off the blazing-hot private equity sector. The breadth of the bonus pool may start to narrow. As this plays out, I expect prices to be generally flat in the second half of the year.
Neil Binder
principal and co-founder, Bellmarc
What would cause New York City to see a slowdown in the residential market like the rest of the nation?
A dramatic decline of the stock market. The high end of the real estate market is the strongest segment right now. My belief is that much of that is occurring because of the stock market. If the stock market declines precipitously, the high-end market will as well. The current stock market surprises me. At the end of 2006, [the Dow] was around 10,000. Today it is 13,600, an increase of 30 percent.