Page 7 - New England Condominium December 2019

NEWENGLANDCONDO.COM NEW ENGLAND CONDOMINIUM -DECEMBER 2019 7 CONT... The Reality Jonathan Miller is the president of Miller- Samuel Inc., a real estate appraisal and con- sulting firm located in New York. Miller is people look at prices first, but that’s sort of in to beat the rising rates. a national expert on both commercial and low-hanging fruit when it comes to trends. residential markets, and publishes annual and One should look at sales activity and inven- quarterly reports for markets throughout the tory first. Offering prices take 12 to 24 months still clinging to the price they thought they timately happen with the China trade war. United States including New York, Boston, to show a pattern after sales and inventory do would get a couple years ago. It takes sellers There is, overall, too much uncertainty. The southeast and western Florida, California, their thing. We saw inventory rise in 2018. In longer than the rest of the market to adjust to bond market is already collectively terrified, and select markets in Texas and Colorado, 2019, we saw prices begin to slide. In 2020 we new forces and factors. among others. According to him, “2019 has will see more of that. But ultimately, the ef- been about taxes, especially in New York City fects of the SALT reductions were skewed by and other high-tax areas. The change in the the drop in interest rates for home mortgages. er says, “The downtown market is still boom- SALT deduction that went into effect last year Overall, the situation is not as bad as it could ing – it’s one of the fastest moving markets in purchases. played havoc in the purchase market because have been.” it caps deductions at $10,000. It slowed down New York and its suburbs before anywhere else. In general, California tends to run a year to Miller, has come at the top of the market – for the most part affordability is the main is- behind New York in trends, and we are seeing the so-called luxury sector – in all areas of the sue. similar trends pick up there now.” Sensitivity to Interest Rates Another major factor in real estate sales to begin with, and there was far too much in- markets is the price of money itself. Most ventory. Many of these units are not moving. buyers (though not all) borrow substantially to purchase a home, especially in the starter Westchester and Fairfield counties are more and today’s buyers aren’t finding deals as good will be a year that reflects the changes already market. When interest rates – aka the cost of stable, mostly due to low interest rates, but as they once did. There is also lots of stock in under way, and the ability of investors to react money – rise, monthly carrying costs become their high end is still off. The area overall is the luxury market, which is a bit overbuilt.” higher. That change in financing cost can slowing, and pricing are slipping. Not all seg- depress or inflate a market. When rates fall, ments are showing the same softening, but in ton still has a housing shortage overall. In buyers can afford more; when they rise, prices the aggregate sales are down and prices are 2020, we are nearing an all-time population inevitably fall. “Mortgage rates falling a full point over purchases is still strong due to lower interest Middle-market units are the only place where the past year have mitigated damage from rates. Miller believes the overall market will we don’t see inventory increasing. I expect the effect of the reduction in SALT deduc- tions,” says Miller. “What’s really important is a sudden rise in interest rates, which might when we look at housing trends is that most cause a short-term burst with buyers getting The Deepest Cut The most pronounced change, according high sales. It does fluctuate over the years, but and financial markets are cautiously trying to nation. In places like New York City and Mi- ami, the top end of the market was overbuilt agent for My Boston Condo, “Lower interest room for growth. The losers appear to be high Miller notes that inventory in New York’s less. Prices rose quickly over the past decade, it’s too early to tell long term, but that 2020 up – though the starter market for first home high. The real challenge is affordable housing. stay like this for a couple of years, unless there 2020 will continue at the current pace.” “The bottom line,” says Miller, “is that sell- ers still haven’t gotten the memo.” They are moves the Fed will make, and what will ul- Boston Of the market in and around Boston, Mill- the country.” The condo and townhouse mar- ket there continues to show low inventory and tentative change. Investors in both real estate According to Bobby Woofter, principal early winners appear to be low tax areas with rates have buoyed the market in 2019. But tax areas that have benefited from growth and sales are lower, and inventory is up nonethe- Woofter continues, explaining that “Bos- Politics Non-market considerations are also af- fecting the housing market. The main con- cern among investors revolves around what and while discussing bonds may be the cure for insomnia, the reaction of those markets to political influences has repercussions on the markets that provide financing for real estate 2019 will likely be remembered as one of find their way through a myriad of factors, in- cluding the change to our basic tax laws. The investment during the past cycle. Miller says and adjust. n A J Sidransky is a writer/reporter for New Eng- land Condominium, and a published novelist. 2019-2020... continued from page 1