Sign of the Apocolypse - Top NYC Appraiser Joining Distressed Condo Investment Group

Well people don't appear on TV, internet & print media for nothing. There's an angle, he was promoting himself. Good for him.

"There is no shortage of inventory. In Manhattan alone, about 6,500 condo units completed or near completion but have not been listed for sale. Add to that new listings on the market, and that figure jumps to 8,500.

In New York City there are about 22,000 condos completed or near completion, but not listed for sale. That's more than 26,000, counting new units on the market.

Ouch.

FLMAO. When miller and pals go bellyup, THATZ your signal to BUY. Moron never saw this shit happening, but he can definitely see when it's bottoming.

Look ppl, Noah rents instead of buying, Miller is joining the 1st wave of vulture funds to go directly to the banks - cause maybe the banks are getting religion... so ya know these vultures w/ lower cost basis is gonna try to cash flow these developments (i.e. drop rents). So 22K units drop rents like mad, rents take another leg down.... NYC RE sales/one-offs are gonna be toast. YOU heard me saying this for a year... it's the 2nd inning in NYC RE....

bulls?

they're busy trying to get a last minute HELOC to buy that ONE xmas gift that'll make this yr SPECIAL.

If the discount to NAV is big enough and the capital long term the strategy is sound.

I wonder what effect this type of investment will have on housing prices.

Will it help to stabilize prices by sucking up some of the inventory or actually accelerate the price drop by increasing the volume of sales with significant price cuts and adding to the rental inventory.

Look at Miami. Banks are clearing in the $200-$300 psf price range. What do think is going to happen here? I'm not saying it's going that low, but it sure as shit isn't going higher.

What we have seen so far is just a taste. The main course is still ahead. NYC will drop 30-40% more in the next 18 months. Once banks can no longer delay (mark to fantasy) the real show will begin. The "shadow inventory" in NYC and the surrounding "it" areas will be dumped on the market like a tidal wave. This is not opinion it is fact. There are tens of thousands on new inventory hidden from the numbers.

This was never just a sub prime problem. Millions of people were given loans on every level they could never afford. It was only a matter of time before it all exploded. I'll go another step further and say that these very banks knew 100% exactly what they were doing and knew full well what the response from the govt was going to be. People it was a crime and to think that it wasn't is just being naive.

Two scenarios.
1. Equity market tanks again and we take out the lows. Disaster for RE.
2. Worse is over and we are in a true recovery. Disaster for RE. Why? Because it will cause interest rates to climb rapidly. If a 30 yrs non-jumbo goes to 7% that will just about knock off 20-25% off the value of your home.

Either way if you own you lose. If you buy now you risk losing 20-25% within the next year or 2 no matter what. Market recovers rates go up, your home value goes down. You buy and equity market tanks again and you risk losing even more.

Solution is very simple. Wait.

Food for thought. Ask yourself a very logical question. Who is going to buy all these new condos? There aren't enough people in this city making all this money to go around. NYC has a ton of money however it is not spread among this many people. To qualify for a $1M condo just think about how much your income needs to be today. Their are not enough people who make that kind of money. There never were. Sorry people it's going to get very ugly way before it gets better.

You vigorous inventory debaters, may I ask --- is there a concensus that this quote is roughly accurate????

The Quote, again: "In New York City there are about 22,000 condos completed or near completion, but not listed for sale. That's more than 26,000, counting new units on the market."

It JMiller says it, you can believe it. From the mouth of god to Miller.....

Jim, it's jives with other estimates I've seen. I still wonder if it's just going to take ten years to unwind it all and be rather boring to watch, rather than being another fascinating cliff dive, but who knows?

It seems to me if this number is accurate then it can't take years to unwind (it refers to near completioin or complete), unless you define going rental as taking years. I understand a year or two, but thousands of condos are unlikely to sit empty for years without major impact on market prices of all housing in the city.

By the way, I have no idea what this means in terms of size relative to the total housing stock in nyc. It does seem that it is fairly dispersed, perhaps with the exceptioin of Wmburg (I dont know LIC at all). In Miami it was different, I think, in that there was a huge new development concentration in some particular areas like Brickell....but...those are questions, im not sure

Miller joining this distressed buyers club and trumpeting it sounds like a bottom to me. we have seen this before, at both (any)market tops and bottoms. somebody "in the know" makes a bold bet after markets have already moved in the direction of that bet. then they get burned. i have been bearish on RE until this fall. When things look the bleakest, it's time to buy. like the V-shaped stock market recovery(which no one predicted and nobody trusts) i think RE is set for a rebound. it will not be V-shaped but i suspect we are at a point similar to march '09 in the stock market. there is much fear out there but open houses are full and people are buying. interest rates are at insanely low levels.developers are cutting deals. banks are much more eager to lend than 6 months ago. how can you not consider buying here? oh yes-fear. fortune rewards the brave.

Cfranch -- but all prices have done is roll back a couple years, still well within bubble terrority many would say , defining a bubble as prices not tethered to any rational, historical method of assessing the capital value of an asset, while the thing that makes this asset have value -- the rental stream -- is clearly in a downward trend. Price of place I lived in 2000 is still double price then, while the rent is basically the same as then.

I agree with Jim. On a historic basis, prices overshoot on both ends of a bubble. We're nowhere close to the bottom in NYC re, IMHO.

angler7 -good grief - whats your point? I've been talking about this for two years. The warm and fuzzies you casually refer to are the surge in re-sales activity, not new development. 2 distinctly different markets because of the way credit is playing out.

w67thstreet - thanks for the vote of confidence, but you actually make some good points in your rant - although its funny how much heat I have received for not being rosy enough since mid-2005 and you seem to fault me for being too rosy. Of course you don't read about that.

evnyc - i'm thinking along the slow erosion for several years idea. Bumping along trying to find a bottom. Credit and high unemployment are the culprit and ultimately determine which way this ship turns.

Hey JM. Timing. Been following your stats and posts for some time, so appreciate that you have been transparent and pulled no punches. This investment move could be genius. However, the broader market implications on new-dev, re-sales, rentals, etc. of a successful play in the distressed condo space is real downward pressure on pricing in the short to medium term. My $.02

Happy Holidays!

mmmmm...downward pressure

If Miller had stats from the 80's the charts would make a lot more sense. A spectacular run up (until '89), then a downward drift, meandering (until '95) and a eventual rise just like many a stock chart.

Will RE have a V shaped recovery? Impossible. Those lending conditions are not coming back.

If you can afford your payment even under horrible conditions (laid off, dipping into "emergency cash") then buy it.

why buy now?

No this is not the bottom at all and interest rates and going up next year, they say probably close to 6% so why would you buy now with new inventory coming to the market and a significant number of preforeclosure in Manhattan?

why by now?
opportunity!
Reasonable inventory (not famous) with no CRASH in sight. Low fixed 15&30yr rates. If your shopping for a primary this is a pretty good time. If your the guy who has to purchase at the absolute bottom day than I can't really say but, everyone who buys now for the long hall (non-investment RE) will look back at this opportunity as excellent. When I bought Goldman at $82/share on the way down to 62 it felt moronic but, today it looks like a wise move. If I bought gold at 900 instead of complaining about buying at an all time high I'd be satisfied. All purchases a subject to timing. My father would say It's better to buy on the way up than the way down. I agree! I'm not always sure of the direction we are heading. My own personal plans have changed so I hope the buying opportunities improve over the next 2 years. That would match my time frame. I'm eyeballing a studio right next to Sheik Kahlid Mohammed.

RE in Manhattan is still too expensive, it does not make any sense buying now unless you have very specific reasons, if you are looking to invest just wait!

I'm not saying to buy now as an investment. I'm saying that if the your mortgage payment is 10% of your take home pay, then do it. As an investment, there's plenty of other places to make $.

dco: excellent analysis.

"People it was a crime and to think that it wasn't is just being naive." looting the treasury before the fall of the republic.

dco: exactly, some banks shorted the housing market..

from the NYTimes: http://www.nytimes.com/2009/12/24/business/24trading.html?_r=1