Weeeee - Manhattan Doing Fine, But....

Posted by urbandigs

Tue Oct 2nd, 2007 12:53 PM

A: Cmon now, you can't expect me to let such a solid report on Manhattan real estate come and go without a little attention here! As far as I can see, the year-over-year reports from the likes of Elliman, Corcoran, Halstead, & Brown Harris Stevens are solid! My concern is the lagging nature of these reports in the media and that the true state of the Manhattan real estate market has undergone a psychological shift which is NOT reflected in any of these numbers. Consider me cautiously optimistic as I await the next report that will better show how our housing marketplace handled the recent credit squeeze!

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With that said, lets review this bullish report on Manhattan real estate that in my opinion is a direct result of the extremely tight inventory over the past 3 months!

According to CNN Money:

Prudential Douglas Elliman reported that inventory in Manhattan fell 31.7 percent to 5,204 units in the third-quarter from a year-ago total of 7,623 units, while units stayed on the market for 123 days, faster than the 150 days seen in the same period last year.

The broker reported that the number of sales increased 65.6 percent this quarter to 3,499 units as compared to the 2,113 units sold a year ago. In similar quarterly reports from Brown Harris Stevens, Halstead Property and the Corcoran Group, all three brokers also reported shrinking inventory.
So what do we have here, lets do some text based math:
SHRINKING INVENTORY + SHRINKING TIME ON MARKET + RISING # OF SALES = SOLID BUYER CONFIDENCE
I discussed in a past post that buyer confidence / inventory is ruling Manhattan prices right now and the threats to changing this trend in the future! I stated:
It all comes down to the buyers when evaluating the strength of a local real estate marketplace. Are there buyers out there? Do they have choices or not? Do they have buying power? Do they have confidence in the local housing market? Are they motivated to buy? These are extremely valuable questions that I wish I had real data on, but I don't; so I'm left to speculate. The answers to these questions in large part will determine the effect on local inventory and pricing. And that is where you can stop and analyze a local market for its strength or weakness. When buyer demand is strong, choices are limited, buying power is prevalent, confidence is high, and motivation is rising then I'm willing to bet that inventory in that local marketplace is very tight.
This report confirms my inventory reports (Sept 24th, Sept 11th, Aug 23rd, Aug 9th) but its the sales volume that I question in the upcoming quarterly report for the months of August, September, & October. My gut is telling me that sales volume will slow resulting in a slight build of inventory for these months!

This hasn't happened yet and we will not know until reports come out in the media in December/January! My feeling is that buyer psychology / confidence has negatively shifted a bit with the headlines from the credit mess, tighter lending standards and rising loan rates ultimately resulting in some hesitation from those buyers that either:

a) weren't sure whether to rent or buy
b) are heavily reliant on bonuses as significant portion of annual salary
c) first time buyers
d) employed in financial sector; especially hedge funds, derivatives, structured credit, debt / fixed income positions

What I don't know is the percentage of the entire buyer pool that fits into these categories. Let's see how it plays out in a few more months especially after the fed's action to increase liquidity / confidence sparked a new stock rally, and I'll revisit this post for a follow up. If Manhattan proves to emerge from these past 3 months with continued shrinking inventory, continued rising sales volume, and falling time on market then there will be little argument against the near-to-medium term strength of this housing market!


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