Bloomberg Reports on Manhattan Real Estate
A: Because its from Bloomberg, it seems to carry more weight! While this report is not surprising and shouldn't be surprising to anybody that is following the macro trends, it could be the start of a media induced effect on confidence. Lets get right into it.
According to Bloomberg's article, "New York City Real Estate Market Slows as Wall Street Cuts Jobs":
Manhattan apartment sales fell in January and February from a year earlier and new properties came to the market at the fastest pace since at least 2000, according to data from New York-based real estate appraiser Miller Samuel Inc. Transactions slid 6.4% to 3,250, while the number of condominiums, co- operatives and townhouses for sale at the end of last month climbed to 6,225; 15% more than at the start of the year.JPMorgan Chase & Co.'s planned buyout of Bear Stearns, once the fifth-largest U.S. investment bank, is rattling buyers and sellers now, said Gregory J. Heym, chief economist for Terra Holdings LLC. The closely held company owns residential brokers Brown Harris Stevens and Halstead Property LLC.
"The amount of uncertainty, at least as long as I've been following the market, is unprecedented," said Heym.
One of the reasons why I love working at a firm like Halstead, is because they tell it like it is! Greg Heym is the Chief Economist at Halstead and serves on the New York City’s Economic Advisory Panel. I had the pleasure of hearing him speak at the last Halstead semi-annual meeting, and let me say that he was dead on in terms of what is really going on out there; very refreshing to say the least!
Moving on, lets go back 3 months to Dec 27th where I offered you my specific predictions on the Manhattan real estate market for 2008:
"I expect inventory to build as we near summertime, as a result of a slower than normal bonus season, and wall street to deteriorate as we get more clues about whether we are in a recession or not. As wall street falls, so will confidence and demand on the buy side for Manhattan real estate products. At the same time, we will see more types of sellers contribute to inventory builds toward the end of 2008; speculators, foreign buyers flipping, second home's selling, and struggling buyers who bought a bit more than they can chew or whose job security has changed to the negative. I expect job losses to grow during the first two quarters of the year as a result of the credit crisis and hit to the financial sector, leading to what I described above."For all those that have been reading my stuff for the past 2 1/2 years, you know my passion for macro and telling it like I see it! You will NOT find fluff on this site and the goal will always be to offer unbiased front line reporting and opinions about the macro economy and Manhattan real estate! We need a more transparent marketplace and that is what I am spending much of my time on trying to accomplish!
The Streeteasy.com widget has been wonderful in keeping pace with Manhattan's TOTAL INVENTORY so far! The UrbanDigs charting tool is almost out of BETA testing and in 2-3 weeks you will be able to do more powerful searches and analysis on all four listing metrics: new listings, price cuts, contracts signed, & total inventory trends. It is very comforting to see appraisal guru Jonathan Miller's inventory # (6,225) come in pretty much in-line with our total inventory number of 6,280 as of today; although JM's # is from last month I think we were in high 5,000's at that time! It's clear that our efforts on accuracy have been paying off and Streeteasy's tech team deserves great credit for helping to make NYC real estate a bit more transparent!!
UrbanDigs Says: This is not news to UrbanDigs readers. We have seen inventory rise for the past 3 months and stay over 6,000 for about 2 weeks now. At this level, there STILL is not a glut by any means out there! Thats the key takeaway. What we must keep in mind is that inventory has dropped significantly as a result of strong sales volume for the past few years. We are now ticking up, but are no where near a level that warrants fierce seller competition; fierce seller competition is the phrase I used often here to describe a local re marketplace in distress! It's a metric to monitor as the full effects of the credit crisis reveal itself; economic slowdown & job losses which effect confidence. In my opinion it is all about confidence. While it seems the fed has averted a systemic financial meltdown and will do everything in its power to continue to do so, we are now entering a period of time where we will see the economic fallout from the credit storm. Our eyes will be open!
Comments (15)
These new regulations rules may have a long last effect on Wall St profits...
http://www.reuters.com/article/ousiv/idUSN3139245220080331
This enforcement may be the biggest nail?
Posted by uwsider | March 31, 2008 12:03 PM
I hear that inventory (although rising) is still low/moderate. (And that this Jan-March period is quiet anyway.) What number would suggest a real buyers' market? 9,000? 11,000? I have just been following the RE market for 4-5 months - but it seems that everyone is in a wait and see pattern - is that your impression? (Things that are priced "right" are moving - but sellers with wild expectations are having to wait.)
Posted by october | March 31, 2008 12:30 PM
october - it IS! Thats what I described in the last section. Hard to say, but inventory of over 8500 or so should cause some level of seller competition.
About half of my clients are wall streeters, so they are on hold to see how their job security is. Other buyers I have are LONG TERM, savvy, and qualified buyers who use me to find the best product in the price point from a resale point of view. Things priced right ARE moving!! Your feelings are pretty much dead on.
Posted by Noah | March 31, 2008 12:52 PM
At this rate of growth, we will hit Noah's 8500 mark by the end of May and "october's" target by the end of June. A clear sign that it is better to wait.
Posted by sam | March 31, 2008 1:35 PM
(1) New listings ALWAYS come on the market from Jan-April
(2) People buy those apts in Feb-May.
(3) Closings happen from March/April-June.
(4) Sales get recorded and listings come off.
Inventory levels should decrease as apts get bought over a normal 3 month span. Isn't this a common Manhattan inventory cycle Noah?
Posted by Steve | March 31, 2008 2:13 PM
STEVE - yes! We will NOT know the strength/weakness of the JAN-APRIL bonus season until inventory #'s for MAY/JUNE, in which total inventory will reflect those units sold during the previous 2-3 months.
Last year there was a big dropoff of inventory from MAY-JULY or so; lets compare to this year and see the difference. Hard to argue the change in sentiment from a year ago though.
Posted by Noah | March 31, 2008 2:20 PM
Noah, you quoted Greg Heym(above), he and I graduated with MBAs in '98. Great guy, very analytical and keen observationist. He has been a bull for housing since I've started condo investing and now he notices "unprecendented uncertainty." For him to use those words it must be true. So what is the most likely outcome of this uncertainty....IMHO, again IMHO, the scenario I see is a bottleneck of cash building and when this credit crisis is played out we should have another deluge of cash coming to market. People will want a piece of Manhattan thinking that since it weathered the credit crisis it must be a solid market.
Posted by Steve | March 31, 2008 3:36 PM
I agree on ALL fronts Steve; Greg knows his stuff and its interesting to hear that about him!!
Our market slowdowns are lagging and then leading on the recovery. Question is how long is the in between?
Posted by Noah | March 31, 2008 3:52 PM
uswider,
(getting off topic but I think you're referring to my previous post on regulation). Thanks for the article. Bill Gross of Pimco raises a valid concern. My guess is that regulators will apply different capital standards to banks that accept consumer deposits vs. broker/dealer an investment banks, in order to maintain market innovation.
However, it's too soon to tell. The proposed regulatory overhaul is just that, and any changes wouldn't be implemented until sometime after the new President is sworn in and special interests/Congress have pounded it through. A big driver will be whomever on Congress has the most pull, rather than what makes the most sense for the markets.
Regardless, an overhaul is necessary as the current system is outdated. And any changes to oversight won't prevent the next market downturn, but such is life.
Posted by Beth | March 31, 2008 6:02 PM
It seems that all the info that's been posted here has bascially been pointing to some uncertainty and possible decline. This Bloomberg story is just another small chapter in a long book that this site's been building for its readers. Anyone who checks in daily should not find any of this surprising. Yes this could be just another cycle and inventory might clear up right away - but banks are tightening their lending, the dollar keeps dropping dramatically (bad news for those overseas who bought Manhattan RE which is both depreciating and declining). I think this is one of the best "wait and see" periods for buyers I have seen in NYC real estate in many years.
Posted by Ed | March 31, 2008 8:34 PM
Noah..on a diff note ,,, what up with Gold ?
Posted by Johny | March 31, 2008 10:26 PM
I'm interested to know...those of you in RE sales...what do your inventory/closing per month numbers look like compared to the past few years? What impact is all this mess having on NY and other area agents/brokerages?
Posted by CR | March 31, 2008 11:58 PM
Johny - you are starting to see the currency speculative trade exit some metals; especially gold. As slowdown threatens int'l markets, and their currency goes down against ours at a time when we dont know how aggressive the fed will get with future rate cuts, you'll see some spec money come out of commodities.
Remember this post on March 11th:
http://www.urbandigs.com/2008/03/10year_trends_sp_500_vs_fed_ra.html
"Today's fed move probably means fewer rate cuts down the road. In my opinion, the hidden gem in today's announcement is the targeted nature of the shot that will limit pipeline inflation (geez, there's enough of that as is) by reducing the need to cut fed funds rates as aggressively as previously expected. That means the US dollar may not become as weak as expected and commodities priced in dollars may lose a dose of steroids (rate cuts) that they were betting on. If you want to get real crazy, what if we assume that international markets are lagging the US and they are about to enter a period of financial distress similar to what we have been through for past 4-6 months? Our currency could bounce further if foreign cb's start easing at a time when our fed found a way to limit future rate cuts. Ehh, just a thought with many if's."
Posted by Noah | April 1, 2008 7:47 AM
CR - Im 1 deal LESS right now than I was at this time last year. But my pipeline of clients are bigger now than last year.
Posted by Noah | April 1, 2008 7:48 AM
I'm an agent in Hoboken, NJ and our market seems to very closely track Manhattan's but at much lower price points. So our stats don't include the ultra-high end transactions that exist in NYC. Brownstone sales top out at just over $2 mil. The most expensive condos are under that.
We have had pretty steady prices here on condo sales over the past year or more. The days of 20% annual increases in average sales prices have ceased. The biggest change shown by our MLS numbers (almost everything here is multiple listed) is the increased inventory. Buyers are waiting it out and afraid to commit. Sellers are still overvaluing their properties. Here's the 1Q '08 report:
http://hobokenrealestatenews.com/2008/04/03/hoboken-condos-sales-activity-shows-slight-slowing-in-1st-quarter-of-08/
Posted by LT | April 12, 2008 10:22 AM