Halstead TV: Behind The Numbers

Posted by urbandigs

Tue Nov 11th, 2008 05:29 PM

A: This is my company's new Market Report narrated by Halstead Chief Economist Greg Heym. Greg is very real, very in tune with the current situation, spoke to agents about a year ago about the challenges we face, and tells it like it is. Very refreshing I must say. Anyway, just wanted to pass this along, as I know they are working on enhancing this quarterly video report as we enter 2009. Enjoy.

Behind The Numbers - 3rd Quarter 2008

Few tidbits:

  • Average Price 1.47 Million; Up 12% from Q3 2007

  • Just Under 3,200 closings in Q3; Down 14% from Q3 2007

  • New Dev Accounted for 1/3 Total Q3 Sales & 70% of all Condo's Sold in Q3

  • On Average, New Dev Contracts Were Signed in DEC 2007, closing in Q3

  • NYC Employment Up 31,000 from AUG 2007, Despite Loss of 11,000 Securities Jobs

  • NYC Unemployment Under 6%

  • While Greg discussed the raw data, it is important to understand that we are at now now. Greg mentioned the challenges NYC faces, and acknowledges the credit crisis that began just over a year ago. Its true that 'so far the data remains positive', but that is to be expected from lagging data. My own opinions on where we are now and likely trends looking ahead include:

  • Average price data will start to reflect weakness, and accelerate as we go through the next 3-4 quarters. This is all lagging data as reports catch up to real time contracts being signed, and new dev closings are slowly replaced by resales. Right now, we are in the process of finding out who is distressed and over-leveraged. This is when deals sometimes happen at surprising levels, based on the sellers level of desperation.

  • Unemployment is going to rise in Manhattan and I would guess that job losses in our financial industry near 75,000-100,000 by this time next year; especially as mergers close. So this data will be lagging as well. Its very sad, and nobody wants it, but lets keep it real here.

  • Sales volume will remain low compared to peak levels from year ago, and media headlines will likely further depress buy side confidence for a few quarters as the initial shock of the adjustment results in patience by buyers. The negative wealth effect will contribute to low ball bids as buyers price in downturn risk, leaving the seller with a decision to make. Unless a property is aggressively priced, sellers lost a bunch of negotiating power in the past 8 weeks.

  • We are probably down about 15%-18% from peak levels right now, and sellers are finding it hard to get that strong, serious bid in. Those that must sell quickly have to resort to aggressive price cuts and strong consideration of low ball bids received. It looks like 22% of all listings experienced a price cut in the past month, assuming 1,916 price cuts for 8,683 properties available for sale in the past 30 days.

  • There is nothing wrong with openly discussing what is going on in our market! Manhattan historically lags in recessions and leads in recoveries. Arguably, the national housing slowdown is in its 3rd year now and we are probably 8-12 months into our downturn with the severe knee-jerk adjustment lower occurring mostly in the past 8 weeks. Why? Buyers simply backed off. Local real estate is all about the buyers and Manhattan is no different. If a deal needs to get done, the seller has few options and time against them. Now is not the time for sellers to be anchored to peak prices!

    This might surprise many, but I am a bit less bearish than I was 12 months ago when we were near peak levels and apartment sales were yet to catch up to deteriorating macro fundamentals. I know the worst is still to come for Manhattan, and I am still bearish, but when an illiquid housing market rolls over the initial adjustment is fast. Today, a noticeable adjustment has occurred and the pendulum has clearly swung in favor of buyers.

    But who is buying? This is why I am still bearish. Consider me less bearish than I was 12 months ago, now that the downturn begun and prices are starting to correct; but still bearish for the next 3-4 quarters as job losses mount, distress rises, and negative wealth effect hits home. If it were a baseball game, I would say we are in the 2nd or 3rd inning; better than the pregame warmups right! The good news, we have to go through this. The bad news, we have to go through this. There is nothing I can do to stop it, so lets adapt to the changing world and act accordingly.

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