Quick Manhattan Update

Posted by urbandigs

Mon Aug 10th, 2009 09:50 AM

Share |

A: Content will be light for a while folks as Jeff & I work on the next phase of UrbanDigs. For now, here is a quick update on the Manhattan market as this one broker/blogger sees it. The market is still considerably more active than it usually is for this time of year yet, it doesn't seem as crazy as it was during the months of May & June. My thoughts on that are a combination of the timing of sharply lower prices, buyer control during negotiations, reflation trade mentality, and a confidence boost that the deep recession is nearing an end as stocks surge and price in recovery. By far the most important part of the equation was lower prices across all price points. In short, this market had a wave down in prices once thought impossible that reached a comfort zone where buyers were confident enough to jump back in and buy property.

The change in psychology affects both buyers & sellers; buyers, while more confident with Armageddon seemingly off the table, still want the discounts that this market seems to offer and sellers want the highest price possible now that stocks have rallied and green shoots are being discussed everywhere. It takes two to tango so if either buyer or seller psychology get altered too much in one direction, we may see another disconnect in our marketplace leading to much slower sales volume than what we saw over the last 4 months or so. The rise in contracts signed + the number of listings removed from the market has had an effect on total active inventory; with what appears to be a 15% drop since the recent top of about 11,200 listing in early June.

Here are a few month-to-month comparisons (comparing the periods of Mid-June to Mid-July against Mid-July to present) of important metrics for all Co-ops & Condos in Manhattan; this is the closest thing I have to real time information as it happens so do your own interpretations - generally speaking, for seasonal markets its best to derive interpretations from year over year trends to filter out a seasonality effect:

AVERAGE LISTING PRICE - $1,391,247, or down 0.42% comparing prior two 4-week periods
NUMBER OF PROPERTIES SOLD - 731, or up 51% comparing prior two 4-week periods
LISTINGS REMOVED FROM MARKETPLACE - 1,348, or up 50% comparing prior two 4-week periods
NEW LISTINGS - 942, or up 0.21% comparing prior two 4-week periods
CONTRACTS SIGNED - 1,030, or up 4% comparing prior two 4-week periods
LISTINGS WITH PRICE CUTS - 955, or down 15% comparing prior two 4-week periods
AVERAGE PRICE PER SFT - $1,088, or down 0.91% comparing prior two 4-week periods

Again, imagine if you have two four week periods (6/15/2009 - 7/13.2009 against 7/13/2009 - 8/10/2009) and you want to compare how the market has changed. Above is the answer and unfortunately I don't have any access to more data prior; I wish I did!

So what are we seeing:

a) average listing price is down
b) number of properties sold is way up - this is reflecting contracts signed 2-3 months prior and shows the activity we had during the months of May & June compared to the frozen few months before; never forget the lag this market has between contract signing and closing.
c) basically the same amount of new listings hitting the marketplace
d) big increase in listings removed from the marketplace either for personal or seasonal reasons; this is certainly affecting inventory trends too
e) significant drop in price cuts - hmm, interesting, perhaps sellers really are getting less motivated to lower their prices with the recent surge in equities and MSM's green shoots
f) still a healthy number of contract signed that will likely lead to a solid Q3 and even a Q4 report when they come out; the Q4 or Q1 report will be especially interesting as it is compared to Q4 of 2008 and Q1 of 2009 that were practically frozen and defined the correction

All in all, it's proof that more activity is not a sign of rising prices. Prior to Lehman, prices were still near peak levels and were disconnected from the reality of this crisis. The market froze up and buyers disappeared UNTIL prices came to a zone that were more in line with the reality of our new world. That freeze up lasted roughly six months, perhaps with denial playing a big role for sellers in the beginning of that corrective wave down - leading to such light sales volume. Then reality set in, sellers were willing to accept that the market was discounting their property at a certain % down from peak levels, and deals started to happen! The natural forces of the marketplace at work - a wonderful and healthy thing.

With the average listing price still down, real sellers know that the market is still trading in that comfort zone reached with the first wave down in prices. If that comfort zone represented a range 'down from peak' (see my tiered price adjustment opinions here), then I would argue that this market recouped some losses and is trading at the lower end of those ranges down from peak depending upon price point. This was the markets way of equalizing itself from the Armageddon / Fear trades that occurred in February & March - in short, the market has priced OUT Armageddon as it overshot to the downside when it was pricing in Armageddon earlier in the year.

That's the best I can offer you guys right now. Working on delivering a better system for you in the future!