Pending Sales / 90-Day MA Closings / Q1 2010 Preview

Most of the buyers that I am working with currently are very astute(afraid;skeptical,educated?), hence not chasing any units into bidding wars. They know choosing NOT to buy or loosing an apartment rather than chase it is not the end of the world, plenty of fish in the sea kind of attitude.

There is also a ton of inventory that falls into the;
mediocre location+poor condition+no view+delusional pricing=150 days on market and counting.

Call it the new normal, high inventory with robust sales?

Keith - thx for comment!! totally agree on the mediocre inventory comment, which makes the good properties even that much more desired when they do come on..especially at a good price.

most action is in first 2-4 weeks, so if its good and priced right, that is when your seeing the demand get right in. I have clients that are simply waiting for the right product to hit the market and Im sure there must be others out there who need to buy for varying reasons in the same position.

but at same time, yes, I consider my clients disciplined as they deal with these types of situations..if we make a play, we do it knowing where the market is...if we lose it, we lose it.

Noah, I notice the large spike in pending sales in early 08 and lasted until sept or so 08. Wouldnt you expect the closed sales average to increase in response to all these new deals? I know there is a delay but I would expect a large bump in closed sales reflected somewhere.
It seems like a bumb from may/june 08 until nov 08, but doesnt seem that large.

why?

Would like to see the lagging indicator of closings right alongside contracts signed. I know your working on it. :) Even with the 30/60/90 day lag, it average out in the end and will help provide a more complete picture.

truthskr10

QST - John and I have been asking ourselves this question for the past 10-11 weeks now, since we deemed the data clean enough to start making some chart queries.

You guys are going to have to understand that the data source I got is the closest and most direct source to the rebny broker updates, however, sometimes deals with flaws. To name a few, sometimes developers wont give an update until they have a whole batch of listings with changed status's, sometimes a brokerage firm will withhold updates and do a manual check and then send a batch at one time (we saw this twice in last 9 months or so on our backend since we started), every so often a company will inundate the distribution hub with listings (occurred with Bellmarc a while back we are told) and accidentally started to send out entire db every few seconds causing issues on other end, or something breaks on distribution hub end that needs correction...

We dont know. But we checked and checked to see if we were measuring wrong, and we are not. We just have a HUGE batch of status changes at that time (likely from a buildup of status changes in the months before), and I think over the course of 1-2 days (hence the vertical gap up)...its gotten better and this does not happen as often anymore we are told.

Anyway, we have to count them because they are real. As John says, 'Im not going to make excuses for what the data actually is'. So we must deal with the sharp adjustments or set moving averages to smooth it out. We'll provide that for you.

Our checks continue and we wont launch unless every metric is being measured properly.

anon - what do you mean? you want to see daily signed contracts and daily closings in bar chart form next to each other?

that would be too inconsistent and spikey. it would have to be smoothed out.

or do you mean something else?

QST - keep in mind we very much are still in BETA and these sneak peaks are a look into progress so far...we definitely do have some final tuning and checks on all of these.

just want that to be clear...John will look again at that spike though but I recall we did this months ago.

Great work Noah on getting closer to a "realtime" snapshot of what's happening out there right now. Certainly a great improvement on quarterly reports!

But, I'm most intrigued by your statement "I continue to have macro concerns." With all this effort to improve the current picture, let's not totally forget about the future picture!

Especially coupled with the Feb 18 post of Christine about where the deals are happening, it'd be easy for a reader to get the wrong idea. The wrong idea being that "unless you bought in Feb 2010, you missed the bottom. if you sold in Feb 2010, you lost money because you were scared."

Of course, if you're just promoting realtime data tools, that's fine. People can buy the data, do some analysis, do some thinking and come to their own conclusions and predictions.

But right now, in advance of the data products being offered, it'd be easy for a reader to read about your memory of the past, your snapshot of the present, and imagine that you're drawing a straight line trend to the future. (There hasn't been much real analysis about how the macro situation might affect manhattan real estate lately---a lot safer to report how it looks right now.)

Could you really, in good conscience, let a friend buy a property right now, unless they're comfortable with prices falling another 25% over the next few years? Or, on the sell-side, could you really advise a friend to hold on to a property she wants to sell until prices went up until the all cash-offer bidding wars spread mediocre properties?

Jay - great comment, thanks. First, let me say something about this statement of yours:

"unless you bought in Feb 2010, you missed the bottom. if you sold in Feb 2010, you lost money because you were scared."

Id prefer to replace FEB 2010, with FEB 2009. Its FEB 2009, or thereabouts, that I would argue was where the bottom for this most recent wave down in pricing occurred. In hindsight, it is easy to see this. When it was happening, nobody knew that was the bottom and many thought the pain and fear would last way longer than it ultimately did.

Moving on. Yes, this piece was a bit to promote the new tools that are coming and I have worked sooooo hard on for soooo long, but basically I wanted to share with you what these tools can tell you and the story they are saying.

As to macro issues and how it might affect Manhattan real estate, yes, its a confusing world out there right now and this market is mostly affected by performance of asset classes and general confidence. So its easier for me and better for you if I focus on whats happening out there real time, so you are ahead of the curve! Always a goal of this site.

But readers of this know my macro concerns and worries over the unintended consequences of stimulus withdrawal and likelihood of double dip in years to come, maybe 2011, maybe 2012. Higher rates, higher taxes, more regulation, sovereign defaults, stimulus withdrawal, all will play a role and I see a more drawn out and less sexy housing market after this initial bounce from the lows in early 2009 has played out. Its exciting now because the market overshot to downside and is now normalizing itself and its getting kind of crazy out there again...not to peak levels but from the little world we adjusted to after lehman failed. volatility is always worth watching..if we just sat here and muttered for years and years, trust me, there wouldnt be much to talk about!

That is kind of where I see the market in the future. I dont see any huge sharp gap downs again like we did after Lehman, because a) it happened already and that is healthy and b) because I dont see the powers that be allowing that to happen in this new 'everything is guaranteed' world. But there will be consequences and higher rates and higher taxes and more regulation and stimulus withdrawal I think will be the main pressures buyers will face both financially and emotionally as time goes on.

In meantime, Ill chug along and try to give you reports as real time as possible. For now, got to run to appointments!!!

thnx Jay!

Noah,

thanks for your comments. I might add "extended elevated unemoyment" to your list of macro concerns too. I think the factors that supported the prices here have mostly been removed. Add significant economic downturn and unemployment and I see NYC real estate headed down for years, although at a modest pace. Think japan: sharp 40% decline in one year followed by 13 more years of small declines. Looks to me like we've experienced some of the sharp decline already. Now it's going to be like you say, unsexy.

Some of the things you listed, like sovereign defaults, might lead to further sharp downward shocks. I'm just hoping we don't have to mix in a quality of life in the city factor into the local price trends.

And thanks for the correction: feb 09.

gl with your Appointments. Keep up the good work!

"anon - what do you mean? you want to see daily signed contracts and daily closings in bar chart form next to each other?

that would be too inconsistent and spikey. it would have to be smoothed out."

Along with Inventory, new listings....why not? As you stated, so much depends on broker followup on listings for their proper assigned status in its in contract life, closings are easily indicated and maintained by Acris. While it is important to note the contracts signed metric, it is equally important to note contracts that actually close.

A recent stock debacle was Spongetech if your familiar with it.They were advertising in every sports stadium. It was reporting unbelievable new sales figures for 2 years, yet who was tracking actual shipped goods. It created an atmosphere to hype the stock.

It is not outrageous to think brokers create a high fever atmosphere with "contracts signed." It is unprovable until closed. As an example, if you have a metric showing 800+ contracts signed each month for 90 days,and then a metric showing 600 closings each month for 90 days, though it is lagging it provides confirmation for the previous quarter and/or a trend.

Let's look at your chart starting in January '08. The disparity in contracts signed to closings is alarming. And March '08 would have already signaled a big problem between perceived market conditions with actual.

Off Topic: must read CRE article of the day (from MISH):

http://globaleconomicanalysis.blogspot.com/2010/02/commercial-real-estate-apocalypse-in.html