Pending Sales / 90-Day MA Closings / Q1 2010 Preview
A: I'll try to get right to the point here for you guys. I continue to see Pending Sales stay at healthy levels after a short adjustment down from the surge we saw in contracts signed starting around mid 2009. My data shows Manhattan Pending Sales hovering around the 4,356 level right now; pending sales are contracts that were signed and are awaiting approval to close. This suggests a fairly strong upcoming y-o-y comparison when the Q1-2010 market report is released in early April. In addition, the 90-day moving average for closed sales clearly shows both the plunge and improvement this market experienced over the course of the last 18 months or so - that is pulled directly from ACRIS and is public record.
The data doesn't lie and it certainly does paint an interesting picture when you filter out the noise properly from the source data and assign the right rules to calculate different metrics worth following in the Manhattan residential real estate market.
Below is a chart comparing the trends for Manhattan Pending Sales (orange) vs. the Closed Sales 90-Day Moving Average (green) the past 4 years:
Consider this another sneak peak at what's to come here on UrbanDigs in a month or so. So what is this chart telling us?
1) First off, in my eyes, the 90-day moving average for closed sales (taken from a direct feed with Acris) clearly shows the roller coaster ride this market experienced starting in mid 2008. The plunge in sales was dramatic to say the least and if you want to really blow your mind you can do some digging into the plunge in DOLLAR VOLUME this market experienced as a result of the higher fear and mortgage market freeze up surrounding credit crisis at its peak; both for residential and commercial sectors.
You will notice the slight lag between Pending Sales and this 90-day sales trend due to the lagging nature of the sales process from contract signing to closing.
The improvement in the sales trend shows you the sustained increase in deals being signed since May/June of 2009 or so - I like to look at it as this market pricing IN fear leading up to early 2009 and pricing OUT fear over time as the reflation mentality took hold.
2) Second, pending sales dropped from about low 7,000s to about mid 3,000s in about 7-8 months time at the height of the crisis. The plunge was dramatic, the adjustment was dramatic, and it had a fierce, uncertain, scary feel to it. When it was happening nobody knew how far it would go or how long it would last before stabilizing. In hindsight, the % drop from peak varied across price points and took about 8 months to find a comfort zone; as noted right here on UrbanDigs in February 2009.
As sales volume started to rise with time, we topped out around the August-November period with pending sales hovering in the low 5,000s - we are now seeing these deals close and be captured by quarterly reports. The slight move down in pending sales was more a function of seasonality in December around the holidays then a new trend to the downside in sales volume - recall that in June, July & August we were averaging about 1,100-1,200 or so contracts signed a month as buyers swooped in with the fierce adjustment in price action. It shouldn't be a surprise that we could not sustain that level of activity for long. Over the past 30 days my new systems show 971 contracts signed and that was closer to 785 or so about 6 weeks ago reflecting the seasonal slowdown in December.
With pending sales holding at a healthy level I think its safe to say that when the Q1 2010 market report is released to the public on April 1st, we will see a stunning y-o-y improvement that could have some 'headline effect'. Just be prepared for it as it will be a function of an improving marketplace being compared to the report that marked the worst period of sales in the past decade or so; recall that Q1 2009 recorded only 1,185 sales, and I would not be surprised to see Q1 2010 sales come in around the 2,400 - 2,600 level! Let's see how close I get!
For now, as I attempt to setup appointments for clients I get these types of responses about half the time:
I have the tools in place to track these CONTRACTS OUT & OFFERS ACCEPTED broker status changes but unfortunately many brokers do not bother to update a listing's status to these "in between" settings in their respective broker sharing systems. The natural progression in regards to how a broker handles a new listing that stays on the market and ultimately closes is NEW ACTIVE --> OFFER ACCEPTED --> CONTRACT OUT --> CONTRACT SIGNED --> CLOSED. It would be great if all brokers updated their sales listings as this progression took place in the real world, because having a listing whose internal status is set to OFFER ACCEPTED or CONTRACTS OUT doesn't change a thing for the active webad. For all intents and purposes, that listing is still ACTIVE in the public eye. But its clear that very few brokers update each stage as it happens which gives me less confidence to those metrics for trend purposes.
Now, even though well priced apartments are seeing strong demand I continue to question the sustainability of this pace of signed contracts! That's just me as I continue to have macro concerns and worries over the withdrawal of stimulative policy and programs. I won't deny its happening, but I do question how long it will last.
GOOD PRODUCT w/ DESIRABLE FEATURES + PRICED RIGHT = STRONG DEMAND OUT THERE
Simple - so don't interpret it as anything other than this. No, you can't price at peak levels and expect multiple offers. No, you can't have a property priced high and in need of a total gut renovation and get multiple offers over ask. And No, you can't have a property with no light or view fetch top dollar and sell fast today! If you price high and test the market or have a property with features that make it a hard sell (low floor, undesirable location, lack of sunlight, lack of view, in need of major work), you will find the market may be very different than what I am describing here. My business has been quite active for about seven months or so with about $4.1m in closings the past four months, $4.4m or so in contracts signed pending closing, and another $7.8m or so in active negotiations across varying price points in Manhattan right now. All of my deals seem to fit in with the updated range of where I see this market trading right now. I leave it to you guys to tell me if you see something different!
Posted by Keith Burkhardt
Fri Feb 19th, 2010 11:20 AM
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?
Posted by Noah
Fri Feb 19th, 2010 11:47 AM
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.
Posted by QST
Fri Feb 19th, 2010 12:32 PM
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?
Posted by anonymous
Fri Feb 19th, 2010 12:48 PM
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
Posted by Noah
Fri Feb 19th, 2010 04:47 PM
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.
Posted by Noah
Fri Feb 19th, 2010 04:52 PM
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?
Posted by Noah
Fri Feb 19th, 2010 05:33 PM
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.
Posted by Jay
Sun Feb 21st, 2010 10:01 AM
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?
Posted by Noah
Sun Feb 21st, 2010 11:00 AM
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!
Posted by Jay
Sun Feb 21st, 2010 12:57 PM
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!
Posted by truthskr10
Mon Feb 22nd, 2010 11:42 AM
"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.
Posted by truthskr10
Mon Feb 22nd, 2010 11:59 AM
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.
Posted by Thisson
Mon Feb 22nd, 2010 02:34 PM
Off Topic: must read CRE article of the day (from MISH):
http://globaleconomicanalysis.blogspot.com/2010/02/commercial-real-estate-apocalypse-in.html
Posted by coach handbags
Thu Aug 12th, 2010 09:55 PM
we have multiple offers and all cash offer over ask that is about to be accepted..we are waiting to hear how the seller would like to handle the other offers as we are negotiating privately for now given the board is on the tougher side