Upcoming Q2 Report: Corcoran's Likely To Be Least Rosy

Posted by urbandigs

Wed Jun 23rd, 2010 08:21 AM

A: The market is definitely experiencing a seasonal slowdown right now. You can blame it on the volatile equity markets, the declining euro, or the decline in confidence/wealth effect with all the sovereign debt concerns floating around. I'm going to stick with 'the market simply needed a breather' line. After what was a very active 4 months to start the year, seeing a surge in sales pace, it's clear that it was unsustainable and normal considering the seasonality of our markets. Looking ahead to the upcoming Q2 report that is released in about 9 days, expect rosy year-over-year reports from Elliman & Halstead; a bit less so from Corcoran! I'll explain.

First, here is another sneak peak at one of the charts in the upcoming UD 2.0 showing you the monthly pace of contracts signed direct from the real time Broker Status Updates tool that we have developed:


You can see from the tabs at the top of this sneak peak the huge tasks I've taken on to build this new platform. Unfortunately with a project like this, delays in launching are part of the process. From this chart you can see how the reflation (orange bars showing 2009) morphed into a bit of a mini-frenzy in early 2010 (red bars showing 2010). The latest monthly pace fell sharply to about 1,100 contracts signed for May and I expect this to fall to around the 900 level for June. This is normal, seasonal, and expected given the unsustainable pace from the 4-5 months prior.

On to the upcoming Q2 report.

Back in May I discussed, "Why The Q3 Report Will Reveal Improvement". Most people look into year over year comparisons of the market in order to filter out the noise that is associated with seasonality. Monthly and quarterly moves are useful in determining the general trend of the market, but comparisons to the same period one year earlier give a seasonally adjusted view of the health of the marketplace. It is for this reason that I believe:

1) Year-over-Year Comparison to Q3-2009 - It was the 3rd quarter report of 2009 that defined the downturn, a few months after the real trough in our market, as public record finally caught the sales that were signed into contract earlier last year. We are now heading into these negative defining reports, making y-o-y trends easier to beat.

2) Public Record Yet To Catch The Full Improvement - Due to the lagging nature of these reports, as time passes we will see how this market behaved for months that already passed. I can tell you that JAN-MARCH 2010 were very strong as tight inventory and strong demand caused some competition amongst buyers. The result was a sharp decline in days on market trends and listing discount measurements; as seen in the chart in my post, "Misinterpreting 'Bidding War' Statements From Brokers". With time, quarterly reports will gradual catch up with the progressive improvement right as we head into the two y-o-y reports that defined the downturn this market experienced.

Looking at the chart below, which shows you the Quarterly Average Sales Price Trends from 3 top Manhattan brokerages, we can visually see that Q2 and Q3 2009 reports were the weakest ones reflecting the adjustment we had.


Focusing on Q2 of 2009, you can see that Corcoran's price levels are significantly above those for Halstead & Elliman. Therefore, on a y-o-y basis, expect Corcoran to show a less rosy report than these other two big brokerages. Q3-2010 is a different story and likely will be a very good report on a y-o-y basis. As is usually the case, its very likely the market will be experiencing a different sales pace than the report suggests at the time of release due to the lagging nature of our marketplace. Time will tell!