**Since March 2010, Mr. Bernstein has served as Senior Vice President, Research, for AH Lisanti Capital Growth, LLC, a registered investment adviser. This commentary solely represents Mr. Bernstein’s views and opinions as of July 21st, 2010, does not constitute investment advice and does not depict the views of AH Lisanti Capital Growth, LLC.
Action in the bond, stock and commodities markets have been very confusing to me as of late. The stock market, which has broken critical technical levels (see my recent piece "Critical Juncture") has "hung in there" recently, partly due to the extremely bearish sentiment of investors, who typically "get it wrong" as a group in the short-term.
But much more perplexing to me than the stock market's refusal to completely barf over the stream of negative macro economic data points and poor technical action, is the lack of spread widening in the bond market in the face of plummeting bond yields. I know I'm talking "inside baseball", so let's back up and define some terms.
Risk spreads are the premiums demanded by bond buyers above the "risk free rate" (embodied by short-term US treasury rates - peanut gallery please refrain from Uncle Sam is broke jokes) in order to be persuaded to hold bonds with some non-zero risk of default. When bond investors get nervous about bond issuers ability to pay back their debts (weakening economy and/or liquidity crisis) these spreads (yield differentials) tend to "blow out" (widen). Shockingly, while bond yields are "breaking down like a soup sandwich" lately (their prices are surging and yields falling, indicating inflation pressures in retreat), riskier bonds are rallying almost as much, keeping spreads in check. As you can see from the chart below, which I borrowed from the Bank Credit Analyst, bond spreads have not blown out during the recent treasury rally. This is likely explained by the new peak in return on capital being reached by corporations (as their returns on investment are far eclipsing their cost of capital). This large spread is a cushion to corporations' abilities to support their debt, even if sales and/or profit margins were to contract to some degree.
Many investors believe that the bond market is less flighty and more rational than the stock market, particularly in light of the bond market's sniffing out the world financial crisis before the stock market did. For this reason I take the strange behavior being exhibited by bond spreads seriously. If one were to assume a less omniscient bond market, one could explain the current situation thusly: Investors are worried about deflation and are piling out of stocks and into bonds, they are also blindly buying credit risk in a desperate grab for yield. The expectation would be that eventually the slow economy would punish the yield seeking buyers by haircutting their bond prices (raising yields) and blowing out spreads versus treasuries.
But what if bond buyers are actually very smart and rational? What if they actually believe that the economy will slow, unemployment will remain high and inflation will not be a problem for a long time? What is they also believe that this does will not result in a slow down bad enough to cause bond defaults, maybe just earnings disappointments? Then bonds rallying across the risk spectrum would make sense. Interestingly, I believe that the recent action in gold prices is expressing belief in the same theory.
Gold has been a one way bet for the last couple of years. It has seemed to be "insurance" against two tail risks (unlikely but highly damaging occurances). In the first case, the market imagines that the economy stabilizes and begins to turn around and all of the bank reserves that have been stashed away and creating no economic growth because they are not being lent out, come rushing back into the market too rapidly for the Fed to mop them up, creating an economic overheating and inflation. In this case gold would participate in the inflation trend. On the other side of the coin, what if the economy went into a deflationary tailspin and the only way for the U.S. to pay of it's debts was to allow the dollar to crash, print money and devalue our way out from under our debt. In this case our cheapened dollars would barely buy anything, causing the hyper-inflation seen in undisciplined emerging economies in the past (think Argentina a few years ago). Gold would certainly retain its value and explode to the upside in a relative sense, under such a scenario. Recently, however, gold has tended to be more and more correlated to a rising stock market, and has felt more like a momentum driven risk play. As such, it has grown "tired" as the stock market has rounded over and churned. Click (View image) to see a gold chart which appears to be potentially topping out (note that during gold's multi-year run, it has had corrections of this duration and magnitude before and later moved on to new highs, although these seemed to follow more parabolic rises than the recent run.)
I like the self consistent picture that seems to be being painted by stocks, bonds and gold right now. In short, the action of all three assets suggests that the economy is slowing....enough to dent corprate earnings and stocks (though downside from here should be limited - stocks always go to extremes so maybe 10 - 15%), while tail risks (deflationary spiral/hyper-inflation or overheated recovery) are off the table, implying riskier credits will be okay and treasury bonds are not set to tank anytime soon due to the lack of economic traction. Oil, which is stuck in a trading range, also seems to concur. If economic growth were really about to plummet oil would be acting a lot worse. We will see if this explanantion plays out, for now it seems to best explain the interesting trends I see in the markets. Technical action in the stock market still leaves me cautious on equities, but I'm not in the deflationary spiral camp and I don't think Mr. Market is either.
A: Interesting piece out in the journal interviewing David Rosenberg and James Paulsen. With my time completely dedicated to finishing this project, I'll be referencing more macro articles over the next few weeks. I am definitely in the Rosenberg camp on this one.
Via The Wall Street Journel's, "A Mid-Year Bull vs. Bear Investing Smackdown":
Q: Where is the market headed the rest of this year and over the next 12 to 18 months?Interesting to hear Paulsen's last bit on becoming bearish if inflationary pressures start to creep in, causing bond yields to rise. Many, including yours truly, have discussed the 'end game' of this crisis and actions taken to stem this crisis as being a collapse in bond markets sending yields much much higher. But that phase seems to be years away. Right now, deflation is the main concern and the drive to safety is constraining US bond yields. That game lasts until the market starts to perceive the safety of US Treasuries in a different way. Think Greece, Italy, Spain, and Portugal. Sure we are the great US of A, but you never know when the markets may force the fed's hand and start sending the longer end of the curve for a ride. Again, I think that is years away and deflationary pressures are still in the pipeline for us to go through first. Perhaps a 2012-2013 issue. Maybe later.
PAULSEN (the Bull): Investor optimism, which got ahead of itself in early spring, has been checked, considerable liquid asset holdings are on the sidelines and concerns about a potential double-dip recession seem overblown. Recently the dividend yield on the Dow Jones Industrial Average rose above the 10-year Treasury-bond yield for the first time in decades, and the price/earnings multiple on year-end estimates has declined to about 13.
With interest rates and oil prices down, earnings still rising and policy officials showing no inclination of taking the punch bowl, the upside potential for stocks is encouraging.
ROSENBERG (the Bear): The market is not cheap. By the end of secular bear markets, stocks trade no higher than P/E multiples of 10 and at least a 5% dividend yield. We very likely have quite a long way to go on the downside.
The market moves in cycles -- 16- to 18-year cycles, in fact. This secular down-phase began in 2000. The best we can say is that we are probably 60% of the way into it. In a secular bear market, rallies are to be rented, not owned. We're in a primary bear market, not unlike what we endured from 1966 to 1982. Back then, the principal cause was inflation; this time, it's deflationary debt deleveraging.
Within the next 12 to 18 months, I can see the Standard & Poor's 500-stock index breaking back below 900 [it's currently at almost 1100]. A substantial test of the March 2009 lows cannot be ruled out.
Q: What should investors keep an eye on?
PAULSEN: The job market will likely determine conditions in the stock market during the balance of this year. Either job growth will soon accelerate or concerns about a double-dip recession or a crawling recovery will overwhelm stocks.
ROSENBERG: The economic recovery phase is behind us. The boost to growth from the inventory bounce has run its course and the stimulative effects of fiscal policy will diminish amid a public backlash against increases in government debt. That constrains the government's ability to try to fine-tune the economy.
Even if we manage to avert a double-dip recession, the chances of a growth relapse in the second half of the year are higher than the equity market assumes. The U.S. unemployment rate will stay near double-digit terrain, and inflation and interest rates will remain low.
A market priced for peak earnings in 2011 could be in for some pretty big disappointment. We'll see that with guidance from companies when second-quarter results stream out in the next few weeks.
Q: What should investors do with their portfolios?
PAULSEN: We recommend sectors most sensitive to the economic cycle, such as junk bonds and energy, materials, technology and financial shares, which have been left for dead. Now that China is done tightening, the emerging-market story may regain prominence. Cash offering zero returns (with today's ultra-low interest rates) and relatively "risk-free" 10-year Treasury bonds at a 3% yield don't offer much. Defensive economic sectors like health care are relatively overvalued. We like small-cap stocks and industrial stocks longer term, but both also seem a bit overvalued.
ROSENBERG: My primary theme has been SIRP -- "safety and income at a reasonable price." Yield works in a deleveraging deflationary cycle. The median age of the boomer population is almost 55, there is very strong demographic demand for income and with bonds comprising just 6% of the household asset mix. So appetite for yield will expand.
Within the equity market, squeeze as much income out of a portfolio as possible -- a reliance on reliable dividend yield and dividend growth makes perfect sense. Gold makes up a mere 0.05% of global household net worth, so small incremental allocations into bullion or gold-type investments can exert a dramatic impact. And central banks, selling during the higher interest rate times of the 1980s and 1990s, now are reallocating their reserves toward gold, especially in Asia.
Q: What makes you most enthused about the investing environment?
PAULSEN: If 2000 was the era of "irrational exuberance," today must be the era of "irrational pessimism." Too many are too pessimistic and are greatly underappreciating potential investment returns.
ROSENBERG: We are entering into a period of stable consumer prices that should last at least for a generation. This will help prevent erosion in real household incomes.
Q: What could happen that would turn you into a bear/bull?
PAULSEN: I could become a bear again if the massive policy stimulus introduced during this crisis prove too highly inflationary. That could raise bond yields, force more extreme Fed tightening and lead to a collapse in stock P/E multiples.
ROSENBERG: Signs that the debt deleveraging cycle has run its course. A new "killer app" or major technological breakthrough. A sustained decline in oil. Structural economic reforms in the world's "surplus saving" countries like China, India and Germany that stimulate their domestic consumer spending. Progress toward working our way though the repair process of the balance sheets of domestic households and businesses.
As for the reflation, it was always built on an unstable foundation of stimulus and a fed engineered dollar carry trade. So of course it would not last forever. The difference I find myself in lately with colleagues and friends about these topics, was the artificial and unsustainable nature of that reflation; whereas many looked at the rebound as a solid, economic recovery. Clearly this seems not to be the case. We are yet to see the unintended consequences of all the policy actions taken to stem this deflationary debt crisis. For now, its kick the can down the road as long as we can. As many wall street trades tend to go, that works until it doesn't anymore.
A: Here is an excellent summation on the first half of 2010 by Frederick Peters, President of Warburg Realty. Fred really combines his experience and wisdom with his 'in the field' observations, anectdotal reports from his agents, and whatever data he has access to for this report. From where I am standing, the observations are spot on. The entire article is worth a read, with some highlighted points to focus on. After you read this, go back and check the Real-time Contracts Signed (direct from broker updates signaling the pace of listings entering contract from a previously ACTIVE state) chart I posted last week and you can see the confirmations in the data.
From Frederick Peters, "Warburg Realty Mid Year 2010 Market Review":
The second quarter of 2010 behaved like March in the old adage: it came in like a lion and went out like a lamb. April was the acme of a sales avalanche which began gaining force in the fall of 2009. Throughout Manhattan and western Brooklyn residential properties of every category were snapped up, often with competitive bidding, at prices averaging only 10-15% below the 2006/2007 peak. Numerous all time price records were set, especially in mid-sized and larger apartments, during March and April. Confidence and the stock market surged higher.Thanks Fred! Keep the reports coming in.
Buyers began emerging and becoming active during the fall of 2009, as gradually rising prices made them apprehensive lest they miss the opportunity to purchase while the market was still depressed. The wave of purchasing gained traction during the winter, and by March inventory had dropped from a 19 month supply to an 11 month supply, essentially normalizing the marketplace. Larger properties saw particularly robust gains during this period. While the absolute top of the market (properties asking $20 million and above) remained sluggish, demand for properties of six to twelve rooms was intense. It was precisely these properties for which demand had declined so precipitously during the period between September of 2008 and September of 2009. There was little available in this category, especially on the Upper East and Upper West sides, and only those buyers who acted quickly and aggressively succeeded in making a purchase. The early months of 2010 were replete with cognitive dissonance: buyers simply could not believe that they had missed “the bottom” and that failure to act decisively once again left them empty handed just as it had three years earlier!
The smaller apartment market, which had suffered less during the recession, rebounded less dramatically. The one- and two-bedroom markets did see significant absorption, but with lesser price increases and little competitive bidding, as supply for the most part continued to outweigh demand. The inconvenience surrounding construction of the Second Avenue subway depressed prices along that corridor and helped moderate demand for the postwar inventory which makes up the bulk of the housing stock north of 59th Street and east of Third Avenue. In the Village, in which the housing stock remains primarily rental, scarcity drove the market as it had before the recession, with many buyers competing for the few available offerings, especially in the larger two- and three-bedroom categories. In both Tribeca and the Financial District an overhang of unsold inventory from the condo construction boom helped keep prices moderate, while at the same time demand remained strong for the “old” Tribeca lofts, with their high ceilings and enormous windows, in the prewar industrial buildings for which the neighborhood was originally known. In Williamsburg, developers responded early and dramatically to the recession, slashing prices at their buildings and guaranteeing a level of activity which was the envy of most other emerging and more recently gentrified neighborhoods.
As April moved into May and May into June, first economic and then seasonal factors came to bear on the marketplace. Debt crises in Greece and Spain and a falling euro sidelined many Eurozone investors whose interest in New York real estate had buoyed the condo market for years. In our new global economy those European debt concerns began to weigh heavily on OUR equity markets as well. Consumer confidence here at home was further shaken by the program trading driven rout in stocks on Thursday May 6, which temporarily reduced many issues to near zero values. Although the market rebounded, the confidence did not. The jobless nature of our recovery, our mounting national debt burden, and government gridlock, both in Washington and Albany, further depressed the Dow, which lost value during much of June. And then, of course, summer arrived.
Real estate purchasers react in different ways to times like these. While recent developments have certainly taken the sizzle out of our market, deal flow remains healthy as buyers see a home purchase as an alternative to stocks and bonds, with significant collateral benefits. The latter half of June, July, and August are always slower in the residential sales, as both buyers and sellers spend more time out of the city. But with the market a little slower, real opportunities exist for buyers. Some sellers will still be holding out for pie in the sky, but for now that mad moment seems to be over.
Since March 2010, Mr. Bernstein has served as Senior Vice President, Research, for AH Lisanti Capital Growth, LLC, a registered investment adviser. This commentary solely represents Mr. Bernstein’s views and opinions as of July 15th, 2010, does not constitute investment advice and does not depict the views of AH Lisanti Capital Growth, LLC.
Bob Knakal of the eponymous New York City commercial real estate brokerage Massey Knakal put out his "Summer Commentary" recently. While Bob has every reason to paint a rosy picture of New York City commercial real estate (his firm is consistently the largest broker in NYC in terms of number of deals due to their dominance in sales of smaller buildings). Bob actually is as much of a straight shooter in his market commentaries as he is in real life....no grain of salt needs to be taken with regards to the following:
According to his summer commentary "the acute imbalance between supply and demand today appears to be impacting the market more than it usually does. Presently there is excessive demand met by a relatively weak supply of available properties for sale." Sound strange? It is actually highly intuitive. Those who are not over-levered or facing maturity defaults (see my recent piece "Real Estate & Banking Reality Check") don't feel a great need to sell into a market overshadowed by a slow economy and high unemployment and dominated by vulture buyers. Meanwhile distressed sellers are being thrown lifelines by their banks. As opposed to the popular belief that they are under-capitalized and can't afford to take the losses (they have all taken TARP and raised equity), banks simply imagine a better time to liquidate REO (real estate owned) than today and also don't want to miss Wall Street earnings estimates by prematurely calling in loans. Knakal goes on to profess that investment sales volume will increase by at least 40 percent year to year in the second half of 2010 as sellers seek to beat the increase in cap gains taxes, pent up demand for 1031 exchanges is released and (my words not his) funds put together in past years invest it as opposed to handing it back to their limited partners (at least they can continue to collect fees).
Interestingly, a similar scenario seems to be playing out in other markets around the country (particularly Boston, San Francisco and Washington). A recent Time Magazine article entitled "Is Commercial Real Estate Bouncing Back", quotes Mike Kirby of respected REIT research firm, Green Street Advisors, saying that "It's mainly Arab money. They have been the main source so far. The German syndicators are back in business. They've been toeing around the market. There's also been interest from sovereign wealth funds of all stripes.". Kirby contends that prices for commercial real estate are up 20% off their lows, which has not yet been captured by market indexes which track closed rather than announced transactions.
A Dow Jones Newswires article last week entitled "Commercial Real Estate Bargain-Hunting Makes Bargains Scarce" discussed how investors are bidding aggressively for assets in foreclosure, paying as much as 90 cents on the mortgage dollar. So, despite delinquency rates of 10% versus a more normal 1%, according to Jack Taylor a managing director and head of Prudential Real Estate Investors global high-yield debt group, "There is no such thing as a distressed asset". According to Maury Tognarelli, President and Chief Executive of real estate management company Heitman LLC, "Demand has exceeded supply, and as a result, the pricing is just not appropriate for the risks still there". John Murray a senior vice president and portfolio manager at PIMCO added "this makes some investors think a rapid, broad-based recovery is underway; but these transactions don't paint a good picture of what's happening for a substantial segment of the industry, where properties remain under-capitalized".
From my perch covering regional and local banks this promises to be an interesting earnings season as construction and development loan write-offs hand the baton to maturity defaults on commercial owner occupied and investor owned property loans. Troubled Debt Restructurings (TDRs) will be the topic of discussion for those with significant numbers of maturing loans, however in many markets, commercial bank loans were largely made with 10 year or longer maturities (5 with an option for 5 more was typical in NYC) and these loans will not be recognized as problems as long as payments continue to be made. Considering the generally well capitalized status of survivor banks (there are certainly many zombies that will be merged and purged by the FDIC) I don't expect properties to be blown out with 20 - 30% liquidation discounts. The banks that acquire troubled loans through FDIC assisted takeovers have strict reporting requirements which will enable regulators to see whether they are leaning too hard on loss sharing deals by liquidating bad loans willy nilly.
According to a recent Bloomberg article, data from Real Capital Analytics shows commercial real estate sales rose 58% year-to-year in the first half, despite running at a quarter of the rate of the prior six years. In my mind, while some unique circumstances have conspired to cushion commercial real estate's fall, the avoidance of "liquidation discounts" is probably a positive for the economy (prevents further deflation due to acquirers with super low basis costs slashing rents) and the improved liquidity being evidenced in the markets bodes well for the commercial real estate market, the banking system, and by extension the economy. If we can avoid a bear market in stocks, that would help too.
Commercial Real Estate Shows a Faint Pulse
Commercial Real Estate Crisis Averted?
The Accidental CMBS Recovery
Away for 4 days and back to work Thursday. While we finish final structural improvements and front end design UI to wrap around the analytics platform, here are a few more sneak peaks comparing the Upper East vs Upper West sides for you. Consider as beta for now as we are yet to implement a few structural upgrades to data. The new site was designed to allow subscribers with the flexibility to customize charts to submarkets and price points. Here are just a few examples without the new UI code:
2 YR TRENDS OF PENDING SALES FOR ENTIRE UES vs UWS MARKET
2 YR TREND OF PENDING SALES FOR UES vs UWS 2-BATH (minimum) MARKET BETWEEN $1m-$2m
**Note: These are pre-launch snapshots and may not reflect the final version. We have a few major revisions yet to finish to enhance data quality and measurement quality for all statistics, that are not reflected in the above charts. Use at your own risk for now, as final numbers may change a bit for official launch when all coding fixes are fully implemented.
The new system was designed from the ground up around the idea that Manhattan is a highly segmented marketplace. In other words, there is no ONE market. Rather, Manhattan consists of many various sub-markets and price points ranging from studio apartments in FiDi to 3BR/3BTH+ apartments in the Upper West Side; and everything in between and outside of that. I'll try to give some more sneak peaks as we progress towards launch.
Back to posting end of week!
A: MillerSamuel did some nice upgrades to his data search engine last week, and I was able to play around a bit with it. I figured it might be interesting to check out the Median Sales Price for Manhattan over the past 10 years to try to visualize the boom, the adjustment, and the reflation we experienced. Here goes.
The reason I use Median Sales Price over the Average Sales Price is to filter out those occasional uber high-end sales that tend to happen from time to time. Certainly the conversion of The Plaza and new dev 15CPW highly skewed average sales prices from late 2007 to late 2008 when deals closed and were captured by ACRIS public record - and then counted in the reports that we analyze. I think when looking at this 10yr chart you get a fairly good idea of what this market has done in reaction to a credit boom, a credit bust, and a fed engineered reflation environment.
Via Miller Samuel Aggregate Search Data Engine:
This is for all Manhattan sales, ranging from studios to 4BR+ apartments. Clearly Manhattan is a highly segmented marketplace comprised of many submarkets with varying price points - something that makes this market so unique from many other local markets across the country. What we see here is a general story, not so much a specific one. What would be interesting to parse is how the different submarkets behaved over time. In other words, how did the Studio market hold up relative to the 3BR+ market from late-2008 to mid-2009; and so on? Given the nature of the crisis we faced, it was the high end market in Manhattan that virtually shut down and saw the greatest percentage drop in price action from peak to trough. These are the challenges I'd like to tackle to add more transparency for analyzing Manhattan residential real estate in the months ahead.
I wish everyone and happy & safe 4th!!
A: With Q2 report now in the books, we have the most recent lagging look at what the market did 3-6 months ago. The story is basically the same, with the usual discrepancies between the largest brokerage firms. Streeteasy is becoming the go-to report only because I trust them the most and the in house tech guys that parse the available data to come up with the most accurate measurement of what's going on out there. The story is basically the same: YoY Sales Surge, YoY Prices Up, and Qtr-to-Qtr Prices Mixed. As discussed previously, Corcoran's report was in fact the least rosy of the top brokerage firms. But what is happening NOW????
What these reports do NOT show is the real time movement of Inventory in the most recent months that basically define what is going on out in the Manhattan real estate market today. That's where the gold really is! The future is real time and the future is almost here!
What I wonder about is how the most recent adjustment in equity markets may have affected confidence in buyers? Where are bids coming in now? Are they high enough to get deals done and a listing status changed from ACTIVE to CONTRACT SIGNED? Are buyers signing contracts or getting nervous from market selloffs? This is what we need to know!
From my real time data, the answer is quite simply: This market has definitely slowed!
Take a look at the Month-to-Month pace of Contracts Signed; updated directly from the brokers maintaining the listings in the Manhattan real estate market:
Two things are clear in this one chart:
1) Sales pace was unsustainably strong for Feb-April, during what are normally our most active months
2) The dropoff in sales pace began in late April and continues today
Now, we have to be careful how we interpret this. Part of it is seasonal and to be expected, part of it is a result of equities selling off / negative wealth effect, and part of it is how confidence changed recently with the very active Feb-April months (sellers confidence rose and got anchored to expectations of higher bids seeing comparable units sell fast / buyers confidence started to wane). What we can be sure of is that the market today is not seeing the pace of deals being signed, like we did 3-4 months earlier. This is to be expected for most calendar years come May & June, but unfortunately 2008 and 2009 were not 'normal' calendar years. In 2008 we had the beginning of the wrath of doom from the credit crisis. In 2009 we had a delayed seasonality as fear levels rose and sales volume dropped off a cliff.
The reason we cannot go back farther for this chart is because of The New Dev Problem; where we found a mass upload of 'contracts signed' by sales offices in late 2007-early 2008 for deals that in reality were signed into contract up to 24 months prior. The result was inaccurate data, poisoning an otherwise accurate platform to measure the movement of this market's inventory from one state to another:
"In reality, unreleased units were for sale; they just were not released to the public and had no record created that the unit ever even existed. Therefore, what we have is a situation where the sales teams uploaded a batch of signed contracts in one swoop (for ease) well AFTER the actual contract signed date and leaving us with a new unit whose first history record is set to CONTRACT SIGNED. The result is that anyone trying to measure both active inventory and pending sales will have a problem as a result of how these new developments handled the maintenance of their inventory.That last part is quite important when understanding why we did what we did. I personally sifted through thousands of these 'inaccurate records' and verified that contracts signed in mid 2006 and early 2007 (the height of the boom), were in our broker sharing system and on record for being signed into contract much much later; in early 2008. So, naturally the charts show a surge in pending sales in early 2008 - when in reality the surge was late 2006 into mid 2007. The decision was made to remove the poison.
As it is now, we have to pull out all new devs with no prior ACTIVE state from our data so as to not poison all the efforts we made to enhance accuracy for measuring the existing resale marketplace in Manhattan."
Moving on, what you need to know is that these quarterly reports are lagging and not necessarily representative of what is happening today in the Manhattan real estate markets. The market peaked in 2007, adjusted in late 2008, troughed in early 2009, progressively improved for the past 14 months leading to a mini-frenzy from Feb-Early April, and slowing down now. It's simply too early to tell where bids are coming in across the broader market and submarkets. I am both seeing & hearing more reports though of buyer hesitation and the data is confirming this.