10YR Manhattan Median Sales Snapshot: 2000 - 2010
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!!
Posted by Fred
Fri Jul 2nd, 2010 04:11 PM
man, this chart is just dying to retrace the $500k to $600k range.
Posted by lesterdiamond
Fri Jul 2nd, 2010 09:06 PM
Noah,
This chart and current environment scare me as much as any bear/realist. As an owner since 2006 (Central Village), I'm praying that RE prices won't correlate stock prices if they re-test new lows like 16 months ago.
- I can't imagine many indivual investors (potential buyers) with NEARLY the same equity exposure as they had in 2008. And I'm not talking about the same type of individual investors (late to the party) who tried to catch a falling knife in Apple this week.
- Bonus money was good last year and likely to be reasonable this year. Derivative & Commodities departments hired several thousand workers in '10
- For the 80% of the people who actually are working in a vast array of industries, those folks are making money
- Tighter underwriting guidelines shouldn't have affected coops as much since boards are pretty much in line with lenders today.
- There aren't many foreclosures in Manhattan (not including Harlem), especially coops.
- Overseas money weren't helping drive coops higher due to board restrictions so I'm not too concerned with a slumping Euro
Back in 2003 when RE prices really started exploding, I'd like to think that Manhattan RE prices went higher because it was somewhere else to invest money in a terrible bear market (along with a bounce from 9/11 prices and massive credit expansion).
Is there any hope that we could see something similar to 2002 with VERY low interest rates, higher savings rate and momentum from the bounce off 2009 lows? Especially when people pull out money in stocks because of the Bush tax credit expiring? Any chance this money could come to NY real estate?
I'm not talking about a rally in RE. I'm just talking about not having another drop if the DOW were to test 6000 or lower.
It would also be interesting to view a chart with price per sq. foot for maintenance & taxes. Buildings are typically assessed with the average values of the last 5 years and monthlies have been going up in my buildng at least 14%/year. A recent board meeting claimed that placing revenues in some type of emergency fund was healthier for the building than not raising maintenance??? Why would a person want to pay 600k for a $650 square foot place and pay $1150/month for dues?? and $1300 in two years from now? That's half a mtg payment at these rates! This coop has PLENTY of equity and has the opportunity to refinance their small 2nd lien at a much lower rate.
Thanks for allowing me the long post. Love your site. Keep doing what you are doing.
Lester
Posted by Sechel
Mon Jul 5th, 2010 02:43 PM
This chart really shows how much we are above the long term mean. I would agree with the post above about how scary that seems except the stock market is trading way below it's average p/e or dividend yield over time. Not sure what to make of all this asset inflation.
Posted by OT
Mon Jul 5th, 2010 08:07 PM
Not sure I would agree that we are trading above a long term mean based on 10 years of data. If we look at the trend extended over a 20 year period, the trend looks much less dramatic (although certainly plenty of room for downside).
Posted by Fred
Tue Jul 6th, 2010 09:28 AM
50% above the 10yr average isn't a lot? On a 20yr basis, it would be even higher above the average.
Posted by OT
Tue Jul 6th, 2010 10:08 AM
Fred - 50% above a 10 yr average coming at the tail end of 10 years of flat movement says more than just looking at the latter 10 yr period.
Posted by Fred
Tue Jul 6th, 2010 11:12 AM
OT - not sure I understand but am just eyeballing the chart which looks like $600k to $650k for the 10 yr average, which would put the current $900k about 50% above the long run average. just as one could argue the market was undervalued during 2000-2005; one could argue it is overvalued during 2005-2010. the average is what it is, obviously market going forward is what a buyer and seller will agree to, which may or may not regress to the long run average. but the data is a good perspective on what the market has been. imagine what 2005-2010 trend would have looked like without I/Os, ARMs, high LTV Jumbos etc.? some might argue that the long run average is high and adjusted for the spike, should actually be in the $500k range.
Posted by Fred
Wed Jul 7th, 2010 08:42 AM
An appropriate quote from RealClearMarkets this AM in connection with NJ's attempts to balance the budget:
"Yet there is another alternative, which Christie can see right across the Hudson River, in New York State. It's called managed decline. Whole areas of New York have been semi-depopulated since the state went on a war against business and wealth beginning in the 1960s, prompting Eliot Spitzer to declare in 2006 that upstate New York resembles Appalachia. The incredible earning power of Wall Street has kept downstate from following suit, though increasingly the New York City economy looks like a donut, with the middle class hollowed out."
The Manhattan as a "donut" metaphor seems quite appropriate. It may be fashionable for some to quip that home ownership in Manhattan is ultimately an ego-event, but the truth is the middle is quickly disappearing.
Posted by kevin
Wed Jul 7th, 2010 09:34 AM
A better measure might be the price per sq ft over time, both adjusted for inflation and not. the top 1% will probably still distort the numbers, but I think it would give a better picture overall.
-K
Posted by Noah
Wed Jul 7th, 2010 10:14 AM
i dont trust price per sft...its inflated big time and nothing to verify for coops which are missing tons of size estimates, and therefore excluded from the measure.
Posted by anonymous
Fri Jul 9th, 2010 10:36 AM
Why assume that concentration in wealth will continue. The last 10 years is a poor guide as most of the concentration was driven by leverage, which is now decreasing.
Posted by Fred
Fri Jul 9th, 2010 01:15 PM
http://www.zerohedge.com/article/guest-post-how-increasing-inflation-could-affect-housing-prices-correlating-mortgage-rates-a?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+zerohedge%2Ffeed+%28zero+hedge+-+on+a+long+enough+timeline%2C+the+survival+rate+for+everyone+drops+to+zero%29
Interesting article from Zero Hedge on the correlation between mortgage rates and housing prices. One way to think about the recession is that housing had a de facto rate increase in the form of an implosion in structured finance. They didn't HAVE to take the punch bowl away this time; the bankers drained it and smashed it to pieces all by themselves. The article talks about a correlation lag of 3 years between rate changes and price reaction. As I've been harping for quite some time, the resumption of normal lending practices (i.e. by by I/Os & ARMs & no docs), the net effect was to rein in credit; arguably harsher than a mere increase in the nominal interest rate because we went from 120 mph to 0 mph in many cases.
As for the argument that NYers just make more money over time, that certainly has been the case. But as someone points out, how can anyone make predictions about future job growth in Manhattan at this point, much less income growth? If the lame ducks get their way, they are going to cram through some very fugly tax hikes this Fall and it will hit higher cost areas.
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