Crains: Manhattan Luxury Market Still Rolling

Posted by urbandigs

Wed Dec 29th, 2010 09:50 AM

A: Quantifiable trends! That is what we want and need! Something that we can trust and verify to see whats going on out there. All too often the media will utilize quotes from the top producing teams out there that have hired PR firms to get their own business more exposure. There is absolutely nothing wrong with this and its part of big business in this fast paced real estate market. What you need to look out for is whether there is an agenda there? How many times is that top producer showcasing one of their high end exclusives as part of the story? Quite often! For me, one team's production is not a market make! So lets look at the entire market's performance instead and look for trends we can quantify to see if one segment of this market really is over or under-performing!

Crains New York reports, "Luxury apartment sales close 2010 on high note":

Nine apartments asking more than $4 million went into contract last week, according to brokerage Olshan Realty. By comparison, during last year's Christmas week, no apartments over $4 million went into contract, according to Olshan Realty's records. Among the luxury pads that went into contract during the week of Dec. 20 were a seven-room, 3,500-square-foot duplex penthouse at 200 Eleventh Ave., which was asking $17.5 million, and a seven-room, 2,900-square-foot condo at 15 E. 63rd St. for $10.5 million.

In fact, the number of luxury apartments that went into contract so far this month, 52, rose 62.5% from the same period a year ago. UrbanDigs, an analytics and consulting firm that tracks Manhattan housing activity in real-time, confirmed the strong contract signing activity for luxury apartments last week. "Contracts being signed for properties over $5 million have outpaced the number of listings that either closed or fell out of contract," said Noah Rosenblatt, founder of UrbanDigs. "There is demand for $5 million properties."
Lets look at the data and see for ourselves - and you must always note that % changes vary wildly depending on how far back you look! The trend in the past 3-months may tell you one thing, but when you look back 1 or 2 years, you may see something totally different that tells you the bigger picture of where we came from and where we are now! Let me show you in pictures when we track only pending sales for units over $5m:

Manhattan Pending Sales >$5M - 1 QUARTER - UP 34.4%

5m-pending1.jpg
*we are a real time industry, focusing on the most recent trends in the last few months - the above uptrend explains and quantifies why brokers are reporting a rise in luxury properties entering contracts. Relatively speaking from 3 months ago, there was a 34% rise in luxury properties being signed into contract.

Manhattan Pending Sales >$5M - 1 YEAR - DOWN 3.5%

5m-pending2.jpg
*this 1-yr chart puts the recent move in better perspective. Its clear that the most recent move is not as strong as the move higher in this price point we saw earlier in 2010. I think there was a typo in the article, as the 60% move up was over a 2-yr period, when compared to late December 2008 after Lehman's failure and the high end market shutdown sending pending plummeting.

Manhattan Pending Sales >$5M - 3 YEARS - DOWN 33.3%

5m-pending3.jpg
*my favorite chart is the longest term chart we have, which really tells the full story of what happened before Lehman, the destruction of the high-end post Lehman, and the reflation to a lower trading range we see today. In this new trading range, we are seeing mini waves both up and down and today we happened to be at the top of a recent wave up from the slow summer.

Full tools to quantify the movement of Manhattan inventory from one listing state to another are available to subscribers. What you need to know is that Pending sales experiences:

Loss at the tail end --> signed deals that either close or fall out of contract are no longer counted as pending...
Gain in the front end --> as listings move from ACTIVE to CONTRACT SIGNED, it is captured by pending sales...

So, the trend is a function of the net gain or loss as each day passes - so its real time! Taking a look at the first chart, the 1 quarter chart above, you see a move UP from 61 to about 83 - a net gain of 22 deals. Hypothetically, this could mean that if ten $5M+ deals closed and came out of the measure then 32 new deals came in the front end for a net gain of 22 resulting in the trend up. That is how this new system works so its important for you to understand what these metrics are telling you!


Manhattan Sales Brief: Pipeline Solid for Q1

Posted by urbandigs

Tue Dec 28th, 2010 10:49 AM

A: I hope everyone enjoyed their holidays and the Blizzard of 2010! I also want to take this opportunity to wish everyone a very safe, healthy, and prosperous 2011! The Manhattan sales market, as expected, slowed down in the last two weeks as buyers, sellers, and brokers enjoyed the holidays. The first half of December was strong, seeing a continued strong pace of new contracts being signed. The last few weeks - not so much. This is seasonality and is both expected and normal. As we head into 2011, the pipeline of pending sales remains at noticeably higher levels than a few months ago meaning that we have fuel to fire a sustained rise in recorded sales as 2011 begins. Expect a dull Q4 report followed by a stronger Q1 report.

Lets go to the charts. Below is a monthly tally of new deals being signed into contract by all REBNY member brokerage firms - I grayed out December to give you an idea of where this month will close out (I can do this by viewing the 30-Day column in the Real Time Listing Updates tool available only to subscribers):

estimated-december.jpg

As you can see, December will see a slowdown in new deals signed into contract from November; as well as a tick down from the same period 1 year prior. However, due to the depth of the slowdown during the summer which led to a very weak pace of closings in Q4, it should be fairly easy to see a relative tick UP in Sales Trends in coming months. And that is what I expect. It seems to me that ACRIS sales are in the process of 'bottoming out' and are yet to reflect the rise in pending sales that took place during the course of October through early December. You can see this recent rise in activity relative to the slow months of August and September above.

Taking a step back to look at the bigger picture, it seems to me that the pipeline of pending sales (signed deals awaiting closing) is at noticeably higher levels than a few months ago. More importantly, today's level is in the midst of a general move higher compared to depressed levels from this summer. This should fuel a rise in recorded ACRIS closings as we get into 2011 and lead to a stronger Q1 report relative to the current quarter. Remember, that Q1's report will be released April 2nd, 2011 right at the tail end of our active season. Here is the chart showing you the last 9 months of ACRIS sales trends vs. Pending sales trends - notice the lag and the recent tick UP in pending sales (red line) that is yet to be reflected by the ACRIS trend:

pending-leads-acris-december.jpg

A quick look at the price points tells me that the tick UP in action occurred at ALL price levels - especially $2M and up. In fact, its the under $1M market that seems to be pulling back recently. Therefore, I would expect the following:

1. Q4 Median & Average Sales price trends to fall relative to Q3
2. Q1 Median & Average Sales price trends to rise relative to Q4
3. Q4 Pace of ACRIS Sales to fall noticeably from Q3
4. Q1 Pace of ACRIS Sales to rise noticeably from Q4


This is the first time that we have real time tools like this to track Manhattan's fast paced inventory and sales trends; so I am putting myself on the hook a bit with these predictions. However, I have faith in these tools and the utmost confidence in the integrity of our data after over a year of 'cleansing' out the data breaches. This is our first real test as we get Q4's report in about 5 days and ultimately get Q1's report in 3 months. Time will tell!


The "Square Feet" Mystery - Get That Floorplan!

Posted by urbandigs

Sun Dec 19th, 2010 09:07 PM

A: I'm dealing with this situation in reality and I see the NY Times feels its enough of an issue to put the story on its front page this weekend. The problem has to do with overstating square feet; specifically coops. My advice, visit the space yourself to measure it and focus on the dimensions in the floorplan! Never, and I mean never, be bullied into bidding up for a coop based on price per sft arguments. Lets discuss.

NY Times reports, "The Elusive Measure Known as the Square Foot":

The tape measure does not lie. But when it comes to measuring the square footage of New York City apartments, the tale told by the tape can be exaggerated, massaged, misrepresented and manipulated.

There are willful -- and legal -- tactics to make a space appear bigger on paper, like including common spaces and elevator shafts in the calculation of an apartment's size. There are also honest mistakes that derive from historical inaccuracies, differences in how condominiums and co-ops are measured, advances in measuring technology, changes in measuring standards, and unusual layouts. Then there are outright misrepresentations.

Brokers are often careful to say they take no responsibility for listed square footage, and owners may honestly not know how large their home is. So, often, there is no obviously responsible party when discrepancies are found.

Frances Katzen, an executive vice president of Elliman, said a number of her clients had bought apartments that turned out to be smaller than they had been told. She counsels her clients to focus not on square footage, but on what similar properties in the same building have sold for in the past.
First off, you will notice that on the new UrbanDigs.com there is not one chart measuring sales price trends using price per square feet. The reason is because we simply do not trust it and if integrity is sacrificed we will not put that chart type up on this site. Second, I really do not understand the fascination with valuing coop property on a per square foot basis if we all know we can't trust the size estimates? With condos, fine I can understand the analysis since the square footage is documented in the offering plan. But most of our housing stock is coop, not condo. Therefore, buyers should go into a coop purchase knowing that the dimensions on the floorplan + the visit to the property itself are your best bets when figuring out total size and if the space works for you; NOT the listed square footage in broker marketing materials.

Since size does affect valuation, I agree 100% with Frances Katzen that buyers should devise a coop bidding strategy by analyzing same unit trades or similar comp trades; not a price per sft analysis using inaccurate data. I would take it one step further and advise coop buyers to:

1) VISIT the property themselves and see if the total interior size meets your needs - if you have visited 15+ similar properties you should have a very good idea of what works for you and how big 500, 1000 or 1500 sft really is

2) IGNORE the stated square feet that a broker markets a coop unit at, and instead focus on the dimensions stated on the floorplan - if anything, measure these dimensions yourself to check for accuracy so you can do the math yourself

3) SKIP the price per square feet valuation when bidding and instead focus on how either the same unit has traded in the past or how very similar units (what we call 'comparables') have traded at recently in the same building - for more on Valuing Manhattan real estate, click the link

Just because a broker says an apartment is 1,700 sft doesn't make it 100% so. Lets face reality here folks, there are disclaimers everywhere stating that these numbers are 'estimates only' to legally protect the selling broker and their firm. As far as I know there is no oversight on this issue, no standards, and no plans in the future to implement any. If one unit in a coop building overstates square footage than chances are many other units marketed in that same building were overstated to some degree too. Too much evidence is out there that these size estimates tend to always be on the high side. After all, when was the last time you saw an apartment underestimated in total size?

While there is no norm, I would imagine that many (not all) coops are overstated by 5% - 15%. I strongly advise you to focus on the provided floorplan w/ stated room dimensions to set realistic expectations on the size of the target apartment. That is usually where the problems begin anyway, as potential serious buyers add up these dimensions and then compare that total to the marketed square footage on the listings' webad. What starts out as simple furniture measuring can turn into a big time issue real quick.

The important thing is to go into the process with these expectations and to quantify any bid using a valuation from verified same unit or comparable sales - NOT price per square foot calculations that are subject to 'estimated' apartment sizes. Don't be fooled into bidding up for a coop based on price per sft arguments of past similar coop sales. Economists would call this, 'garbage in - garbage out'. If invalid data is entered in the front, the resulting conclusion will be invalid as well. So I say, skip it for coops.

A same unit coop trade (hopefully a recent one) is by far the best way to do any property valuation as you see how the open market valued the exact same space at a prior point in time. The only variables you need to take into account for these are renovations that may have been done and a time adjustment to account for changes in market conditions.

Back to the problem, brokers try to put as much information as possible on the internet to help procure the highest and best bid for their sellers - and the sellers may apply pressure to inflate that size to justify a higher asking price. In many cases, the broker will see how any one unit was marketed in the past and simply use that size estimate for the next round of marketing. Either way, its buyer beware on the total size. So I say, visit the property and see if it works. If you must know the exact size then get the floorplan and measure the dimensions yourself for accuracy.

In my opinion, all coop listings should just leave out the total size for marketing unless it is consistent with a hired appraisal that can be provided as needed in the future. The important thing to understand is that you can't trust what is not documented in either an offering plan or an official appraisal. So go into the process with managed expectations and do your valuations for future bidding strategies on same unit or same line sales with the exact same footprint to see how the open market values the space; leaving adjustments for time (market conditions), floor premiums, renovations, and any other special features that may exist.


Mid-Month Check

Posted by urbandigs

Wed Dec 15th, 2010 08:46 PM

A: Thought some of you would want to see the Real-Time Market Ticker as it stands mid-month.

Dec-15th.jpg

Yep, that's 101 new deals signed in the last two days. Looks like buyers are signing their contracts before the holiday season begins. So far, December is seeing a continuation of solid deal volume that started in October. However, as we near year end we should see some strong days on the 30 day ticker leave the tail end and future weak days due to holidays come in the front end that makes DEC close out at a weaker pace than what it shows now. November closed out with 801 contracts signed, up from 749 in October but down from 910 in November of 2009. Time will tell as the market is the ultimate master here and the market does what the market wants.

Remember, the 30-Day column is a moving window reflecting deal volume from NOV 15th - DEC 15th.


Bidding Strategy 101: Reverse Psychology

Posted by urbandigs

Mon Dec 13th, 2010 09:25 AM

A: Before you enter the next property for a showing remind yourself to act unimpressed, point out the bad features of the property (such as the lack of sunlight, renovation work needed, or noise level), and not say any sentences that include the words "I Love..." or "...that is gorgeous". The broker that is handling the open house or the specific appointment usually pays very close attention to your remarks (at least I do), and then provides their client with a report as to the success of the showings. Originally Published Nov 15th, 2006

negotiating-new-york-city-real-estate.jpg

Interesting isn't it. If a seller is told by the hired broker that most of the people that come in to view are not too impressed or complaining about the dungeon-like feel, then what do you think will happen when a lower than expected bid finally comes in?

I do this automatically when I accompany my buyer clients on showings. While I don't usually advise them beforehand to 'act unimpressed' in front of the seller broker, I go out of my way to point out that "...the kitchen needs a lot of work", or "...there really isn't as much light as the listing describes", or "...I wish there were better views".

The reason I do this is because I don't have any contact with the seller; thats the seller broker's job. Obviously the apartment is available because I'm there viewing it with a client, so I point out some of the things that I believe are causing this property not to sell with the hope that the seller broker relays that message to his/her client.

Very rarely is a property perfect and priced right at the same time. Chances are the property you are about to bid in, hasn't had any bids yet and the seller is just ancy to get 'a taste' of what it might sell for on the open market.

Negotiating is an art, not a science and many factors play into getting a seller to come down below their hopefuly price point.

By pointing out the negative features of the property you are in essence reminding the seller that their property really isn't as beautiful as they think it is.
Trust me, every seller thinks their apartment is worth top dollar until its on the market for 3-4 months. Your job is to bring the seller down to earth. But how do you do this? Here are a few steps to guide you:

STEP 1: Show Off Your Poker Face At Showings

Don't get excited, don't point out everything you love about the apartment, and for gods sake don't ask the seller broker right then and there if their client would accept a certain bid.

I remember one of my exclusives last year where the buyer (who had a buyer broker by the way) showed off their true feelings about the apartment I was selling on both showings. I relayed this info to my client. When they finally came in with a low bid, I told my client not to respond as I knew they would come up again within a day or two. After a few conversations with the buyer's broker and hearing the aboslute top that the buyer would pay, I advised my client to respond with a one time counter $10K over this #. The end result, I got my client that price! And it was all because I knew how much the buyer loved the property and that a measley $10K wouldn't break the deal.

Am I a scoundrel? No, I dont think so. After all, my fiduciary responsibility is to my client (the seller) to get the HIGHEST and BEST price possible for their apartment. Put yourself in their shoes. Would you be mad if your hired broker was astute enough as to point out to you that he can get a bit more from the buyer? I doubt it. I'm just doing my job the best I can.

My advice to that specific buyer
: You should have had a better poker face and not reveal how much you loved the property to begin with so I would have nothing to report to my client during the negotiating process.

STEP 2: Do Your Research To Determine Market Price

Do you know what the last comparable unit sold for per square foot in that building? What are the nearby comps selling for per square foot? How is this unit priced compared to other active units in the building per square foot?

Be sure to give a premium per higher floor ($5,000 - $10,000 per floor is a generally accepted formula), for renovation work, and for natural sunlight and views (find out recently sold's exposures for this info) that the apartment has compared to last solds or other actives.

You must know this information. This is why you should be using a buyer broker whose real service will come to you during the bidding process. Ask your broker for all this information before you place the first bid. Bidding on a property without knowing this information is like driving a car with your feet; Yea it's possible but that doesn't mean it's to be done!

STEP 3: Devise A Bidding Strategy

The hard part yet the most fun part for me because of the challenge. While every situation is unique here is a quick step-by-step guide that I usually follow:

First: After all the research that you did you must determine the price that your are both HOPING to get the apartment for and WILLING to pay for the apartment.

Second: Start out 3-5% below the price you are HOPING to get the apartment for and present your bid in a professional manner. Write out a offer letter which includes your full name, your attorney info, your mortgage broker info, how much you plan on financing, when you would like to close, your job position, company name, salary, total assets, and finally the bid you are starting with. You can also add the phrase "...Please accept this bid in good faith and contact me as soon as possible with any response". Provide a copy of your pre-approval letter from your mortgage lender and a financial analysis form that clearly lists all your assets and liabilities.

Again, your broker should do all of this for you and prepare everything for submission. I usually follow up with a phone call to the broker that a bid was submitted and faxed and point out some of the negative features of the property that resulted in the bid submitted.

STEP 4: Negotiate

After I submit the initial bid and get the seller's first response, I usually know right away what the apartment will sell for. For example:

SELLER ASKING $600,000 ---> BUYER SUBMITS $525,000 BID ---> SELLER RESPONDS $575,000


I pretty much know that the buyer will have to go to around $550,000 to get a deal done for this particular property. I also know that the seller and the seller's broker assume the same thing based on the first counter offer. So, as a buyer broker, my focus shifts to getting $540,000 or lower for my client. Sometimes I can do it, sometimes I can't. But here is how I try.

My client is now at $525,000 and the seller's response was $575,000. My buyer told me they are hoping to get it for $540,000 but willing to pay $550,000 for the property. My next move would be to submit a one-time bid of $540,000 (that is, I mention this is the highest that my client is willing to go) and mention to the seller's broker that if we don't get it for $540,000 that "my client will move on another property that we are interested in". I also mention to the seller broker that we will need to get a response within the next 2 days.

What I am essentially doing is putting the deal in the seller's hands. Are they willing to lose a deal over $10,000? Probably not. By mentioning that there is competition and that my buyer laid out a deadline for a response I put 2 pressures on the seller. I'm hoping they will fold their cards and accept the deal.

STEP 5: It Backfires. Now What?

Ok, so the trick didnt work and the seller didn't budge. The response we got was a 'no response'. Don't panic, the deal is not dead yet. At this point you have to wait 2-3 days at least to let the feelings of a 'lost deal' seap in to the seller.

After some time has passed I would call the seller's broker and ask why their client had no response? I also start my series of questioning, "What is your client looking to get for this property?" "Maybe I can get my client a bit higher, but I need to know whether or not it is worth the effort first.", etc..

My goal is to find out what I need to do to get a deal done. For all I know, the seller wouldn't go lower than $560,000, in which case it didnt matter anyway because my buyer was only willing to go to $550,000. But most of the time the initial assumption was correct and the seller's broker will say to me, "...get your client to $550,000 and my seller would accept; but nothing lower".

That's when my buyer has a decision to make. Sure we didnt get that extra little discount, but it wasn't because we didn't try for it! In the end, both parties got what they wanted for a price that was acceptable.

Hopefully you will NEVER REACH STEP 5 and the deal will be wrapped up at STEP 4! Good Luck and as always, your feedback on enhancing/arguing/expanding this strategy are appreciated.


SEMINAR: Navigate Manhattan RE w/ UrbanDigs Analytics

Posted by urbandigs

Fri Dec 10th, 2010 03:51 PM

A: Im holding another Crash Course for those interested in learning how the new Manhattan tracking system works. It will be MON at 10am at 570 Lexington, REBNY's Mendik Room. I have 15 spots open in case any brokers or UD readers would like to come. Please RSVP by emailing me for one of these spots if your interested. Thanks

DATE: Monday, December 13th
TIME: 10:00am - 11:30am
WHERE: REBNY Mendik Room at 570 Lexington Ave, at 51st St

seminar1.jpg


Are ACRIS Sales Starting To Pickup?

Posted by urbandigs

Fri Dec 10th, 2010 09:56 AM

A: I've been waiting for this to happen. This Manhattan tracking platform is still new to me, and I'm still getting used to the natural lags of the ACRIS sales compared to the real time indicators we offer. We never had this before so I understand the hesitation in trusting it so soon after launch. All I knew is that at some point ACRIS sales would start to reverse course and tick up reflecting the pickup in contracts signed this market has seen since October. We may be seeing the start of it now.

Still, with more than 2/3rds of Q4 sales already booked and the upcoming holidays to go through, I do not see enough time to change how the next quarterly report will end. Expect a sluggish Q4 report reflecting the declining pace of sales from the end of summer and early Fall.

Since early October, the pace of listings entering contract has steadily risen. This is the data and it does not lie. Even the first 9 days of December is showing solid deal volume. This rise in new contracts signed builds a future pipeline that will eventually close - the general lag for a closing is about 2-3 months after contract signing (to account for securing financing, board package, mgmt processing, board review, and co-ordinating a closing). So I have been waiting for this pipeline to start closing, and it seems it may have just started.

Exhibit A
- Manhattan Pending Sales (In Contract) vs ACRIS Recorded Sales (Sold & Closed)

acris-turning-up.jpg

I went back to 07/01/2010-Present for a reason because I wanted you to see 4 things:

1) Decline of Pending Sales July to October - this is as real time as we can get in terms of measuring the pace of demand for Manhattan property

2) Decline of ACRIS Recorded Sales Sept to December - following pending sales, the pace of actual closings has steadily declined at a 3-month lag to pending sales

3) Rise of Pending Sales Late October to Present - representing Manhattan's tick up in pace of new contracts signed the last 2+ months. This is the pipeline building up that will ultimately power Jan-Feb closings in 2011 and lead to a better Q1 report.

4) Tiny Tick Up in ACRIS Recorded Sales this past week - this is nothing to get excited about, however, I can confidently interpret rising pending sales since late October to mean that the future pipeline of ACRIS sales is yet to hit the charts!

It's a simple concept to grasp once you 'get it' - PENDING SALES leads ACRIS SALES. Over time you will learn how to read and interpret the charts that we engineered to track Manhattan real estate, and apply this knowledge to buying or selling in this fast paced market. Since its all relative and we just went through the sluggish end result from a very slow summer, I see at least a few months of rising ACRIS sales that will power improving reports and media headlines as we get into 2011. Isn't it better to know this information in advance?


Manhattan Blog Links

Posted by urbandigs

Thu Dec 9th, 2010 09:11 AM

A: Lets do a scan of our industry and some of the posts our agents and industry voices have been publishing on the Manhattan markets.

Paul Zweben --> "House Rich but Cash Poor?"

Malcolm Carter --> "The High Road: How Many Brokers Count Right?"

Mitch Askinas of Warburg Realty --> "A Hypothesis About Next Year's Sales Cycle: The 2nd wave of first-time buyers"

Frederick Peters of Warburg Realty --> "Three Kings"

Ana Maria of The Apple Peeled --> "The Top 10 Things You Must Know about a Short Sale"

Shaun Osher of Core --> "So, You Want To Be A Developer"

Jonathan Miller --> "Fall Market Remains Stable"

Brick Underground --> "Post Divorce Rental Options Under $2,000/mth"

Are you an agent with a blog? Let me know about it so I can keep tabs on your work and link out if content fits with a future discussion here on UrbanDigs. I would LOVE if more agents write about what they are seeing in their business without the usual 'the market is on fire, buy with my service' angle. People want to know whats going on out there!!


Treasuries Getting Hit; Rates To Follow?

Posted by urbandigs

Wed Dec 8th, 2010 09:32 AM

A: The Treasury market is giving a vote of no confidence to the governments latest efforts to stave off deflationary forces - extending the temporary tax cuts. What does temporary even mean anymore? Permanent? Things work, until they don't and it seems that if the tax cuts do in fact help the economy and private sector, maybe the fed does not need to buy as much treasuries as the markets previously thought? Or it could be trading forces at work, after a huge rally in the market for safe US debt. Either way, it means borrowing costs will rise.

Barron's reports, "Bond Vigilantes May Thwart Tax Deal":

THE BIGGEST LOSERS in President Obama's deal with the Republican on taxes aren't the Democrats. It's the bond market. Yields soared in the wake of the plan that will add upwards of $900 billion to the federal deficit, sending bond prices tumbling, especially in the municipal market.

The question then might be asked if higher borrowing costs, especially for the beleaguered state and local government sector and housing market, will offset the thrust from fiscal policy. The potential for the Treasury to sell more securities to fund the larger deficit, plus the likelihood that the Fed could buy fewer notes, in more robustly growing economy sent yields soaring.
These are noticeable moves and since early October the 10yr has risen by over 80 basis points. Here take a look courtesy of Yahoo Finance:

treasuries-crushed.jpg

Now, some will argue that with gold near 1400 and now treasuries rising, that the markets are telling us that inflation is right around the corner; and if that is so, then real estate is a hedge against inflation and will rise. There are a few flaws in this argument considering where we came from and where we are now.

First off, housing as an asset class is no longer coveted as it was from say 2002 to 2007. It will never be viewed like it was for this period, especially the last few years of the credit boom. Second, the availability of credit and loose underwriting standards that defined that period is non-existent today. Yes its true you can get a loan, but its no where near as easy and there are no where near as many exotic loan products available to extend perceived affordability for home buyers. Third, the job market is hovering around its worst levels and there is no sustainable job growth that outpaces population growth in the near future. Remember, this economy needs to add 150,000 jobs a month to keep pace with population growth. Finally, I dont see any sustainable signs of wage inflation that will extend affordability for the masses.

So lets be realistic towards housing as an asset class after the greatest credit bust since TGD, when talking about inflation that is still far out there.

The reflation thus far is largely a function of fed stimulus and liquidity programs combined with government fiscal stimulus to counteract trillions in lost wealth from the credit crisis; aka, recapitalizing the banks so that one day they are healthy enough to lend in a meaningful way. Everything rallied, including those toxic assets hidden on banks balance sheets. But has the masses really participated creating a positive wealth effect that can fund trade ups in housing? Doubtful.

I always said that End Game involved a few things:

a) higher rates
b) higher commodities
c) higher health care costs

If we do get inflation it will be in the form of higher metals, higher food prices, higher health care costs, higher borrowing rates, higher energy costs, etc..All the stuff we need to live, without the rise in wage inflation and happening at a time when the jobs market is still struggling - its happening already with gold at 1390, oil at 90 and gas over $3 again. It will squeeze consumer's wallets and pinch corporate profit margins. There are no free lunches and if the fed/govt get what they want, we may be looking at 5% 10YR treasury yields and 6-7% lending rates that will offset any growth potential for a period of time.

Just like deflationary forces have been offsetting the inflationary policies of the fed and government since 2008, we could also see future inflationary worries offset future growth potential before any sustainable recovery takes place. As for tradable markets, I still think we got one more wave of pain to go through to price in the unintended consequences of all these policy actions - I just have no idea when that will be or where it will fall from as figuring out whats 'priced in' and whats not is extremely difficult.


Sales Continue To Follow The Slow Summer

Posted by urbandigs

Mon Dec 6th, 2010 09:35 AM

A: The Manhattan reports will always follow ACRIS trends because true sales serve as the 'Verify Point' for this fast changing marketplace. Its the highest quality datapoint we have on where the bids are coming in! The problem is the lag it takes for IN CONTRACT listings (a.k.a., "pending") to close issuing in price discovery of the bid. Therefore, if we follow PENDING SALES we should be able to accurately predict Sales trends early. From what I see, sales continue to reflect the slowdown this market experienced over the summer. I think we will have to wait for Q1-2011's report, released April 2nd, 2011, to see the qtr-to-qtr uptick that our real time pending sales data is showing.

Josh Barbanel continues to be on top of Manhattan real estate in his latest WSJ.com piece, "Manhattan Home Sales Slide":

The pace of co-op and condominium transactions in Manhattan continued to lag in November, setting the stage for the lowest rate of quarterly sales since the depths of the economic slowdown last year...
Lets stop there for a moment and check out UrbanDigs ACRIS Sales trends that update daily to see if we can verify this statement:

ACRIS SALES TRENDS (90-day moving average)

acris-since-2009.jpg
*subscribers can view this chart in Market Trends tab, and selecting "ACRIS Sales 90day MA"

Yep, pretty spot on so far. As you can see the pace of sales has slowed to levels last seen in early 2009 - a period I often referred to as the 'Manhattan Fear Trades'; there were not many of them.

Now, while sales pace is close to those depressed levels the situation is far different. Yes its true that prices generally follow sales volume, we must also take into account seasonality, where we came from and where we are now. What I see now is ACRIS sales that continue to follow the action from the slow summer we had; not yet reflecting the pickup in new deals signed as those deals await closing. Prior to that we had a very strong bonus season that simply was not sustainable as we head into the normally slower summer. We must keep in mind that the pace of sales did not fall in the summer due to fear or a negative wealth effect. Rather, sales fell because of seasonality following a very strong early 2010.

Back to the WSJ article:
Yet brokers say that they have been busy over the past few months, with an increasing number of new sales contracts signed but not yet counted in the statistics. Much of this new activity won't be reflected in sales statistics until early 2011, they said. Noah Rosenblatt, a broker who tracks listing statistics on a new website, Urbandigs.com, found that contract signings slid over the summer and began to rebound in October and November.
Let's now move to what's happening in Manhattan today. This chart shows you Pending Sales vs ACRIS Sales trends over the past 9 months - enough to see the steady decline in demand over the summer, how ACRIS is now reflecting this, and the recent tick UP in demand since October:

qtr-pendingvsacris.jpg

As you can see, I think the slowest part of the summer (in late September, early October) is now fueling December sales - so, not much fuel to fire any surge in sales there. However, it looks like we are past the biggest % declines in pending sales from the slow summer - which means we probably are in the last dull month of sales right now. Looking ahead, Q4 appears to be headed noticeable slower than Q3; we get that report January 2nd and I am expecting it to be dull. If you ONLY read the quarterly reports, then we will have to wait until April to get confirmation that Manhattan has in fact picked up in recent months - shown in the above chart by the rising green line in the last 2 months.


Pace of New Contracts Signed Rises in November

Posted by urbandigs

Wed Dec 1st, 2010 08:08 AM

A: November is in the books and we show 801 newly signed contracts for the month, up from 749 in October. This was down from 910 signed deals in November of 2009. Last year was a highly volatile one, seeing fear trades and destruction of sales volume as prices adjusted, followed by a delayed seasonality and reflation from mid to end of the year. This year is turning out to be much more normal and highly seasonal.

The Broker Updates YoY bar chart (subscribers only) showing you total monthly signed contracts going back to JAN 2008:

updates.jpg

I put the hover in for November's totals so you can see the 801 figure that was just booked. Keep in mind that there is an added algorithm that kicks in before finalizing the data totals for these bar charts. The system:

a) only counts unique changes to CSGN
b) counts the last updated state as of the last day of the month
c) is governed by the same Flow Algorithm that was integrated to adapt to data integrity issues discovered in the broker status updates


Everything about this new site is about data integrity; and we have big changes and great new tools in development. Remember, I would consider this site 60% done at this point and its being upgraded every week. By mid December, we will enable our real time searches to include charts for coops, condos, and townhouses. For now, Im off for a few days so no posts unit Sunday.