A: The NY Times is out with a story today that I would like to discuss. I also want to give a shout out to my friend and colleagues cited in this article, Keith Burkhardt and Doug Heddings; two guys doing their own thing and making it work! The main point of this story is that as technology advances adding more transparency to the NYC housing markets, is the 6% sell side commission justified?
My short answer is that I think the 6% model is going to see some pretty innovative competition in the years ahead; and its starting already. UrbanDigs has its own ideas for a sell side solution that will not launch for at least a year; we plan to finish the analytic tools, ACRIS comps section, launch a flat fee buy side solution first.
But there are companies out there launching innovative new ways to sell property. The NY Times reports, "You Don't Have to Pay 6%":
For as little as a few hundred dollars a month, sellers can pay an agent to post their listing on broker databases and to handle some of the negotiating. And agents -- even those from larger firms -- may settle for 5 percent, or occasionally 4 percent, to get a deal done.First off, let me say a few things:
Many brokers are reluctant to speak publicly about commissions; representatives from Halstead Property, the Corcoran Group and Prudential Douglas Elliman declined to discuss the topic. But it is hardly a secret that an agent may accept a 5 percent listing if the seller is a repeat customer, a friend or family member, or buying through the agent as well as selling. That lower number is also more common when the agent does not have to split the commission with a buyer's broker, or for properties in the multimillion-dollar range. "At a certain price point, 6 percent just feels vulgar," said Kathy Braddock, a founder of Rutenberg Realty. "I would say there's negotiability in the higher numbers."
Doug Heddings, who started the Heddings Property Group in 2009 after working at Prudential Douglas Elliman, says commissions "have always been negotiable."
1. NEGOTIABLE? Yes. Brokerage commissions are negotiable, especially as you get over the $1m price point. Its a matter of whether or not the broker you meet agrees to negotiate their commission. Also, it is true that the sales manager will have to OK most lowered commission structures. I no longer service sellers and I am my own company, so I don't have to look over my shoulder when saying this on a public forum. If the broker you bring in absolutely will not lower their fee, then try another agent at that same firm (one that is not part of a team that splits the payout many different ways). I found most sellers without a connection to any one broker would bring in at least 3-4 agents to 'pitch' them an exclusive marketing package that includes a valuation + terms of services. Chances are at least one of these agents will vie for the exclusive using an aggressive commission approach. Also, you will start to see innovative commission scale business models start to evolve to grab sellers attention; i.e., 6% if you get X price, 4% if you get Y price, etc..
TIP: Watch out for the dirty trick of sugar coating a seller with a HIGH valuation for your property! Brokers tend to do this in order to tell the seller what they want to hear so they sign that 6-month exclusive marketing agreement. Then after 1-2 months, the goal is to work on price reductions because 'the market has changed' since the original valuation.
2. CO-BROKE / DIRECT DISCOUNTS? Yes. Most Manhattan transactions are co-brokered meaning there is both a buy side and a sell side agent involved splitting the commission. The sell side broker usually will make more money on a DIRECT deal, meaning no co-broker, but in the past few years this gap of added incentive has shrunk. Its not uncommon at all to see tiered commission structures now; one level for co-broke, one level for a direct deal. The days of a broker making a full 6% on a direct deal are all but over.
3. BRIDGING THE GAP? - Depends on the agent. I'm of the thinking that deal volume is the most important thing in this crazy business. Also, its always good service to 'chip in' when I can to make a deal happen. Doug Heddings is 100% right when he says, "If we're $10,000 or $15,000 apart, I'll do what I can with a commission to make sure a deal happens". I feel the same way. Of course, I will fight first to get my buyer client the lowest deal possible but often the seller will not come down to the level the buyer tops out at. In these situations, I will always offer to help bridge the gap to try to make the deal happen. Sometimes it works, sometimes it doesn't. Sometimes the seller broker absolutely refuses to take anything off their end. There's not much I can do about that.
4. INNOVATION & TECHNOLOGY? Big time. This is the biggest threat to the 6% model I see out there. In the years to come you will see many attempts to innovate new business models that either eliminate the sell side broker completely or allow the seller to tap into the system that share's a listing with all brokers. You will see rebate model businesses, innovative FSBO businesses, get into the MLS businesses, etc.. A mix of connecting, web presence and service that cuts costs and passes those down to the seller. It will never fully replace the demand for full service brokerage services, but it will make a dent and start to take market share. Its just a matter of time.
MY ADVICE TO FSBOs --> Hey, you don't like the fees for a full service broker or discounted model? TRY IT YOURSELF! My advice is to try and remove your emotional attachment to your property and your renovations! Just because YOU live there doesn't mean it should trade higher than every other similar comp out there. PRICE RIGHT! Since your not working with an agent, you need to play the role of agent and interpret current market conditions and possible pricing strategies! Make Showsheets. Advertise. Run OHs and try not to pester and follow the buyers there. Try to learn the flow of the selling process, every detail on your bldg/apt, and how to handle potential buyers. Learn what you need to look for in qualifying a buyer. Finally, do your best to handle negotiations how a broker might, not how an owner would! Just because a bid doesnt come to where you think it should be, don't start yelling at the buyer! Chances are you will handle yourself how a rookie broker, with no experience, might and the mistakes that come with it. So learn as you go how to handle yourself and negotiations.
After years and years of being an agent, you learn the ins and outs of our local markets and how best to use this experience to service a client. You have to go through 100s of unique situations to be able to understand how to react and guide a client through anything that may come up during the selling process. So, brokers with years of wisdom will naturally feel they are worth their full commissions. Brokers deal with unreasonable clients in unreasonable situations with unrealistic expectations day in and day out that constantly need to be addressed. Its highly unlikely that a FSBO with no experience will have the same level of expertise when dealing with the crazy situations that always come up that a seasoned broker might. So you have to learn as you go. Just remember to PRICE RIGHT!!
A: Well if it is you will see a few things happen: High yield bonds get hit hard, equities get hit hard, the dollar to rise, gold/commodities to rise...etc.. Yes, gold and oil can rise even when the dollar rises. It happened in late 2008 to early 2009 and it can happen again. Many readers know my stance on the 'carry trade/risk trade' and on inflation worries --> that is, higher food costs, higher energy, higher health care, higher commodities across the board, higher taxes, etc..all the stuff that hurts profit margins and squeezes consumers wallets. This is the 'end game' to policy measures taken to stem a debt deflationary crisis here in the US and abroad. With central banks stimulating anything and everything, there has to be unintended consequences from the mini bubbles that pop as the wall street money follows the trade! For those that attended the Inman RE Conference a few weeks ago, this was exactly what I was talking about on the panel!
Now, we must take all this in perspective because equity markets have done nothing but surge in the past 22 months. But you can't go up forever. During this time the fed has engineered a bank recapitalization environment to carry trade a reflation in assets; especially those crappy MBS still being held on and off the banks' balance sheets. Wall street, as it so often does, rode the wave and you saw tons of money chase any yield they can get. The risk trade was ON. But almost two years later and a helluva rally in equities, commodities, and corporate bonds, is this risk trade topping out?
The thing about climbing a wall of worry and having complacency set in, the VIX was at 16 before today, is that you never know what kind of news may spark a reversal of sentiment that drives a selloff - today, it appears to be Egypt. Then the money runs for safety or the safest asset classes they can think of. Today it seems the US Dollar and Commodities are enjoying the Flight to Safety. This move is nothing compared to where we came from and if this really is the beginning of a bigger story then expect way more volatility ahead.
Today I see, "Egypt: bye-bye to the carry trade?" at the FT:
Egypt has been a locus of that enduring emerging market passion, the carry trade, and that's why the unfolding political crisis matters to so many foreign investors.Thats the thing about markets, and masses following a fed engineered reflation trade. When it turns, it can turn fast. It's still too early to see if today's action is the beginning of the end for this carry trade and search for risk/yield that brought us so far from the days of Armageddon in early 2009.
They have used dollars borrowed at ultra-low interest rates to buy higher yielding debt in emerging markets. In Egypt's case, the central bank's benchmark interest rate is an alluring 9.75 per cent. But street protests against the rule of Hosni Mubarak are putting the carry trade in jeopardy. A sharp weakening of the Egyptian pound against the dollar is a clear sign that some of this money is being pulled out. The weakening of the Egyptian pound could even set off a downward spiral, because the currency was a key element of the carry trade equation. For the time being, the significant price moves have been confined to the longer, riskier end of the yield curve.
But events are moving fast and in unpredictable directions. By the time they settle down - whenever or however that happens - it may be hard to revive the carry trade.
Considering how much we rallied, its not abnormal to see corrections so lets just keep our eyes open. But when we see the dollar up, gold/oil up, and equities hit, we know something may be going on under the surface!
A: With January almost in the books, the pace of ACRIS recorded sales is still quite dull. I am yet to see any tick up from the relative rise in demand that our pending sales picked up on a few months ago. Since these tools are new to me too, and the general lag from pending to closed is about 3 months, I would expect the pace of ACRIS closings to pickup soon. Time will tell.
PACE OF MANHATTAN ACRIS SALES - 9 MONTHS
We got a few more months to go, but if this pace remains I may be way off in my prediction that Q1 will outpace Q4 based on the pickup in Pending Sales in the last quarter. Let's see how it plays out and if our active season starts to perform the way we are used to it performing --> with a few months of over 1,000 contracts signed. So far, we got a long ways to go!
A: I'm hoping this is a sign of things to come! It's been quite quiet these past 3 weeks and that is definitely due to seasonality around the new year. keep in mind it takes time for new listings to get good exposure and it takes time for a verbal accepted offer to turn into a fully executed contract of sale. What I see in the field is nice action, but it hasn't been showing up yet in the ticker. That's because it takes 1-3 weeks to go from offer accepted to contract signed!
The Real-time Manhattan Real Estate Market Ticker:
I'm hoping the last few days are a sign of some more volatility. It should be with the tail end of DEC filtering out and the last days of JAN yet to come in. So, watch the 30-day ticker for CONTRACTS SIGNED in the next few weeks for a nice rise from the recent high 500s level.
A: A big thank you to all our subscribers that provide us with feedback on making this Manhattan tracking platform better! We will start to roll out upgrades in a few days that will last for a week or two. Here is a taste of the new charting capabilities for anyone interested in breaking down the Manhattan housing markets and sub-markets in real time!
In a few days we will roll out a collapsed version of Chart Tabs in our CHARTS section. The main goal for this re-engineering is to allow subscribers a way to compare customized sub-market trends to the market as a whole.
In addition, we will add a PROPERTY TYPE dropdown input that will allow you to chart trends for:
- only Co-ops
- only Condos
- Only Townhouses
This was one of the most requested features. Let's say you want to see how the Upper East Side Condo Sub-Market has performed compared to condos throughout the Manhattan market:
Upper East Side Condo Pending Sales vs Manhattan Condo Pending Sales
Let's say you want to see how the Lower Manhattan Condo Sub-Market has performed compared to condos throughout the Manhattan market:
Lower Manhattan Condo Pending Sales vs Manhattan Condo Pending Sales
From the above charts we can see how the UES condo market has outperformed the rest of the Manhattan condo market while the Lower Manhattan condo market underperformed the rest of the condo market. You can do this for sub-markets as well by tweaking the BATHROOM input and the PRICE input. Recall that we use bathrooms for our real-time charts because we found that brokers tend to inflate the marketed 'number of bedrooms'...discussed here.
We have plenty more on the TO DO list and we will launch some major new tools in about 3-4 months; something we are calling our Phase 2 which will complete the analytics portion of this entire project! After that its all about enhancing the user-experience and making the site way more engaging! All in time...
A: Just wanted to show you how Q4 fared by the top brokerage firms out there and Streeteasy.com's market reports. I find it much easier to interpret when its in table form, showing both average and median sales trends for the current quarter - year ago quarter - prior quarter. Here you go.
The Manhattan Sales Table for the 4th Quarter:
It's pretty clear that:
Keep in mind that these sales reports are not only big time lagging, but they are flawed when being considered for individual unit valuations! Always, and I mean always, focus on your target units building sales when doing a property valuation. As you go outside your building you are introducing variables that only degrade the integrity of any specific unit analysis. Instead, stay in-building and focus on same line or same type sales for a comparable analysis. Ask yourself, what did someone else pay for either the exact same unit or the same footprint/exposure (same line) recently? Then make adjustments for time, floor, renovations, and size.
Average sales price trends will contain outliers that greatly skew the numbers in either direction. Median price trends are subject to the 'type' of properties that are selling during the reporting period. If you have a batch of 1BRs close for a few months followed by a batch of 2-3BRs close afterward, you will see wild swings in median sales trends. Both trends are lagging in time by about 3-6 months minimum.
Finally, its important to point out that when doing any analysis its best to do a time adjustment using the date of contract signing - not closing! When a contract is signed for a unit that ultimately closes, it is at that point that the market conditions for the deal is defined.
TIP: I use ACRIS and click on the IMG button of the recorded sale - which then runs a JAVA program and allows you to look for the RP-5217 document that contains the CONTRACT DATE.
Think about a deal that was signed 30 days before Lehman, but closed 3 months after Lehman; an extreme but useful example to understand this concept. That deal likely does NOT represent the adjustment down post-Lehman even though the sale happened after the event. The reason is because the deal was inked prior. Little things like this are quite important when understanding the lagging nature of these quarterly reports; so do not make the mistake of using a lagging indicator to interpret how the market may be performing today!
A: Looking for a "January Effect" in terms of pace of new active listings to the Manhattan housing markets. Now, keep in mind that this would include all listings that are changed to an ACTIVE state from a prior off-market, contract signed state or closed state.
DID YOU KNOW?: The past 3 January's saw an average of 1,926 new listings hit the Manhattan markets!
THIS YEAR?: As of now, the 30-Day pace of new listings coming ACTIVE to the market is 1297. There simply are not as many new listings coming to market as there has been in the past few January's...
If you don't see as many new options as you hoped so far this year, now you know why. So far 2011 is starting out in a holding pattern; it's just too soon to tell how many deals are 'cooking' out there. Remember that it takes a good 2-3 weeks to go from initial negotiation to accepted offer to due diligence process to fully executed contract of sale. For what its worth I already encountered about a dozen of listings with "contracts out" while trying to setup buyer appointments the past week or so; anecdotal yes, but still something that comes in waves for my business.
Here is a bar chart showing you the monthly total of NEW ACTIVE listings to hit the market, with the months of 2008-2010 side by side:
A: Subscribers out there are noticing a decline in the pace of deals signed over the past 30 days; following our real time Manhattan market ticker. Now this is the data, and the ticker is accurate in showing the decline from levels seen the past few months. But I just want to go into detail a bit about how this ticker works and point out that the last 7-10 days of December and first 3-5 days of January saw the usual holiday market silence. Right now, the 30-day ticker is counting all those days while the strong days prior to the holidays finally got filtered out. Let me explain.
Manhattan real estate is a very fast paced marketplace that warrants real time tools to track it. However, one day or one week is not a trend make! I tend to focus on the 30-day trends at a bare minimum. But even when focusing on that for any changes in our market, we must keep in mind how the ticker works. The Real-Time Market Ticker shows you the following updates:
TODAY --> Updates 6-7x a day as brokers update the status of exclusive listings via Rolex sharing process
YEST --> Shows you the total capture from YESTERDAY
7-DAY --> Shows you a 7-DAY moving window of total changes
30-DAY --> Shows you a 30-DAY moving window of total changes
When I published the last check in on this real time ticker we saw much different numbers - click here for the last visual of this Real Time ticker. It showed 220 contracts signed in last seven days and 720 contracts signed in the last thirty days. Today, I see 144 contracts signed in the last seven days and 600 contracts signed in the last thirty days - quite a tick down. There are two reasons for this:
1) The last 7 days saw a decline in activity, that much we all can tell...
2) The stronger days of early December got filtered OUT of the tail end of the 30-Day moving window...
...and that is what I want to bring to your attention. If you plot on a timeline the total number of contracts signed each week and then take a step back so you can see the last few months, you will be able to see the tick UPS and the tick DOWNS in the trend. Factor in a bunch of holidays (xmas, new years) and a few snowstorms, and you should expect a week or two of silence - and that is exactly what happened. For those keeping tabs on the 30-DAY moving window in the Real-Time Listing Updates tool, please keep in mind that a) the strong early days in DEC are no longer counted and b) the bulk of the silence around the holidays and snowstorms are fully counted...
Take a look:
I hope that this visual will help explain how this 30-DAY Moving Window works..and why we have seen a noticeable tick down from levels seen in November and December. The stronger Nov & Dec pace is better seen in our Pending Sales chart; which looks at trends for the total pool of IN CONTRACT listings awaiting closing in Manhattan. The new UrbanDigs platform offers different tools with varying degrees of sensitivity when tracking the Manhattan markets. Some look daily (TODAY Real Time ticker column), others track monthly (Broker Updates Bar Charts), and yet others take a bigger picture view of the markets (Active, Pending, Off Market charts)
Right now, the ticker is counting the total # of new contracts signed between the period of Dec 18th - January 18th. Of that period, Dec 24th until January 4th or so was radio silence due to the holidays. These dull days are holding down the 30-day ticker and will continue to do so until we get past the first week in February!
That is why February, March and April tend to be the most active months of the year - a pace usually proven unsustainable as we head into the hot summer months.
Here is a Manhattan Monthly Bar Chart showing you the pace of CONTRACT SIGNED since January 2008:
As of now, the ticker shows the month of JAN on pace to come in around the low 600s; which would be a noticeable tick DOWN from the last 3 months. However, due to what I just discussed I would expect this number to rise as we filter out the slow days at the end of 2010 and replace them with fresh data yet to come in as we close out the month of January! Give me another week and I'll have a better idea.
A: While the pace of ACRIS closings are yet to move up, the market has seen a nice move higher in Active Inventory followed by a nice 7-10 days or so of new deals signed into contract. Our active season usually sees around 250-300 new deals signed each week and as of now we had 220 new deals signed in the last 7 days. While one week is not a trend make, we got the real time tools so why not talk about them!
Here is a snapshot of the Manhattan Market Ticker, otherwise known as the Real-Time Listings Update tool for subscribers; this tool updates 6-7x a day as brokers update the status of their listings via the ROLEX broker sharing system:
I highlighted the 7-day new CONTRACTS SIGNED slot even though I keep tabs on the 30-day moving window more closely. We got some weak days in the end of Dec and early Jan, so as we get into the end of the month and early February I would expect the 30-day slot to bump higher.
I did happen to notice a big move higher in Midtown West pending sales the past few weeks, and I'm going to investigate that further and try to report on it later.
A: I'm still expecting the pace of Manhattan sales to tick up, but it hasn't yet. It looks to me that the pace of ACRIS sales, that is recorded filings with the city register's office, is still slugging around depressed levels that caused Q4 sales reports to show qtr-to-qtr declines. The sales pace is yet to reflect the higher move in pending sales that took place during much of the fourth quarter.
ACRIS Recorded Sales vs Manhattan Pending Sales
The main point of this chart and discussion is to point out to you how the pace of ACRIS sales (green line) still reflects the the slow new signed deals pace that we experienced over the late summer and into early Fall:
POINT A: Shows you the bottom of pending sales in mid/late October that has powered fewer sales in Q4, and led to a qtr-to-qtr slowdown in the latest quarterly reports from brokerage firms. If you follow the red line (pending sales) after that you will see the tick up in new deals signed that are yet to close..
POINT B: Shows you the bottom of ACRIS sales following the lead of POINT A above, at a 2-3 month lag. Since it takes 2-3 months to go from contract signing to closing and another 1-2 weeks to get captured by public record, the lag between pending and ACRIS recording is about 3 months. If the tick up in pending sales started in late October and continued into December, I would expect ACRIS sales pace to start to pickup in late January and continue into March or so.
As of now we show 1,934 units pending closing.
Let's see how it all plays out. I still believe strongly that Q1's report (released April 2nd) will easily beat last quarters report and lead to some headline effect right as we hit the sweet spot of our 'active season'.
I can't stress enough that this site is not finished! I would say we are about 60% into our final vision for this site; we will roll out subscriber improvements every month for the foreseeable future. In the meantime, I'm constantly being asked... 'how do I use these new charts? how do you interpret them and apply that to the real world?'. Its a fantastic question and Ill try to answer it in two parts, starting today with the Sell Side discussion.
First off, how I interpret these trends and how you may interpret trends can be vary greatly. The interpretation of trends will always be open to multiple arguments and angles, taking into account different built in biases of both the economy and the local housing market in general. Psychology plays a deep role in how any one person (whether acting the role of buyer, seller, broker, or landlord) perceives their current environment. We hope to become a reliable forum to discuss recent trends for various real time data points.
FOR SELLERS - Sellers should use these tools to help figure out whether their apartment is not selling due to a pricing issue or a market issue. In addition, sellers will be able to see inventory and demand trends in their sub-market as well as the market as a whole. All sellers should first understand that...:
#1 - Pricing is everything!
#2 - You know your activity best
If your priced wrong you will get little to no interest in the property. No interest = No traffic = No bids. A listing that sits and sits and becomes stale or switches firms will eventually become harder and harder to maximize profit potential on!
You and your broker are in the best position to gauge how you are priced; so simply listen to what the market is telling you. Whether you choose to accept that your price may not be right is a different story. You see the level of interest and you see all bids submitted! My tools will allow you to track and quantify relative trends for both supply and demand in your sub-market in real time (i.e., is your competition going to contract without you?).
Lets assume a seller is looking to move a 1BR/1.5BATH apartment that is priced at $995,000 in the Upper East Side - what charts should we look at how do we interpret them?
Go to CHARTS --> click on SUB-MARKET TRENDS tab --> then set:
LEFT SIDE INPUTS --> Pending Sales; Upper East Side, 1.5 Baths, <$1m
RIGHT SIDE INPUTS --> Active; Upper East Side, 1.5 Baths, <$1m
Click 1YR Chart Button and here is what we get:
CONCLUSIONS: By looking at the supply vs demand chart for this unique sub-market of Manhattan, we can clearly see that demand for 1.5 bath units under $1m has been muted. We know the general market saw a tick UP in new deals signed into contract in the 4th quarter and many markets saw a subsequent decline in supply - not so in this sub-market! In short, this submarket is under-performing other segments of the Manhattan market. According to our systems, there are 34 such units trying to sell in the UES alone right now; remember the algorithms and rules we place on our database to ensure only the true & updated listings get counted!
If you are a selling broker or seller in this sub-market (like this one, or this one, or this one), I would consider any solid bids received more seriously - given the under-performance of your sub-market to the general market recently. I would also consider a price reduction to try and get your unit 'ahead of the curve', so if anything sells its yours and not the competition! There is just not that much demand right now for these units and when it does come you want to take advantage of it. If you watch this chart weekly, and you see a tick up in pending sales and a move down in supply and still 'nada one offer - not even a taste', then you know your priced too far above what the market can bear right now for your unique property!
The goal is always to price your apartment as close to where the market will ultimately value it to try and entice multiple bidders at the same point in time. That is how you maximize profit potential. Remember:
a) Buyers justify a strong bid when they see multiple interest in a property right off the bat...
b) Buyers question current market value when a property has sit on the market and reduced their price to no avail...
In the end, a "testing the market" pricing strategy for a period longer than 2 months will do more harm than good! No matter what you may think about your apartment and the work you put into it, its only worth what someone is both willing and able to pay for it and any given point in time. As a seller, you and your broker's job is to find that sweet spot and maximize marketing exposure to try and get multiple interest! The market dictates final value, NOT the seller or the seller's broker!
A: Im off to LSSMC ReBarCampNY for the day, so no time to write anything new. Here is a quick look at the last 3 months trends for inventory versus pending sales; a.k.a., supply vs demand. This is part of our FREE charts for all to use.
MANHATTAN INVENTORY (red line) vs PENDING SALES (green line)
A: This is partially my fault since we are yet to put up the full methodology page and an updated 'about' page on this new site. I'm working on it along with a million other things! But I wanted to explain one element of these new tools that brokers keep asking me: "why do you use 'bathrooms' in the Sub-Market chart section", "is it typo, shouldn't it be sorted by bedrooms?". The answer is NO, its not a typo so let me explain briefly.
When we first started this project in August 2009, we got a data dump and saw how many data breaches there were with a system that is updated and maintained by brokers. Remember, its the exclusive broker and their firm that is responsible for editing and maintaining all the raw information about the property for sale + the changing status of the listing as it moves from ACTIVE to OFF MARKET to CONTRACT SIGNED and to CLOSED. The data is ONLY as good as the agent that updates it! The worst thing we could encounter for an analytics system is a) missing data altogether, followed by b) inaccurate data, followed by c) stale/obsolete data. All 3 exist out there and there is nothing anybody but the listing agent and their firm can do about it.
This system attempts to minimize the data breaches so as little poison as possible infects an otherwise elegant tracking platform for Manhattan real estate.
With that said, the reason we use 'bathrooms' as a way to fine tune a sub-market (in addition to neighborhood + price range) is because it was the highest quality data-field available to us! We consider this site and the tools offered an innovation, something that did not exist before yet was desperately needed to see how Manhattan is changing in real time. We know that brokers, buyers and sellers are used to certain ways of measuring the market - i.e., by price per square foot or by bedroom size. But after seeing the data, we chose NOT to measure anything if we were not confident in the data underneath - that means outsky's with price per sft (not even close) and sorting by bedroom size! Let me explain.
Think about how many 2BR apartments are out there that have only 1 bathroom! Now think about how many 3BR apartments are out there that have only 1.5 bathrooms, or 2 bathrooms. Since we see all the data in its rawest and freshest form, we know that apartments are artificially inflated when there is a chance to do so; and sometimes when it is illegal to do so. If there is an alcove or dining area or separate office room or even a space in the apt with bedroom walls but no window, chances are the broker and seller will market it as having that 2nd or 3rd bedroom!
But don't take my word for it. Take a look at what one of the broker sharing systems shows me when I set the criteria to ALL NEIGHBORHOODS, ALL PRICE POINTS, ALL PROPERTY TYPE, MUST BE UPDATED IN LAST 30 DAYS, and then set it to show only 2BR apartments with at most 1BATHROOM:
It maxed out because there were too many!! In short, there are tons of listings out there where 2BRs only have one bathroom and 3BRs only have one and a half or two bathrooms. These are more than likely artificially inflated and not what true 2BR or 3BR buyers out there would consider inventory in their target sub-market - and we didnt want that to affect what our charts are telling you! So we decided to use the data-field that is rarely over-inflated: the bathrooms! Ask yourself, when was the last time a broker inflated how many bathrooms an apartment has? Not only that, but bathrooms allows us to break down the sub-market more accurately for the buyer or seller and deliver more accurate charts for analysis.
Everything is done for the sake of data integrity because when it comes to charts and analytics, the trends are only as good as the data that makes it up.
A: I have been asked by more than a few UrbanDigs readers in the past 2 weeks why their properties are not selling, even though the price seems right! And these are the sellers themselves or friends of the seller, but in each case IT WAS ANOTHER BROKER TRYING TO SELL THE PROPERTY! Here is a piece I did for sellers last April but the strategy still applies today. For all you soon-to-be sellers out there who are curious to know HOW your property should be priced, try this pricing method. Originally Published April, 9th 2007!
Make 2 data ranges consisting of PAST COMPARABLE SOLDS IN THE LAST 12 MONTHS and CURRENT COMPARABLE ACTIVES now on the market in your building. Its the easiest way to get the most likely range of what your home will sell for on the open market. The fine tuning of the pricing strategy based on current buyer demand, your property's unique features, and your timeline to sell is where it gets a bit tricky.
First let me define 'comparable' for all those who don't understand what this means.
COMPARABLE UNIT - A comparable unit is a unit of the same layout (or very similar in interior size) as your own property in either the building you live in or a similar building nearby. When doing a pricing analysis, it is very important to compare apples with apples! If you own a 1BR w/ dining alcove (JR4 layout), then it is best to do research to see what other JR4's with the same layout have been selling for. Comparing the price per square foot (PPSF) of a 2BR or 3BR that sold a few months ago to yours really doesn't make much sense because quite simply there are fewer 2BR & 3BR property's in Manhattan; and less supply means the product should trade at a premium! I also hate any valuation using square feet; instead try to find similar footprint and same line units to compare. In short, your 1BR w/ dining alcove should trade at a slight discount to true 2BR's and 3BR's while taking into account the unique features your property has to offer over past sold units.
Okay, so that is out of the way. Moving on, you need to ask your broker (actually you shouldn't have to ask, the broker should provide this data to you when they discuss the sale of your property) to provide the comparable sales for the past 12 months as well as ALL units that are currently on the market; and the CONDITION THEY ARE IN!
Here is an example (1BR Co-op) of what I do when I visit a potential sales client:
PAST COMPARABLE SOLDS (last 12 months)
30A - SOLD FOR $515,000 (GOOD Condition); 675 sft - closed 10/18/2006
10A - SOLD FOR $547,500 (MINT condition); - 675 sft - closed 10/11/2006
2B - SOLD FOR $510,000 (GOOD Condition) - 675 sft; closed 2/14/2007
16F - SOLD FOR $520,000 (MINT Condition) - 650 sft; closed 10/20/2006
25F - SOLD FOR $590,000 (MINT Condition) - 650 sft; closed 11/17/2006
Range between $510,000 (good condition - 2nd Floor) ---> $590,000 (mint condition - 25th Floor)
CURRENT COMPARABLE ACTIVES (now on market)
Ranges between $600,000 ---> $635,000
Similar report done...(no need to post here, you get the point)
Conclusions? Well, its clear that similar units are selling between the low $500,000's and high $500,000's while current actives are ALL over $600,000! Now that you know the data on what comparable units sold for and what your current competition is, you MUST look at the unique features of the property and do some comparisons to the data just analyzed. These include:
FINAL VARIABLE - Timeline To Sell
Finally, and most importantly, we must take into account the seller's expected and desired timeline to sell! After all, time on market and current buyer demand will be directly related to the initial pricing of the property!
Therefore, I provide clients with three pricing strategies based on all that I discussed above to cover all needs. There is a direct correlation between aggressive pricing and expected days on market! I would present pricing options something like this.
Property Description - 1BR, 12th floor, Mint Condition, No Outdoor Space, Must sell fast
1. TEST MARKET - $590,000. Price at the high range of past solds and under the current competition. Still might take the longest time of the three options presented to move the property.
2. MARKET VALUE - $575,000. Priced right and based on 13 floors lower than last MINT condition unit to sell at $590,000. Should get the most demand of all the property's on the market and result in a shorter time on market for the seller. Probably will sell between $550,000 - $575,000, so this presents the top of the expected range.
3. AGGRESSIVE - $560,000. In mint condition this property should get 30+ people at the first open house, especially if the first showing is delayed giving more buyers/brokers time to find out about the listing. The goal here is to get a bid from a qualified buyer within the first few weeks and hopefully a bidding war! In the end, the seller will only accept a price that is agreeable to them and that meets their timeline to sell.
UrbanDigs Says: On both the premium and discount side of the equation you MUST look at what the features of the property in question has to offer in terms of selling points and marketability on the open market! Based on the data of the past comparable solds and the current competition, a fair market pricing strategy could be derived. Pricing options should be created AFTER this analysis based on the unit owner's anticipated TIMELINE TO SELL! When it comes to getting the deal done, its the brokers job to fully market the property properly and the seller's job to agree to correct pricing! In the end, the market dictates the market value of the home, NOT the broker!
A: We have seen plenty of new listings hit the market in the last week or so - 406 so far by our measure, and today's updates are not done. The pace of contracts signed is down due to minimal action the last 10 days or so of December. So, the 30-day moving window that I focus on will take another 3 weeks or so to filter out the low action from the tail end.
A quick check of Real Time Listing Updates, courtesy of all broker updates via Rolex sharing system:
Remember how the columns work when tracking newly changed ACTIVES, CONTRACTS SIGNED, and OFF MARKET listing changes:
TODAY: updates 6-7x a day as brokers change listing status; we receive updates every few hours
YEST: shows you Yesterday's full capture
7-DAY: shows you a 7-day moving window of total listing status changes
30-DAY: shows you a 30-day moving window of total listing status changes
This means that you have a daily loss at the tail end and a daily gain in the front end! This 'Manhattan Market Ticker' of sorts is as real time as you can get on how this market changes day to day. Since daily changes are not a trend, you should look out a bit to at least 30-days using our line charts that take into account a broader time period in its measurement of each trend. Full access to all tools + ACRIS sales are available to subscribers.
Generally, demand follows inventory. So I would expect inventory to come on first during the next few weeks, followed by a tick up in demand as we get into February. Time will tell how the market performs!
A: For those using this system, you knew exactly how the Q4 report was going to shake out - turns out sales pace was down about 14% from prior quarter and median prices were down between 5% and 7.5% or so across the major brokerages, from Q3. The weak Q4 expectation from mid-November has been confirmed. Lets discuss.
Josh Barbanel at WSJ.com reports, "Manhattan Housing Prices Dip":
The number of sales fell by 13.8% in the fourth quarter compared with the previous quarter, and 7.2% compared with the year-earlier quarter, according to a report prepared by appraisal firm Miller Samuel Inc for Prudential Douglas Elliman.CNN Money reports, "Median Manhattan home price: $840,000":
The median sale price of $845,000 in the fourth quarter was off by 7.5% from the previous quarter and up 4.3% from a year earlier, the report found.
The median price of a Manhattan apartment fell 5.6% to $840,000 from $890,000 compared with the third quarter, according to market data computed by Brown Harris Stevens and Halstead. Still, they found that prices were up 5% from the previous year.And finally, the always wonderful to read Vivian Toy at the NY Times reports, "Manhattan Real Estate Market Continues Steady Growth, as Luxury Sales Perk Up":
Prudential Douglas Elliman had prices down 7.5% quarter-over-quarter, to $845,000, and up 4.3% year-over-year.
Corcoran's figures were down 5% quarter-over-quarter, to $825,000, and up 3% since last year.
The median fourth-quarter sales prices, in separate reports compiled by the city's biggest brokerages and by the real estate Web site Streeteasy.com, ranged from $825,000 to $845,000. Those prices represent increases of 3 percent to 11 percent from the same period in 2009. The prices are still far from the peak of the market in 2008, when the median was close to $1 million and the average over $1.7 million, but they are also up from the bottom of the market, in mid- to late 2009, when the median hovered around $800,000 and the average dipped below $1.3 million.So what is the deal here? Manhattan continues steady growth? Manhattan housing prices dip? Who's right? The answer is both! Data can be spun in many different ways to justify a conclusion. The reason both are right is because one report compares the quarter to quarter performance while the other report looks at the year over year performance. Both are accurate. Generally speaking, in local housing markets we should compare any one given period to the same period one year prior to filter out noise from seasonality. But this is Manhattan and people want real time!
The sales report that show a quarterly drop in prices is largely a function of the very slow summer and early fall we had --> the deals of which have closed during the months of October through December. Year over year, it was the Q3 and Q4 2009 reports that basically defined the downturn of deals signed earlier in 2009 - so seeing a strong year over year report was quite expected. What you need to now is that median and average sales trends, while pure data, has some flaws to it:
1) Lagging - the timing may mis-represent the moment in time when the deal was signed into contract. There is a difference between the sale date/filing date with ACRIS and the contract signed date! Click that link for details on this lag...
2) Outliers - the data is the data and it will be subject to outliers. Generally, its the outliers on the high end that when closed, may skew a trend wildly.
3) Makeup of Closings - keep in mind that if you have a few months of mostly 1BRs closing followed by a few months of mostly 2-3BRs closing, you will see wild swings in both median and average sales price trends
I say these things to make one very important point: DO NOT BASE A BID OR AN ASK BASED ON RECENT MOVEMENTS IN MEDIAN/AVERAGE SALES PRICES!
Its meaningless to value a specific unit in a specific building based on a recent trend shown in a median market report. Not only are you exposed to the flaws I discussed above but you are introducing so many non-comparable variables into the equation that likely presents a mis-intepretation of the current marketplace. For example, I do NOT think prices fell 7.5% (as the Elliman report states) from Q3 to Q4 - and to have a buyer start a property valuation with the assumption that prices fell 7.5% in the last 3 months relative to the 3 months prior would be totally incorrect! The late summer and early fall saw a big dropoff in new deals signed for $2m+ properties, causing a wave down in both volume and median price trends from the period prior - not because a new adjustment down in bids took place across price points.
A property valuation should be done using in building comparable sales, preferably same line or same unit sales, followed by a few adjustments:
1) Time Adjustment - adjust for market conditions
2) Floor Adjustment - adjust using a floor multiplier
3) Renovation Adjustment - adjust for renovation upgrades
4) Size Adjustment - hopefully the comparable has the same footprint/size
5) Special Features Adjustment - adjust for unique features (i.e. terrace, fireplace)
Limit the variables and conduct a solid comps analysis of the target building! Every building is its own local market and once you go outside of that building you are introducing new variables that will degrade your analysis - its quite common to see 2 buildings right next to each other trade very differently. I've written on all of the adjustments before here on UrbanDigs, with the exception of the 'time adjustment'; something I consider an edge when servicing my buyer clients. If an excellent comparable sale occurred 6 months ago, 9 months ago, 15 months ago, 2 years ago, etc.., how can we adjust for time? That is the most difficult challenge when determining where we are and where did we come from!
A: The pace of newly ACTIVE units hitting the market has been on the decline since September. The only metrics that saw a tick up were the pace of new deals being signed into contract and a slight rise in off-market trends. Net net, inventory trends are down about 15% in the past 3 months. For sellers out there with fresh products to move, look to list them now while the options for ready and able buyers out there are minimal!
This is not a sales pitch, because I no longer work for sellers. But I would think the time to list a property for sale will be following:
a) a nice reflation from the height of fear, plus...
b) a nice recent tick UP in demand, plus...
c) a nice recent tick DOWN in supply, plus..
d) right when we enter our normally strongest season..
Seems logical, right? Of course it helps to also have equity markets and confidence at relative high levels too. So to me, it seems the ingredients are in place for fresh new sellers to get some nice action out there! How you price is a different story.
Take a look at these Broker Update Year-over-Year Charts showing you the pace of NEWLY ACTIVE trends:
When I add up new actives, new off markets and new pendings for the last 3 months I get:
3,467 --> the number of newly ACTIVE units in last three months
2,262 --> the number of newly CONTRACT SIGNED units in last three months
1,729 --> the number of newly OFF-MARKET units in the last three months
Net net, ACTIVE inventory saw a loss of about 535 units and that does not count those that fell out of the measure due to a) lack of broker updates, b) associated ACRIS closing with no CSGN broker update, or c) other violations of our database's flow algorithms to ensure the highest data integrity...
Its always interesting to view the market in terms of the main four types of trends: ACTIVE inventory, PENDING sales, OFF-MARKET inventory, and ACRIS Sales trends. While I expect a weak Q4 sales report, volume wise, our Pending sales measure is telling us that the upcoming Q1 report should be noticeably better!