Manhattan Deal Pace Check: May Down From April?

Posted by urbandigs

Mon May 30th, 2011 05:57 PM

A: As should be expected, deal volume slows around Memorial Day Weekend and tends to progressively slow as you get into June, July & August. Its just the way the Manhattan market tends to work and is why real estate markets should be modeled for seasonality. It doesn't mean the market ceases to exist or that price action will tumble. Not at all, in fact we are seeing a very active market right now; just not 'as hot' as this same time in 2010. It just means we are about to enter the normal 'lull period' that comes with hot Manhattan summers and weekend getaways. If we rise from here in June & July I will be surprised! Sustaining 1,000+ new deals signed is not so easy to do. Expect the pace of new deal volume to slow compared to what we saw between March through May. Buyers, sellers and their brokers should adjust strategy accordingly if there is a time pressure to finish a transaction. Lets look at the numbers.

In 2 days subscribers will get the first look at May's performance for new deals signed in the Manhattan real estate marketplace. For now, here is a 3+ yr look at monthly deal volume (each bar shows # of contracts signed for that month/yr) with my estimate (in gray) for the month of May which is yet to tally up:

monthly_new_deal_pace.jpg

When I look at this chart I see that the 2011 'active season' saw the progressive acceleration in deal volume from January to May that is expected for this period in the calendar year. However, what is different is that the month of April saw a decline in this trend compared to last year's market performance. And I expect a 2nd monthly decline when the May #s are posted in two days.

Now, while demand should be measured relative to supply (explained here), my feelings on 2011 so far are that a) with less product coming to market, we sustained a progressive and similar trend as in 2010 but..b) we are losing uumph a bit earlier as well.

My feeling on the latter is because we are seeing less new product come to market as we did for the 2010 'active season'. The reason I know this is because of another subscriber tool that measures new ACTIVE listings to hit the market on a monthly basis:

new_actives.jpg

So this chart shows us how many 'new listings' (thats new to market + back on market) came to market on a monthly basis since Jan 2008. Quite telling. When measuring the pace of demand (first chart above) we should also consider measuring the pace of new supply (the 2nd chart shown). While we had 7 consecutive monthly declines in the # of new listings to enter the market, we now had 11 consecutive monthly declines in the # of listings entering contract. The reason the market feels active and inventory tight, is because of the relationship between the two factors. Pending sales trends are relative to Active Supply trends and should be interpreted as such; remember this general interpretations table for the charts we provide on Manhattan's residential real estate markets:

market-direction.jpg

Truly weak markets will see a combination of sharply rising supply trends & sharply falling pending sales trends...just like we saw in late 2008 and into early 2009!


Risk Trade Facing Another Test - What is Gold Telling Us?

Posted by urbandigs

Mon May 23rd, 2011 04:35 PM

A: Is the risk trade over? With a fed engineered bank recapitalization environment in effect since 2008, is the 'search for yield' play done? If it was, the destruction would be way bigger than the minor selloff we have seen thus far. But what makes it interesting is where the money is headed into; treasuries, dollars, and gold.

dollarindexus.jpgIf the risk trade were unwinding, we should expect to see assets sold in order to raise dollars; so the US Dollar would rally. Lets check this first. Looking at the US Dollar Index to the right here, we can see a little rally in the last 3+ weeks (via Bloomberg). If a bout of risk aversion is in play and the dollar does strengthen, as its been, we should expect that money to pour into US Treasuries (a flight to quality/safety, whatever you want to call it...) as well as see commodities priced in US Dollars selloff with the rising greenback. That includes stuff like oil and gold.

Well, looking at today's marketplace we see the following:

1) US Dollar Index Up 1%
2) US Treasuries Up
2) Oil Down 2.5%+
3) Major Equity Indexes Down 1% - 1.5%


and then we see..

4) Gold Up 0.23%

Shouldn't gold fall when the dollar rises?? While you think about that, take a look at the overall market snapshot below, courtesy of Yahoo Finance: What is not shown is that the VIX (Volatility Index) is still under 20, or I should say under 30, so there is no real fear out there right now. If something bad were going on that may start to affect credit and bring on fear, the VIX will show it. Let's talk about that if that 'fear guage' rises above 25, or 30. For now, its just another discussion after climbing a long wall of worry for the past 2+ years riding the wave of a fed induced rally in asset prices. Is this another minor correction after a huge run? Or the beginning of a likely long unwind to a fed manipulated reflation in asset prices (think bad bank securities still on the books of the major banks and the carry trade to get these down to market). marketsnaps.jpgThis is about the fed engineering the markets, and all the bumps that come with it. That is why gold is not selling off even as the dollar rises!

Sure we had a little pullback, but the performance of the shiny yellow metal is reminding us that the great fiat currency devaluation experiment is still in tact and nobody really knows what the ultimate unintended consequences of central bank policy around the world will be in response to deflationary forces. The 2nd wave down of the great credit crisis likely will be a reaction to central bank policies as they deal with the very consequences of those policies in the long term. We will know it when it happens, and gold will fly and I would not be surprised to see the US dollar actually strengthen as others call for hyperinflation. Gold is not a dollar hedge in this situation. Rather, it is a hedge against fiat currency devaluation around the world and central bank policy in response to the greatest wave of deflation seen since The Great Depression. Just hang tight as we go through end game of this process.


Pending vs Sales Pace; Quick Check on Manhattan Market Ticker

Posted by urbandigs

Fri May 20th, 2011 09:39 AM

A: Lets just check in on Manhattan Pending Sales vs Actual Sales pace and the real time Manhattan market ticker to see how we are doing.

First the ticker. Manhattan is still churning out new deals at a solid pace, even though it appeared that pending sales was peaking 11 days ago. Remember, this market ticker counts all new listings that enter contract as the broker updates the property status in the RLS (REBNY Listing Service):

ticker_manhattan_may20.jpgNotice how the 7-day pace shows 260 new deals signed and the 30-day pace continues to trend above that 1,000 level. As far as I'm concerned, the market is very active if we are putting 250+ new deals into contract a week. Once you see that 7-day pace dip below 200 or so it will be the first sign that the market may be transitioning to the generally slower summer months.

Sellers should track the real time pace of demand if they must unload property soon. History will tell us that once we get into June and July, the pace of new demand slows noticeably; so price your property as close to market value while activity is hot because once we get into the summer you will be chasing the demand that tends to fade. Sellers and brokers should always know that the market dictates value, and if you price too low chances are high that you will receive multiple bids that should end up producing a # that the current market can absorb. Creating a 'sense of urgency' because you priced a property well is always a good strategy!

I say this because I find most sellers are 'worried' about pricing too low and not giving their listing a chance to get a higher offer - the 'wait for the market to catch my price' strategy. To that I say:

1) The most activity is generally in the listing's first few weeks on the market
2) Stale listings that take the slow & methodical price reduction route tend to lose out on potential 'frenzies' and won't create that 'sense of urgency' in potential buyers. Rather, these listings usually attract value buyers that tend to bid low

Here is an updated chart showing you Manhattan Pending Sales vs Actual Sales pace:

pending_sales_manhattan.jpg

The sales pace line chart is set to a 90-day lag so that we can leave enough time on the table for delayed filings to come in - we use the actual sale date, not the filing date which makes it fit very nicely as a lag to our pending sales charts.

The think to look at in this chart is:

1) That Pending Sales (green line) is once again ticking higher after it appeared to be peaking 1-2 weeks ago, and...

2) That the ACRIS sales volume is yet to pick up on the very active start to 2011 that we had. It did pick up on the tick up we had late in 2010 at a 2 month lag or so.


Since quarterly reports focus on sales, it appears to me that Q3-2011's report will likely show the strong start to the year we are seeing right now. I'll be surprised if the Q2 report catches it. Cheers!


Calculating Manhattan 'Days on Market' - When To Reset The Clock?

Posted by urbandigs

Tue May 17th, 2011 03:38 PM

A: Part of my daily ritual is to check the real time Manhattan market ticker every evening and both look for integrity issues + follow what kinds of properties are going 'into contract'. I also check out how the 'days on market' looks for those properties that were changed to a CONTRACT SIGNED listing state by the broker. Which brings me to calculating "days on market". This has been a long debate in the real estate industry and the issues lies with when you reset the clock back to zero. Lets discuss and hopefully we can get some thoughts on this topic.

As the daily market ticker updates throughout the day, we can see how many:

  • new contracts were signed

  • new listings came to market / back on market

  • new listings were removed from market

  • It's as real time as we can get down to a daily ticker that rises as the day goes on. Now, on my admin panel, I can click on the 'number' that displays in that table under the TODAY & YEST columns; which shows me something like this:

    behindtheticker.jpg*screenshot taken at 11am this morning and shows listings that entered into contract today (CSGN/BA in the rolex system)

    As you can see, the address, the unit, the list price, the brokerage firm and the 'days on market' data are shown. I check this daily and like to focus on the types of properties that are going to contract; that is what price points & neighborhood, and then I look at 'days on market' # displayed to see how long it took to go to contract. The DOM # is not fully engineered yet. Still, I learn a ton about the fast changing Manhattan marketplace simply by executing these daily integrity checks to ensure no new issues arise. So for me its a win win.

    Take "Days on Market" or "DOM". How do we define that anyway? Wikipedia defines this as:
    Days on market (DOM), alternatively Active Days on Market, is a real estate term used to describe the age of a real estate listing.

    This statistic is as the definition says the Days on Market for the listing. This is not necessarily how long the house has been on the market. Depending on the rules of the multiple listing services (MLS) that is being used - if an owner switches real estate agents, the number is reset. There is also the sometimes considered unethical practice of "withdrawing" the listing before it expires and adding the listing again. This would also reset the DOM. However, good real estate agents (if the MLS allows) will research the properties MLS History and can tell more effectively how long the property has been on the market.

    Therefore, when this statistic is used it is generally lower than actual.
    This is the problem. Jonathan Miller does something interesting and sets his DOM methodology so that it counts the # of days a listing goes from the 'last ask' to contract signed. Via the Matrix:
    DOM From Last List Date - Measured from the last time the list price was changed, if ever. This is what I present in my market reports. The calculation is: Last List Date Change - Contract Date. This is the more useful of the two methods because it shows the market's ability to absorb a property once it actually enters the market. Essentially, it is the list price of the property just before it goes to contract. In other words, it is the list price that brought the property into the correct market segment and attracted buyers.
    It's great that JM took on an innovative stance when compiling DOM data for the Manhattan market. I certainly don't want to mimic Jonathan's efforts and innovations, and instead would like to approach the DOM methodology from a different angle - one where the ease of resetting the counter is more difficult.

    I would like to see a total tally of days a listing was on the market with a few exceptions to reset the counter (a closing, a period of time off mkt). I have seen this term floated around: Cumulative Days on Market or CDOM - A measure of a property's full listing history counted in days from initial listing until entering a 'pending' state.

    The kicker is how and when does this DOM counter reset to zero? You can't leave a CDOM reset algorithm exposed to agents who can 'game' the system so that the counter goes back to zero anytime they feel like it. In my opinion, there needs to be a pre-determined number of days that the listing must be OFF-MKT, before the counter can be reset to zero. But how do you determine that number?

    Should it be set to 1 month? 2 months? 6 months? You definitely can't make it too short of a time whereby a listing is removed from the market for 2 weeks and then goes back on at a zero days on market. You also can't make it too long. The sweet spot should be able to take into account seasonality properly. For example, a listing is on the market January 1st and come July 1st (6 months later) it does not sell and has tallied up 180 days on the market so far. To me, it seems unfair to discount that time on market if the listing is simply off the market for a few weeks. So lets say it goes off the market for the entire summer. Exactly how long must this unit be off the market before the days on market (for chart purposes) is reset to zero?

    What do you think?? Remember the goal here is to have a real time market barometer measuring the gap between current bids and current asks. We will not find out listing discount until after closing when the price becomes publicly available.

    I would argue around 3 months or so. Therefore the Cumulative Days on Market chart is showing us the average # of days the *current pool of pending sales listings took to go from original listing to contract signed. The counter is reset to zero after a closing OR the listing is off market for 3 months.

    Ideally, there will be two charts for you to look at when trying to see how quickly listings are actually going to contract:

    1) Days on Market
    2) Cumulative Days on Market

    ..where the variables in the methodology that need to be tweaked are:

    a) count from original ask or last ask
    b) add in a counter reset rule

    Getting this right is important as we look ahead to build a more advanced comparable sales platform for Manhattan property. Would love your thoughts.


    Looking at Manhattan Real Estate's Active Seasons

    Posted by urbandigs

    Mon May 16th, 2011 08:42 AM

    A: I thought it would be interesting to take a look at the last 4 "Active Seasons" in Manhattan real estate. For the chart, I chose market wide pending sales versus $5M+ pending sales - so we can see how this year's "Active Season" compares to past years trends. I put the $5M+ pending sales trend in there because I wanted to point out how long it took this markets higher end segment to see a resurgence after the devastating credit crisis we experienced. The way the charts look now, the $5M+ market is outperforming the general market pending sales trend. It was a great start to 2011, but I would not expect this kind of high end deal volume to last much longer - take advantage of it while its here.

    The Manhattan housing market is seasonal, just like most local markets. Usually in the suburbs, the 'active season' is Spring and into Summer. That is when peak activity (we are talking volume here not price action) usually takes place. It's the time when serious sellers need to be cognizant of the current pace of demand, and buyers need to adjust their bidding strategy to get targeted product without paying too much of an emotional premium. Right now we are at the height of our Active Season and when you get to these kinds of levels it gets harder and harder to sustain the current trend. History will tell us that once we get into June and July, deal volume slows noticeably.

    Lets look at the data to see what I mean:

    MANHATTAN PENDING SALES: Market-Wide vs. $5M+

    4years_activeseason.jpg

    I blocked out the 'active seasons' in yellow so you can more easily visualize how this local market experiences seasonality. Our 'active season' generally begins in late January and lasts until mid/late May.

    The exception was 2009 when there was no 'active season' due to the macro elements at play during that time. In short, the market shut down for 6-7 months and progressively reflated starting with the lower end markets first.

    As you can see on the chart, it took over 2 years for the high-end market (defined as $5M+ in this chart) to see a true resurgence. Even though the 2011 market-wide pending sales trend (green line in chart) has not breached last year's peak, when we break it down by price point we know that the high-end (red line in chart) significantly outperformed levels seen at this time last year. Think about what the reports will say when these deals close and get counted - which is 1-2 quarters away.

    Call it what you want, the data doesn't lie. Looking ahead to future quarterly reports, Q2-2011 and Q3-2011 likely will show relative rising median & average sales price trends when these high-end deals close and get publicly recorded - due to the sales lag I would put my money on the Q3 report reflecting current activity. But its anyone's guess.

    The daily real-time market ticker is starting to show some signs of slowing deal volume, which is consistent for mid-May, but its still too soon to tell if the slower summer market is currently fading in.


    WSJ: TriBeCa Bounces Back

    Posted by urbandigs

    Tue May 10th, 2011 08:31 AM

    A: Lets take a look at Josh Barbanel's latest piece that looks at demand for high end Tribeca property. Then lets see what the UrbanDigs real time system shows for this submarket. Quantifying an article and broker reports with actual data/charts is what its all about! No more anecdotal reporting. Are you ahead of the curve??

    The WSJ reports, "TriBeCa Trio Bounces Back":

    After once being all but left for dead, three boutique TriBeCa projects are heading for quick sellouts, brokers said, a sign of a strong revival in the downtown market for expensive, loft-like apartments. At One North Moore, on the corner of Broadway, five of the six apartments went into contract soon after they were listed in March, brokers said.

    Condominium apartments at 33 Vestry St., a modernist stone-and-glass building, first went on the market in 2007, but sales and construction stalled during the downturn, especially after damage was found in the foundation of the building next door during construction.

    Late last month, the last of seven apartments in the project, a $14.95 million, four-bedroom penthouse with a pool and huge terrace, went into contract.

    At another new development at 471 Washington St., 11 of 12 apartments went into contract since they were put on the market in March.
    Now, lets check out the real time inventory charts for Tribeca in two price points: $2-5m & $5m+.

    TRIBECA: Pending Sales (green) vs Active Inventory (red) - $2-5M Price Point

    tribeca_2-5m.jpg

    TRIBECA: Pending Sales (green) vs Active Inventory (red) - $5M+ Price Point

    tribeca_5m+.jpg

    Conclusions: The $5M+ price point in Tribeca really shows the demand that the article is talking about. Both price points show supply trends falling consistently over the past 2 years. There simply is not enough well priced high quality product in this very popular Manhattan submarket. Sellers, are you listening?? Brokers, if you are pitching these kinds of sellers do yourself a favor and pass on these real time trends and explain how the market seems hungry for new product!


    Seasonally Speaking, Are We Peaking?

    Posted by urbandigs

    Mon May 9th, 2011 08:13 PM

    A: We all know most real estate markets are seasonal. Manhattan is no exception. Manhattan's "active" season usually lasts from late January to mid/late May or so. Once we get into June our markets tend to slow down as buyers escape the hot streets of NYC for Hamptons and summer getaways. There was an exception in 2009 when we experienced delayed seasonality due to an adjustment in prices from the credit crisis. For a while in early 2009, it felt like we were on a cliff dive to a 50% retracement in prices; that never happened. Fast forward to present day, and after a very solid start to 2011, the charts are showing some signs of peaking. Now that we can track daily/weekly/monthly market performance, my advice to sellers out there is to take advantage of the action while strong bids continue to come in!

    Here is a look at Manhattan pending sales since January 2010. It shows you how last years "active" season compares to this year's "active" season:

    2011_peak.jpg

    You don't need to be a technical analyst to see that we may be peaking in terms of volume right now. Although we haven't reach last years peak during the "active" season, we are performing quite well given less new product is coming to market lately. After a strong runup in pending sales for the past four months, it takes sustained action to go even higher from current levels. In other words, its not easy to maintain a pace of 250+ new contracts signed in a 7-day period forever - and that is why seasonality shows itself in the charts via waves of activity. High tide for a while and then low tide for a while - rinse, rather, and repeat.

    I can tell you that right now we are still seeing very strong levels of activity even though the pending sales chart looks like it might be topping out. How do I know this? The Real-Time Market Ticker!

    This is the tool that tracks all REBNY exclusive property that changes to a broker-updated CONTRACT SIGNED listing state. The ticker updates about 7x a day. Take a look at the latest snapshot of this market ticker and notice that we have still seen 285 new contracts signed in the last 30 days. Understanding how these tracking systems were engineered, I would say that seeing a sustained 7-day pace over a level of 250 or so would signal a very active marketplace.


    rt_may9.jpg

    As of right now, Manhattan is still churning out new signed deals. When you start to see the 7-day count fall to under 200 for a period of 3 or 4 straight weeks, that is when you know we probably started the transitional slowdown to the summer market. If you're not getting bids now, adjust your price!

    If you're selling and waiting as long as you can before lowering your price, watch that ticker and be sure to pull the trigger when you see the pace of demand start to tick down. Otherwise you will be chasing the market into the slower summer!


    Manhattan High End Surging, Explaining ACRIS $5M+ Chart

    Posted by urbandigs

    Wed May 4th, 2011 08:41 AM

    A: Lets check in on the $5M+ market in Manhattan. With a quick check into pending sales for properties with a last ask of $5M+, we can see how strong this segment of the market has been. Now, where these deals close out and how far from peak we are right now is something we will have to wait for. Remember, pending sales measures listings that go from ACTIVE to CONTRACT SIGNED; they have not closed yet! When we check out our ACRIS $5M+ trends, we get a chart that is exposed to the sample size problem that I discuss here often. Let me show it to you again.

    Manhattan: ACRIS $5M+ 90day Moving Avg (green line) vs PENDING SALES $5M+ (red line)

    manh_5m+market.jpg

    First I want you to focus on the green straight line that is stuck on a value of "2" in this chart. This is telling us that, on average, only two sales of $5M+ properties are occurring per day. The ACRIS line chart stops at end of March for a reason --> our ACRIS line charts are based on "sale date", not the filing date. Due to the lag between actual sale date and ACRIS filing date, we were forced to show ACRIS volume trends at a lag.

    Looking at the red line in the chart, I can see that right now there is a pool of 150 listings in contract and pending closing. If we were to assume that all these listings will ultimately close over the next 60 days (and that is an aggressive assumption), then it would equal out to an average of 2.5 closings per day. So you see, the current green line in the chart above that shows us the daily 90-day moving average of $5M+ closings is in fact accurate.

    The ACRIS $5M+ volume line chart is straight and useless because the sample size of this metric is too small! There is just not enough data coming in to make a worthwhile chart to show you. This is an ongoing challenge for me when talking to brokers about making our systems even more granular. With a real time system for tracking Manhattan real estate, like the one we built, having a large enough sample size to generate worthwhile charts to interpret is very important! I touched on this topic back in February, as we deal with the challenge of adding a 5th input into our submarket search interface: PROPERTY TYPE --> allows you to break down charts further by coop, condo, townhouse, or all.

    Adding more granularity to a system that already scrubs the data increases the total combinations of charts with a sample size too small to be worthwhile to interpret. And that is what this site is all about. Guiding you to a submarkets performance without sacrificing quality due to having too small of a sample size of data to chart out. The $5M+ ACRIS chart above is an example of this - as the straight line basically tells you nothing. This reality is making us seriously think about tweaking the price points for ACRIS sales volume charts, perhaps only showing $4M+ market instead of the $5M+ market.

    As for the current pace of $5M+ deals going into contract and counted as 'pending' in our systems, I think we are peaking out right now. I would expect it to be very difficult to sustain this kind of pace moving forward, especially as we get into mid June and July. All in all, it was a very active start to 2011 and we should expect a slowdown as we hit the summer.


    April's Pace of New Manhattan CSGNs Down 12.5% YoY

    Posted by urbandigs

    Mon May 2nd, 2011 09:32 AM

    A: Ok, April is now in the books and our monthly charts went through their final 'data cleanse' to eliminate duplicates and other listings exposed to integrity issues. The final number for new contracts signed in April 2011 came in at 1,006. This is down 12.5% from performance in April of 2010. It's always better to look at monthly performance on a year over year (YoY) basis so as to remove the noise from seasonality. Lets discuss.

    Manhattan: Pace of Monthly Contracts Signed

    april_csgn.jpg

    The real-time market ticker gave us an indication that April's performance will be over the 1,000 mark as it captures daily updates for ALL Manhattan property listings shared by REBNY member firms. In other words, the ticker IS the ultimate reflection of how this market is performing in real time as brokers change the status of exclusive properties from ACTIVE to OFF-MKT and to CONTRACT SIGNED. In fact, the entire UrbanDigs analytics platform was engineered to track the movement of Manhattan inventory from one listing state to another; while adapting for known data integrity breaches that otherwise result in over-counting of the statistics.

    KEY FACT OF URBANDIGS PLATFORM - The key element of our algorithms are that no one listing (active, off-mkt, pending, closed) can occupy more than one listing state at any given point in time.

    Now, if you read my discussion last week you would know that:

    "The main differences between this years active season and last years, is that this year we are seeing fewer listings come to market and fewer listings being removed from the market."
    Let me show this to you using the Monthly New Active's Bar Chart:

    MANHATTAN: Pace of New Actives & Listings Back on Market

    new_actives_manhattanjpg.jpg

    As you can see in the above monthly bar chart, this is now the 7th consecutive month where we have seen fewer listings come to market compared with the same period exactly one year earlier. If it feels like there are less options to choose from on the market, your not day dreaming. That is truly the case. The reason ACTIVE inventory trends have not fallen further is because off-mkt trends are so much lower than where they were a year ago. With fewer listings being taken off the market, the upward pressure cancels out the downward pressure that comes with fewer listings coming onto the market.

    As far as I'm concerned, anything over 1,000 new deals signed into contract when less product is coming to market for 7 consecutive months compared to year ago periods, is still a sign of a strong market! If there were double the amount of new listings coming to market, yet demand stayed the same, then that would be a sign of weakness. For now, let's hold off on saying the market is slowing down a bit until we see a clear move down to the 800-850 monthly new deals signed level.

    Demand must always be interpreted relative to supply, and vice versa:
    At all times, ACTIVE inventory trends should be interpreted relative to PENDING SALES trends. Think about it, if the pace of inventory falls and the pace of demand rises that is quite a different story than if both the pace of inventory and the pace of demand rise together. Its relative. If pending sales trends fall but at the same time inventory levels fall too, then the decline in the pace of demand is somewhat muted by less inventory out there!