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:



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.