Let The Holiday Season Begin...

Posted by urbandigs

Tue Nov 29th, 2011 12:53 PM

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A: I hope everyone had a very happy and safe Thanksgiving last week. This is the time of year when holidays tend to slow down the pace of new deals signed until we get to 2012's active season. Being the data geek that I am, I added up the total CONTRACTS SIGNED for every month since 2008 to see which months are seasonally strong and which are seasonally weak - November is our 8th strongest month of the calendar year. Barring any major events in equity or bond markets around the world, expectations should be muted a bit as we get into December which happens to be the 2nd slowest month in the calendar year, behind only the month of September which lies at the bottom of the list.

Buyer's and sellers should adjust their unique strategies according to:

a) Current market conditions / trends
b) Manhattan market seasonality, and
c) their unique financial/other situation

All three of these factors play a role in the buying or selling process.

Current Market Conditions / Trends - Its always a good idea to have an understanding of both the market and the submarket that you are trying to buy or sell into. Manhattan is the fastest paced market and most expensive city to live in this country! Add in the fact that Manhattan is not 1 market, rather, a series of submarkets that vary from neighborhood to neighborhood. What's happening in the low-end of the market may be very different than what is happening in the high-end; and vice versa.

So understanding where both the market and submarket are trending today relative to 3,6, or 12 months ago will give you the information you need to adjust your buying or selling strategies.

Manhattan Seasonality - Here is a list showing the top performing months in terms of 'New Signed Contracts' for Manhattan real estate - format "MONTH - TOTALDEALS":

1. May - 3990
2. June - 3989
3. April - 3980
4. March - 3899
5. Feb - 3218
6. July - 3126
7. Aug - 3021
8. Nov - 2869* (NOV 2011 almost finished, 30-day ticker # used)
9. Oct - 2788
10. Jan - 2782
11. Dec - 2537* (DEC 2011 not in yet, avg of 3yrs used)
12. Sep - 2482

By looking at the data it is very clear that the months of March through June see noticeably more action than the months of September and December; two of the three slowest months in the Manhattan RE calendar. For non subscribers, here is a link to one of our free charts on UrbanDigs that show Pending Sales for the Manhattan market - 2009 saw delayed seasonality due to the credit crisis.

**FREE Manhattan Pending Sales Chart (Jan 2008 - present)**

Any buyer or seller under a time pressure to move should take note of these seasonal trends and set expectations accordingly. If you have to buy a property and close in 90 days and its March, chances are you will be dealing with congestion on the buy side over well priced, quality inventory that hits the market. If your a seller who absolutely has to liquidate immediately for whatever reason, and its mid November, you'll be dealing with two historically low volume months ahead of you. These are just two examples but you get the idea.

Dynamic markets are always a challenge to accurately track and when it comes to real estate, we should measure monthly performance year over year for production comparisons (to adjust for seasonality) and month to month to identify the current trend.

Unique Situation - Every buyer and seller's situation is unique and may affect the ultimate strategy. In a service business like real estate, the best broker's will combine past experience and wisdom learned with the latest technology on what the markets are currently doing to guide clients accordingly. What works for one client, may not work for another. On the sell side outside of marketing/exposure, in my head all that matters is a) price and b) time on market for the client - what kind of market are we in, what kind of bid can I realistically expect the market to produce, and how long do I expect it to take to procure that bid given the pricing strategy that I am advising the seller to take?? These are the most important questions and we need to know how to interpret comparable sales, current market strength/weakness, and this market's seasonality to properly guide the seller the best way given their unique situation. Pricing a property incorrectly can significantly impact any timing and ultimate price expectations that the seller may have.

This is the time of year when many unsold listings are removed from the active marketplace to 'freshen up' for the historically more active months that start in February! How this type of advice jives with your client's current needs is another story.

Over the next few months...

*Buyers should expect declining levels of inventory as product is temporarily taken off market - The reverse kicks in around the first and second week of January but often my clients feel frustration of a lack of inventory until well into February

*Sellers with a time pressure should think twice about real, motivated offers received that may be only slightly below their bottom line - chances are the next 60 days will see declining new deal volume

*Deals that are in the works mid-DEC or later should lengthen expectations a bit on the diligence and contract signing process. The holidays always tend to slow things down a bit on that front. What usually takes 1-2 weeks, likely will spill over a bit as we near year end. These days, a deal that is turned over within 4-5 days from deal sheet to fully executed contract is considered quite fast.

Cheers!