Market Still Active - Weekly Deal Vol High

Posted by urbandigs

Sat Mar 24th, 2012 08:50 AM

A: Weekly deal volume for Manhattan is in the low 300s for the second consecutive week, putting us on pace to easily break the 1,000+ new deals signed level for March. In the field I am seeing lots of 'contracts out' so I dont see any reason why the current pace of deal vol will dry up anytime soon. Lets quickly check in on the daily Manhattan market ticker and take a look at 1YR supply/demand trends for the city that never sleeps.

First, the real-time Manhattan Market Ticker (snapshot from midnight last night) which captures daily deal volume, daily new listings to hit the market and daily off-market listing updates direct from the RLS:

ticker_mar24.jpg

As usual, I boxed out the CONTRACTS SIGNED row so you can more easily see the latest deal volume #s:

# of deals signed Friday -->
49
# of deals signed Thursday --> 53
# of deals signed last 7-days --> 315
# of deals signed last 30-days --> 1,139

Use the below graph to interpret market conditions over the past 30-days:

comments_ticker_manhattan.jpg

The market has seen this kind of action for the past 2-3 weeks, indicating a very strong market all while inventory levels are 11% lower than this time last year. Always look at supply in relation to demand to gauge the strength of a local housing marketplace:

If demand surges and supply surges --> the rise in supply mutes the strength of the rise in demand

If demand surges and supply stays flat --> slightly stronger signal as demand continues to rise without a rise in supply

If demand surges and supply falls (current scenario) --> strong market signal as demand continues to surge even with fewer properties on the market

Let me show you the last 1YR of Manhattan Supply (red line) & Demand (green line) so you can see how the current situation is:

pending_actv_mar24.jpg

UrbanDigs Note: Tight supply and surging deal volume is the story of Manhattan right now. There is simply a lack of well priced, desirable product on the market right now. Real buyers who are actively looking in their targeted sub-markets are quite aware of current market conditions as low ball bids don't get desired responses and 'multiple offers in' and 'contracts out/showing for backup' updates from seller broker are common - especially downtown. As real buyers lose out on 1-2 highly desired property, you can bet that they will get more aggressive when that 3rd one hits the market - creating a cycle that tends to feed on itself. Real buyers feel a sense of urgency as they go through these kinds of situations and miss out on desired property. The question is how long this high level of activity will sustain itself given the tight supply out there. In March 2011, the market booked 1,048 new deals signed - In March 2010, the market registered 1,060 new deals signed. Current 30-day pace is 1,139. This quantifiable data should speak for itself. Some notes for buyers and sellers.

Sellers: We need product! Just beware of pricing high and missing out on the current action. Just because deal volume is high, does NOT mean the market is seeing a huge rise in price action. I would advise to price realistically and let the market work for you. If you choose to test out a higher price, fine, just re-visit that strategy in 2-3 weeks if no acceptable bids are received. Your best action will come in those first 2-4 weeks.

Buyers
: I know its frustrating not having as many options as there were 1 and 2 years ago, and then losing out on a desired property. Try to keep emotions in check if you do get involved in a multiple offer situation. A good comps analysis should allow you to come up with a 3% fair market opinion for most active properties - just be prepared to go towards that higher end of the range given current conditions. If you do get a deal in place at a price that works for you, stay on top of your attorney to conduct diligence in a timely manner (4-5 business days once all docs are received) without sacrificing quality of the review. The seller is entitled to entertain offers until a contract is fully executed! My best advice for those in this part of the process is to make sure your buyer attorney communicates often with the seller attorney and sets expectations on when the contract is expected to be signed. These kinds of updates can/do save deals! The worst thing your attorney can do once deal terms are agreed to is a) disappear for 3-5 days or b) maintain radio silence during the diligence process.



3-MTH Pending Sales Check for Manhattan N'hoods

Posted by urbandigs

Tue Mar 20th, 2012 08:32 AM

A: Its been about 5 weeks since the last N'hood update, so lets check back in. My observations in the field are what many of my colleagues are telling me they are seeing as well --> lots of pricey product without desirable features leaving quality, well priced inventory very tight. The result is multiple offer situations for the best product out there that are priced realistically, mainly in the downtown markets. I'm hearing about bidding wars for $14M+ properties in Tribeca and I'm seeing accepted offers getting outbid before the buyer has a chance to sign. The data seems to be confirming this.

My note to sellers who have not seen strong interest/bids over the last 2+ months is to seriously reconsider your pricing strategy while the active season is in high gear! If your listing has not gotten interest or acceptable offers so far this year, its not the market, its your price and your expectations on your property's value! In the end the market always dictates value, not the seller or the the seller broker. Now lets get to the trends.

Notable Neighborhood Moves since the last check in mid-February:

-- Tribeca remains very active jumping from +43.2% to +68.9%
-- SoHo/NoHo/WVill surges from +24.7% to +68.5%
-- Midtown West jumps from +7.3% to +48.8%
-- Gramercy/Flatiron submarket is back in the black going from -16.7% to +4.2%
-- Harlem/Hamilton Heights is the only negative performing market over the last 3 months

Here are all the Manhattan neighborhood trends we track; I added supply trends after each neighborhood's 3-month pending sales #:

3-MONTH PENDING SALES TRENDS -- SUPPLY TREND

Tribeca: +68.9% -- supply down 4.3% over this time
Soho/Noho/West Village: +68.5% -- supply down 26.4% over this time
East Harlem: +52.4% -- supply down 21% over this time
Midtown West/Clinton: +48.8% -- supply down 6% over this time
Battery Park City: +40% -- supply down 18.9% over this time
Chelsea/Midtown South: +36.6% -- supply down 10.8% over this time
Midtown East: +33.1% -- supply down 8.5% over this time
Upper East Side: +29.6% -- supply down 1.4% over this time
Upper West Side: +27% -- supply down 8.3% over this time
LES/East Village/Union Square: +17.8% -- supply down 7.3% over this time
Murray Hill/Kips Bay: +15.1% -- supply down 8% over this time
Fidi/Civic Center: +12.5% -- supply down 20.5% over this time
Inwood/Wash. Heights: +10.8% -- supply down 3.1% over this time
Harlem/Morningside Heights: +8.5% -- supply down 18.5% over this time
Gramercy/Flatiron: +4.2% -- supply down 9.5% over this time
Harlem/Hamilton Heights: -12.8% -- supply down 5.2% over this time

The supply/demand trend should be quite clear, with supply down in every submarket we track over the last 3 months. Subscribers can further break down neighborhood trends in the SUBMARKET Chart section where you can further select a price range, # of bathrooms (we use bathrooms because we found Bedroom count to be inflated in the RLS data), and property type (co-op, condo, townhouse)

Lets end with a quick note from Donna Olshan's Weekly Luxury Market updates ($4M+ properties):

There were 17 sales last week, the 7th straight week that the total price of contracts signed at $4 million and above has exceeded $100 million. Since the beginning of the year, the luxury sector has recorded 143 contracts signed, totaling over $1.1 billion. Other trends: condos outselling co-ops 2.5 to 1 and Downtown remains the most popular luxury area with 20% more contracts signed than the Upper East Side.
The UrbanDigs real-time Manhattan data platform confirms what Donna is reporting on. We are in the process of revamping the entire Chart user interface so that UD subscribers can have much more flexibility with their chart searches. We expect to launch this upgrade with the new Comps Tool in 6-8 weeks or so. Our comps tool will focus on sales trends, building trends, days on market trends, listing discount trends, as well as a Comparable sale relevancy tool that will push forward the best comps for any target unit in mind. No small feat, but we are almost there. For those that gave us valuable feedback on chart UI upgrades and other tools you want to see, hang in there! Its all coming!!


Don't Mess Up In Here...!

Posted by urbandigs

Wed Mar 14th, 2012 08:27 AM

Originally Published October 23, 2006 -- was requested to put this back up, so try to put yourself back into time & place -- The principles still apply in today's marketplace -- A: If you are a new seller who has been on the market 4 weeks or less, then this post is for you. Fact is, if you take a step back and in hindsight look at the traffic patterns of any given exclusive, a pattern becomes clear. That pattern is sometimes the difference of tens of thousands of dollars in the end; IT WAS FOR ME!

Unless the apartment is aggressively priced, most of the activity will happen in the first 2-3 weeks and in the final 3-4 weeks (due to price cuts).

THE FIRST 2-3 WEEKS (The 'Should Have' Period)


I like to call the first two weeks of every exclusive the 'should have' period. The first 2 weeks is the period of time where you get a bunch of appointments scheduled from 'B' buyers who are trying to learn the inventory of their price point and their agents who just want to do a deal already. Maybe you'll get a few 'A' buyers too. Most likely, you'll get a low ball bid. Many times this very early bid is the nightmare for sellers 5 months later. So, I refer to it from the seller's point of view as the, "I should have accepted that bid and saved 5 months of agony".

It makes me think of that scene in Casino where Joe Pesci stares down DiNero as he goes to pick up his wife, Sharon Stone, at Pesci's restaurant. You know that scene, where Pesci snears, "Hey! Don't Mess Up In Here...!"...

casino-nyc.jpg
(not the scene but has that same look)

In Hindsight, every financial decision is 20/20; including whether or not YOU, THE SELLER should accept that offer.

It is during the first two-three weeks of listing your property that you will get the most interest and if lucky, an offer. The offer will not be high but will be very close, the same, or most likely HIGHER than what you eventually accept down the road after multiple price cuts!
I SAY TO YOU, THE SELLER, DON'T MESS UP IN HERE! And if you do mess up and ignore the offer because there is so much activity and you won't sell below a certain price in the first 4 weeks, to NOT blame it on your broker for failing to move your property at the highest & best price possible down the road.

MY STORY: When I had my condo on the market at Astor Terrace, I showed you the work I did and how I was going to market it, I got the most activity during the first 3 weeks. Every open house was packed and I was thinking JACKPOT! I even got a bid. I was asking $1,075,000 (much higher than I knew it would sell for but it was my home, and my home is worth what I say...yea right!) and got a bid of $950K. I shrugged it away without a response and played hardball. Yea, real smart.

Four months later I found myself $6,000 into weekly NY Times advertising and other marketing expenses, tired, worried, and 2 price cuts down to $975,000. Traffic dried up and I was getting very nervous. HOW COULD I HAVE DISREGARDED THAT OFFER! Nights became sleepless and bills seemed threatening to my financial well being.

I winded up accepting a $935,000 one time take it or leave it bid, up from $925,000 orginially. It was all cash and 'looking to close within a month' that made the offer a no-brainer for me. But the mistake was made and the lesson was learned.

THE LESSON: Think about any bid that you receive in the first two to three weeks! Think about even if it is well below your asking price. If you decide NOT to accept a low offer in the first 3 weeks, than be prepared to possibly have your apartment on the market for the next few months! I'll explain why right now.

4th TO 16th WEEK OF YOUR LISTING


During weeks 4 to 16th of your listing, assuming your property was on the market for 4 months or more, your traffic is pretty much the same; SLOW. The broker is showing the apartment 1-2 times a week, and you are having 2-4 people per open house. Not a good sign. The listing seems to have staled up, and feelings of nervousness fill both the agent and the seller as thoughts of 'problems with marketing' begin to arise. I usually hear questions like, "Why are'nt you showing the apartment more often?", or "The ad in the NY Times wasn't big enough", and the best one, "I want this place SOLD, so get to work and SELL IT!". Yea, ok.

You know what I think at this point? I hate to be the bearer of bad news but if you had 30 buyers through your property with no bid submitted, than your asking price is too high and needs to come down to reality; i.e. YOU HAVE TO WAKE UP!

I've said this over and over here on UrbanDigs:
YOUR HOME IS WORTH ONLY WHAT SOMEONE IS BOTH WILLING & ABLE TO PAY FOR IT
It doesn't matter that you are so close to the subway station, or that you have brand new stainless steel appliances, or even that you have a terrace (cause I had a sick one!). It only matters what a buyer will bid for it and whether or not you HAVE TO sell it right now. The problem is that as a seller, you get emotional and ONLY look at the positive attributes of your property when you price it and review offers! The solution should be to be as unbiased a seller as possible! Notice if your apartment is on a low floor, or has no views, or gets no sunlight, or is on a very busy/noisy street, or has a floor-through layout, or has low ceilings, or whatever! This is what buyers will be thinking about when they bid. A biased seller will be unable to make rational decisions when it comes to accepting an offer.

Moving on.

FINAL 3-4 WEEKS

Traffic begins to heat up as you already hit your turning point and have succomb to price reductions. It happened for me after 12 weeks on the open market and 11 open houses. A very long time for any nervous seller!
I didnt get a contract signed until the 18th week and 16th open house and for lower than what I was offered 16 weeks ago!
Your price comes down and activity picks up. Wow. I can't believe it. It's amazing how this works. Why didn't I think of this earlier? Why didn't I respect what my broker originally told me 15 weeks ago about where to price my unit? Why was I so blind?

BECAUSE YOU ARE HUMAN. BECAUSE ITS YOUR HOME. BECAUSE ITS HARD TO SELL ANYTHING THAT HAS EMOTIONAL TIES, MEMORIES, GOOD TIMES & BAD.

But you must not be clouded in your financial decisions. You must be able to recognize when to move on an offer. You must be able to realize that a highly qualified buyer may NOT be so easy to find!

This post was based entirely on the notion of hindsight and what I have noticed AFTER looking back at my clients and my own exclusive listings, to see if there were any patterns. There were. If anything should be gained from this post it's that you must have the vision and the will to accept a reasonable offer if:

1. It comes very early and from a qualified buyer
2. Is reasonable in the sense that you were going to price your apartment at 750K but decided last minute to raise that to 800K. Now you get a 700K offer in first 2 weeks.
3. You are under time pressure to sell

Don't Be Stupid. Don't Be Greedy. Don't Mess Up In Here!


Downtown Manhattan "...on Fire" / UES & UWS $2-5M Under-performing

Posted by urbandigs

Thu Mar 8th, 2012 11:18 AM

A: Lets dig in to the market as its producing right now and show you just how segmented Manhattan is - there is no 1 market on this island. DeNiro calls the downtown market "on fire", I agree, and Deanna Kory calls the UES/UWS $2m+ markets 'oddly....left out of the frenzy', and I again agree. The UrbanDigs real-time charting system is accurately picking up on both trends, showing the divergence between these segments of the market! Lets discuss.

First lets once again check the UrbanDigs Daily Market Ticker for Manhattan conditions in the field right now (snapshot taken midnight last night after all WED broker status updates were in):

ticker_marc7.jpg

I boxed out the CONTRACTS SIGNED row above which is telling us:

Today --> 56 deals signed on Wednesday
Yesterday --> 45 deals signed on Tuesday
7-Day --> weekly pace of 322 new deals signed
30-Day --> monthly pace of 1,021 new deals signed

For some perspective, lets take a look at Monthly Contracts Signed for the Manhattan markets since 2009:

march_2012.jpg

As you can see, the last two March's saw new deal volume over the 1,000 level - which is the current 30-Day pace for Manhattan right now (as seen by the top ticker). The difference today lies in the amount of supply on the market, which I will get to in a moment. Lagging sales reports will not alert you to these kinds of conditions that are happening in the field right now.

Serious Sellers should take note that this is the kind of market you want to list your property in! In general, the broader market has 8% less supply than we had both 1 and 2 years ago; take a look at Manhattan Active Supply as it looks right now compared to two years ago:

actv_march2012.jpg

UrbanDigs Tip: Always analyze demand relative to supply trends. If supply falls and market gets tighter, it will get more and more difficult to sustain a fiery pace of activity unless more supply comes to market. Yet, this market is doing that right now - the question is how long it can last if supply stays this tight. A brokers 'feel' of the market occurs on a 2-3 month rolling scale - the most recent few months of changing market action. To see this simply focus on the most recent 2-3 month trend between Supply & Demand (you can do this market wide, or for a specified submarket) - Just hit the 1QTR button for Active Supply vs Pending Sales trend to see the last three months of action:

3_months_2012.jpg

But not every segment of the market is joining the party!

I spoke to Raphael DeNiro last night on how the markets were doing downtown and he summed up what he is seeing as "downtown markets are simply on fire" - DeNiro works the Tribeca/SoHo/WVillage markets hard and will provide me a more detailed quote later today. In the meantime, lets check in with what Deanna Kory over at Corcoran (primarily focused on UWS/UES markets) is seeing right now:

Deanna Kory: "Oddly - I feel left out of the frenzy and I am not seeing a lot of Upper West and prime Upper East side selling in the market segments in which I am mostly involved: $2 M + co-ops. That seems slow relative to condos but also particularly slow relative to downtown sales. I also sell between $1-2M with my team. That seems more active. But pricing is key and I think that in $2M + category co-op prices are down a bit, especially for apartments that need work."

Now lets compare these observations to what the UrbanDigs system shows for these segment of the market over the last 3 months:

1QTR %CHG: UES vs UWS - Pending Sales - $2-5M - All prop types
UES is down 4.4%
UWS is down 5.0%

Our system is accurately showing us how this segment of the Manhattan market is NOT participating in the action over the last 3 months.

Now lets check on Tribeca & SoHo/NoHo/WVillage submarket over the last 3 months, that DeNiro calls "on fire":

1QTR %CHG:Tribeca vs SoHo/NoHo/WVillage - Pending Sales - $2-5M - All prop types
Tribeca is up 93.9%
SoHo/NoHo/WVillage is up 57.1%

I can't tell you how good it makes me feel to see the UD system picking up real-time trends in hyper-local Manhattan sub-markets so accurately. Exactly what the tools should be used for and tells us that sellers in UES/UWS $2M-$5M segment of the market need to tweak their pricing strategies accordingly, as the pace of demand is not nearly as robust as other higher end downtown markets.

For a baseline, Manhattan Pending Sales is up 11% over the last 3 months. Subscribers can access all Manhattan market segments in the UrbanDigs Submarket Trends tab in our Charts section.

Cheers!

Related: Fred Peters View of Manhattan RE -- Not So Quite on the Western Front


Jonathan Miller on "What is a Comp"

Posted by urbandigs

Mon Mar 5th, 2012 02:50 PM

A: By now regular readers know that this is such a passionate topic for me, and its not because me and my programmers have been hard at work for almost a year on a unique Manhattan Comparable Sales tool - expected to go live in 6-8 weeks. The real reason why I care so much is that many brokers openly argue about "what is a comp"? The main debate lies between "relevancy" and "recency" of the comparable sale to the subject property. I admit, I did "pester" Jonathan to write on the topic because I value his opinion and his standing in the appraisal world is irrefutable. Lets get his take on what a comparable sale is, and take a quick peek at the real world and why "relevancy" should be the clear choice when markets are stable.

First lets define both "relevancy" and "recency" when it comes to picking out a comparable sale for an analysis of a subject property:

Relevancy - the comparable sales used are highly relevant to the features of the target unit. This tends to mean, the same building, the same line, the same layout or the same bedroom/bath size, the same exposures/views.

Recency - the comparable sales used are the most recent sales either in the building or nearby. This tends to be at the sacrifice of 'relevancy' as vertical housing markets like Manhattan rarely have highly relevant sales that are also very recent.

Now, in the appraisal world there are 3 types of markets: rising, declining, and stable. If the market is deemed stable for say a period of 2 years, then its OK to use a highly relevant comparable sale where an applied time adjustment is not too difficult to figure out.

It's only in rising or declining markets that brokers and consumers tend to sacrifice "relevancy" in order to focus on "recency" - probably due to the difficulty in adjusting for market changes over time. This is where I disagree completely, especially since we have the Streeteasy Repeat Condo Index to help us see market changes over time.

Before I continue lets take a look at Jonathan Miller's recent article, "What is a Comparable Sale":

The use of comparable sales are the basic ingredient for real estate appraisers and agents to vet out market value - so the similarity of it to the subject property (the property being valued) is paramount.

As an appraiser, I see the term "comparable sale" often abused. Some of it can be chalked up to inexperience and some of it to fraud. An illustrated deterioration of the slippery slope goes something like this:

Comparable Sale -> Sale -> Data -> Information -> Misinformation -> Fraud

A practical definition: A "comparable sale" is a sale that would be considered an alternative choice to a buyer that might purchase the subject property.

The sale should have a similar set of amenities (ie, size, condition, location, views, configuration, etc.) to be considered as an alternative choice for the buyer. However it gets tricky when the subject property is unique and there are few "comps" to use.

In real estate appraising, comparable sales are presented in the report and adjusted for their differences with the subject property (the one you are appraising). The more adjustments that are needed to be made, the less "comparable" the sale is.

In real estate brokerage, agents use "comps" to establish the market value of the potential listing and use the value to develop a pricing strategy (i.e. listings are not "comps" without considering some sort of listing discount).
I can't agree more about this one statement Jonathan makes in the article:
"The more adjustments that are needed to be made, the less "comparable" the sale is"
I have discussed comps analysis a number of times on this site and I often use the following statement as the focal point of those discussions: AS YOU INTRODUCE MORE VARIABLES, YOU DEGRADE THE QUALITY OF THE COMPARABLE SALES ANALYSIS

Exactly what JM is telling us as well. Now, I understand that some subject properties don't have enough in-building sales data to provide a relevant comp for any analysis. But my issue is when there is enough data, yet the broker or the consumer chooses to ignore it and focus on "recent non-relevant sales" instead.

I was on a REBNY panel recently where there were about 40 people in the room taking the CRA certification course when I asked this simple question:
"If the subject property is Unit 20A in a building w/ good sales data and you have three other A-line, same layout, same size sales that are 12mos, 18mos, and 24mos old respectively and then have a different sized 7G sale from 4 weeks ago, which sales would you rather use for the comps analysis?"
Almost everyone in the room said they would ignore the highly relevant A-line sales and focus on the most recent sale(s) in the building to analyze the subject property. That's when the little hairs on my spine started to stand up. Really? Lets just think about what we would need to adjust for by using the sale types in this example:

Adjustments for three A-line sales --> time, floor, renovations

Adjustments for recent G-line sale --> floor, renovations, size differences, utility of the different layout, differences in quality of exposure, differences in levels of natural sunlight, etc.

Which to you would have fewer adjustments? A G-line in the building may trade completely differently than an A-line for a number of reasons. We all know that's how vertical markets work - buyers value exposure, sunlight and quality of view very highly in this market! Why change all these variables when you don't have to!

Same unit sales are the best as we know exactly what somebody paid for the exact same property at a different point in time - no need for any floor adjustments or major differences in view quality. Simply adjust for time and renovations.

Lets look at a real-world example.

SUBJECT PROPERTY: 1349 Lexington Avenue, Unit 4G (was asking $1.2M, contract signed Oct-2011)
RECENT COMPS TO USE: 10E sale for $1.493M, 9E sale for $1.25M
RELEVANT COMPS TO USE: 2G sale for $950,000, 5G for $1.237M, Same unit sale for $1.2M

Which would you rather focus on? Recent sales or the relevant sales or the same unit sale?

In my mind, I would list the usefulness of these sales in this order:

1. the same unit resale - only adjust for time, looks like it was renovated already
2. 2G sale - adjust for lower floor (low floors are much harder sells) properly and reno
3. 5G sale - adjust for 1 floor higher and time, looks like it was fully renovated too

If you believe you should focus on the more recent E-line sales, I would ask you:

1. How do you quantify the value of a wood burning fireplace? The E-line has one, but the subject property does not
2. How do you quantify the value of the difference in exposure, view, and levels of sunlight?
3. How do you quantify the value of the difference in layout? And size?

You cant just ignore these differences and Im going to repeat one last time that Jonathan clearly states above, "the more adjustments that are needed to be made, the "less comparable" the sale is". And never forget we are talking about COMPARABLE SALES here! Not a simple building analysis.

Just looking at the 4G resale from peak at $1,200,000 (contract signed May 2007) is a great first start - how could you ignore this????

I would argue the market today in the $1m-$2m price point is down roughly 8%-10% from peak. But if your not sure, simply use the Streeteasy Repeat Condo Index to confirm a time adjustment:

Index on May 2007 when 4G was first signed into contract and sold --> 2.020
Index on Oct 2011 when 4G was most recently signed into contract --> 1.890
--------------------------------------------------------------
Market down 6.4% over this time period

We can go +-1.5% to get a 3% range and say the market change was approximately 5% to 8% over this time - very close to my gut feeling of down 8% to 10%.

If 4G sold for $1,200,000 in May 2007 at peak, then a negative time adjustment of $96,000 to $120,000 is probably where it will trade today - this is not an exact science so a 2%-3% range gives us some flexibility. The end fair market opinion I would have given to a buyer client looking to buy this is that 4G in late 2011 should trade for between $1,080,000 - $1,104,000.

Guess what, the closing took place on February 13, 2012 and the market valued the property at $1,082,500! - right dab at the low end of the range using the almost 5yr old same unit highly relevant comp that most brokers would immediately dismiss because its too old!

Appraisers' clients are typically the banks and they have guidelines that they have to follow and a known contract price in hand to work from. I am not an appraiser. As brokers, we are asked where a product is likely to trade and must use the most relevant and hopefully most recent data available to advise our buyer and seller clients accordingly - markedly more difficult.

Without that market contract price known its always a guessing game. This is how I feel a comps analysis should be done - and you can do it any way you want to. I just dont see how you could have got anywhere near as accurate a fair market estimate if you chose to use the more recent, but less relevant E-line sales and attempted to make 5-6-7+ adjustments.



Feb 2012 in the Books - Monthly Deal Vol Highest Since 2008

Posted by urbandigs

Fri Mar 2nd, 2012 11:32 AM

A: If the market feels like there just isn't that much desirable, well priced "stuff" out there, your not alone. Manhattan supply is down about 7.8% from a year ago and down 8.3% from 2 years ago. On top of tight inventory trends, new deal volume for the month of February is at the strongest level since February 2008! Add it all together, and you have a marketplace that continues to see strong demand even with lower supply. This is deal volume we are talking about here, not price action. We still need to wait 4-5 months for deals signed today to close and be captured by public record in order to get price discovery. Always keep that in mind.

Lets get right to the data. Below is a chart showing you Manhattan's Monthly New Contracts Signed since 2009:

feb2012csgn.jpg

The breakdown is as follows:

FEB 2009 saw 484 new deals signed (market bottom post Lehman)
FEB 2010 saw 849 new deals signed
FEB 2011 saw 844 new deals signed
FEB 2012 saw 871 new deals signed

This is as real-time as we can get to track demand for the Manhattan market as the UrbanDigs system tallies all exclusive REBNY member listings that have been changed from an ACTIVE listing state to a CONTRACT SIGNED listing state.

Now lets shift the focus to supply trends. Below is a chart showing you Manhattan Supply trends over the last 2 years:

supply_2yrs_2012.jpg

The breakdown is as follows:

March 1st 2010 supply was at 7,391 actively updated units for sale
March 1st 2011 supply was at 7,346 actively updated units for sale
March 1st 2012 supply is at 6,738 actively updated units for sale

You don't need to be a rocket scientist to interpret what UD supply & demand data is telling us! Even with tighter inventory the market managed to eke out a very strong February! In the field, brokers are experiencing multiple offers for well priced desirable properties as buyers compete with each other for the best products.

Josh Barbanel's recent article "Property Slips in Manhattan" discusses:

Despite chirpy predictions by brokers about a strengthening Manhattan real-estate market in 2012, a slowdown in co-op and condo sales has deepened so far this year.

Sales were off 6.4% so far during the first quarter, compared with the year-earlier period, which was the worst quarter for sales since the Manhattan market hit bottom in 2009.

Brokers said that new deal signings have been rising lately, especially in the last two weeks of an unusually warm February. Residential sales often rise sharply during the spring, usually the peak selling season in New York.

Pamela Liebman, president of Corcoran Group, said that sales may have been depressed lately because of falling inventory, especially of well-priced apartments. Typically there is a surge of new listings in the spring.

"Anything that comes on in a good building at the right price is selling extremely fast," she said. "Open house traffic is up, the number of buyers is up. There is a severe shortage of new development product."

Hall Willkie, the president of Brown Harris Stevens, said that his new contract figures show that the number of deals with signed contracts rose in January and February compared with the same period a year earlier.
Readers must understand the differences between UrbanDigs PENDING SALES and actual sales volume.

UD Pending Sales - tracks the pool of listings that are currently IN CONTRACT and awaiting closing. At all times, there is fresh data coming in the front end as new deals are signed. To not be counted as a pending sale any longer a listing must either:

a) close
b) broken contract, back to an ACTIVE state, or
c) be IN CONTRACT for 6+ months w/out an associated closing

Actual Sales - actual sales roll in daily as the city register files a transaction. Actual sales volume is delayed by the filing process. A sale that occurs today may not be filed for weeks or months. Sales volume is lagging and reflects the trend of pending sales from 2-4 months prior!

In other words:
PENDING SALES IS A LEADING INDICATOR OF FUTURE SALES VOLUME WHICH IS WIDELY USED IN REPORTS AS A BAROMETER OF MARKET CONDITIONS. ACTUAL SALES WILL REFLECT MARKET CONDITIONS THAT EXISTED 4-6 MONTHS PRIOR
The easiest way to visually show you this is a chart that shows UrbanDigs Pending Sales (green line) versus Actual Sales Volume (red line - set to a 90-day lag):

pending_actualvol.jpg

I can't explain this more clearly. I report on pending sales trends and the pace of new deal volume for reports on real-time conditions in the Manhattan market. However, quarterly reports and media will focus on 'actual sales' volume as that is the "verify point" for the market. Pending Sales tells us current demand volume at the expense of not knowing a) if the deal will close and b) what that deal price is. Actual sales tells us with confidence deal volume and price discovery at the expense of time; i.e. at a 4-6 month lag (2-3 months from contract signing to closing + the lag for the city to file the sale).

This is the reason why reports on UD on real-time conditions will not match reports that are sales based. With the tick up in Pending Sales over the last 2-3 months, we can reliably expect actual sales volume to sustainably rise starting around April that ultimately should power a stronger Q2 report when its released July 1st.