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.



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