Manhattan Closing out 'Active Season' Strong / Threat of Eurozone 'Event'

Posted by urbandigs

Thu May 24th, 2012 08:47 AM

A: The threat of a Eurozone event is starting to show itself in credit markets, but not to the point where a 'market event' seems imminent. Putting yourself back in time & place, in late 2007 credit stress indicators across the board were alerting bondholders and derivative traders that something nasty was about to happen -- and 2008-2009 was just that. I don't see credit/interbank stress anywhere near levels from 4+ years ago, but I do see the Eurozone threat for the 4th or 5th time now attempting to rattle markets. Credit spreads across high yield (HY), investment grade (IG) and emerging market govt bonds are all wider relative to treasuries -- a recent move which 'feels' kind of like the move down equities had the last few weeks. So its worth keeping our eyes on. Eventually something will happen with Greece and nobody really knows how markets will ultimately react -- either a quick correction and bounce back or a prolonged downturn that feeds on itself until a panic sets in. What we should note now is the selloff in all risk assets and the flight of money into US Dollars & US Treasuries; a.k.a, "risk-off and a flight to safety".

Markit CDX Indexes for HY and IG show the widening spread recently in corporate bonds. Meanwhile, the 10YR US Treasury yield was "6 basis points" from a new record low -- Bloomberg discusses: "Treasury Yield 6 Basis Points From Record Low":

Treasury seven-year yields dropped to a record as euro-area officials argued over how to keep the 17- nation currency bloc together, boosting demand for the safety of U.S. government debt.

Ten-year yields were within four basis points of an all- time low and borrowing costs tumbled to the least ever in Germany and the U.K following yesterday's EU summit in Brussels.

Treasuries will continue to benefit from the flight to quality, according to Robert Brown, president of the bond unit at Boston-based Fidelity Investments, which oversees $1.62 trillion. Ten-year yields may fall to 1.5 percent, he said yesterday on Bloomberg Television's "Street Smart" with Adam Johnson and Trish Regan.

"We are looking at a period of significant volatility," Brown said. "Our number one focus is preserving principal."
These are all deflationary market signals and why investors will start to worry more about 'return of capital' rather than 'return on capital'. We are in that grey area now where the market can shrug this off as another non-event to worry about at a later time, or, when a 8% selloff may turn into a 15%+ selloff that may spark bigger moves in all asset classes. Watch credit and spreads to treasuries on which way we may be headed.

In the meantime, Manhattan is closing out May in spectacular fashion. The numbers don't lie and it is what is so lets talk about inventory trends for Manhattan property.

The Manhattan Daily Market Ticker tells us hour-by-hour market production in addition to the weekly & monthly pace of new deal volume:


# of deals signed so far today --> 14
# of deals signed Wednesday --> 84! Yes, that's a lot!
# of deals signed last 7-days --> 313
# of deals signed last 30-days --> 1,296

Ok, so we know Manhattan produced 84 deals yesterday and is producing 300+ deals a week and 1,200+ deals a month. Last May we booked 951 deals so it's easy to say we will blow that # away this May. Last month Manhattan produced 1,164 new deals signed, so activity has also risen from last month.

Here is a chart of Manhattan Monthly Deal Volume so you can clearly see year over year as well as monthly trends (I put an estimate to where MAY's # likely will come in based on the 30-day pace shown in the Market Ticker -- May's # will be published June 1st):


Few points:

1. The last 3 months are on pace to produce over 3,500+ new deals -- most of which are still 'pending' and likely will close in the months of June, July, August & September. Understanding the ACRIS sales filing lag, this is why I think today's market strength will reveal itself in the Q3-2012 market report released by the major brokerage houses.

2. Sellers listen up! Manhattan is seasonal and as we get into the summer months of June, July & August, deal volume slows dramatically. It's hard to imagine the market getting 'more active' in 2+ months than it is today so I would take advantage of the action and listen to what the market is telling you in regards to your property's fair market value!

If you have been listed for sale for 3+ months with no offers --> your asking price is wrong
If you have been listed for sale for 3+ months with multiple offers --> you are witnessing where the market currently values your property

It is up to the seller whether or not to hit the bid. The seller broker should be educating their client on fair market value + current market conditions in the broader market and your local submarket.

It's unwise to take a "wait-n-see" sell side approach at this time of year with this kind of deal volume going on! Chances are you will wait yourself into a slower marketplace with much less fish biting at the bait! Sure it may work for a few, but waiting for that perfect buyer to show up in the heat of summer is low risk play.

Equity Markets Jittery Again -- Manhattan Deal Vol Stays High

Posted by urbandigs

Wed May 9th, 2012 10:17 PM

A: A tale of two markets as equity markets get jittery over the same old concerns while Manhattan continues to enjoy peak levels of new deal volume -- weekly pace of newly signed contracts is hovering between 320-350, as the past two days alone (mon+tue production) saw 130+ new deals across Manhattan get signed! Today we booked another 40+. Its common for the pace of new deal volume to lag equity markets by at least a few months - just think back to 2007-2008, as Manhattan held on until Lehman failed in Sep 2008. But today's Manhattan real estate sector is a very active one and the data suggests a notable shift in leverage to the seller over the last 4-6+ weeks or so. I'm especially curious to see how current conditions may affect future lending rates if bank pipelines get too backed up, or how appraisals come in for deals where bidding wars resulted in offers well over ask. Expect today's market conditions to ultimately be reflected in the Q3-2012 market report released October 1st. For now, lets look at what equity markets are worried about again and how we can tell if/when it starts to impact Manhattan RE.

Major equity indexes traded down over 1% today before rallying back as worries over Greek and the EU once again 'mean something' - concerns over Spain are also worth pointing out. Stock markets are psychotic like that as things matter until they don't...until they matter again - its the markets way of self-cleansing itself of bad debts and mis-valuations and it almost always first shows up in bond markets (corporates, government, asset-backed securities, etc.)!

An example of this would be how the Greece 1YR Govt Bond Yield is at 1,143%!! - a sure sign of the turbulence that likely lies ahead for Greece. At all times, equity markets are trying to discount the potential future impact on corporate earnings and in essence is barometer of investor confidence and their taste for risk assets over the near-medium term.

But what I want to point out is just how far we have come since 2009, and how we are at the height of that up move right now -- this leaves contrarians worried over future risk/reward after climbing a big wall of worry and the optimists who want to continue to ride the euphoric wave.

The EU problems are yet to full out crash our markets -- and now it seems like there will be another round of tests of the markets durability to these known sovereign debt concerns. For this to get Manhattan messy, equity markets need to see some kind of substantial selloff strong enough to impact buy side confidence and bids. One technical indicator of rising sell side momentum is watching to see if the S&P500 crosses its 200-day moving average. Looks like we need another 7%-8% selloff to reach that 200-day moving avg and if we close below it, the markets may be in for a deeper down move than many might otherwise suspect.

Below is a chart showing the S&P500 since May 2009, along with the 200-day moving average in red. The last time these concerns surfaced was August of last year and markets dipped below their 200-day moving average and nose-dived 12%-13% over a matter of weeks (shown on chart below) - since then, its been a gradual reflation back to over 1,400. Take a look:


Manhattan real estate deals take weeks to go from verbal agreement on terms to fully executed contract of sale; when it gets counted as 'pending' on Here is the latest snapshot of the Daily Market Ticker:


The ticker lets us track:

-- 2 doses of daily updates; both today's deal production and yesterday's #s
-- a weekly pace of deal volume
-- a monthly pace of deal volume

Looking at the monthly pace allows us to see the broader trend and as you can see, Manhattan produced over 1,300+ new deals over the last 30 days! Daily deal volume continues to be very strong during the week, reaching the 40s, 50s, and 60s and sustaining these levels for weeks now. If the market were to feel an impact to a stock market selloff, this ticker will be the first to show it as future deal volume dies down dragging with it the weekly and monthly #s.

So far that has not happened. In the meantime, lets keep our eyes on equity markets to see if EU worries start to 'matter' again as we finish off a very active start to 2012!.

April in the Books - Pending Pipeline Strong For Future Reports

Posted by urbandigs

Wed May 2nd, 2012 07:36 AM

A: With April in the books, lets take a look at how Manhattan produced in the month and how it compares to past April performances and where we came from since March. With the market continuing to see a very strong pace of new deal volume, the pending pipeline of closings will likely power solid Q2 and Q3 reports -- Due to the lag in ACRIS filings, I would put my money on Q3 being the 2012 report that truly captures what Manhattan is experiencing right now in the field. Lets discuss and quantify these statements with charts.

First, lets take a look at how many contracts Manhattan managed to produce in the month of April, 2012 -- and how that compares to past April's going back to 2008:


Now, lets break down how the month of April performed compared to past April's, and see how much supply we had at month's end -- we should always look at pending sales in relation to active supply trends because the two are related.

Quick Tip: If supply rises big time and the market produces 1,164 new deals (as it did in April), it's not as strong a market signal than if supply fell big time and still managed to produce the same amount of new deals signed! In the case of rising supply conditions, more inventory somewhat mutes the effect of rising deal volume. Whereas in tight inventory conditions, it will get more & more difficult for the market to sustain monthly deal volume this high; higher than 1,100+ new deals signed a month which is a very strong pace.

APRIL New Deal Vol Since 2008 - Active Supply at the Time

April 2008 --> 1,182 new deals signed - 7,072 active units for sale at time
April 2009 --> 642 new deals signed - 9,455 active units for sale
April 2010 --> 1,150 new deals signed - 7,791 active units for sale
April 2011 --> 1,006 new deals signed - 7,886 active units for sale
April 2012 --> 1,164 new deals signed - 6,905 active units for sale

It really helps to put our market trends in perspective when you look at both supply and demand trends in relation to each other, over time.

Now, lets take a look at monthly new supply for Manhattan since 2008:


This monthly new supply bar chart since 2008 should clearly show you how since late 2010 (red bar), Manhattan has seen less supply to come to market on a monthly basis for every month except February of 2012! In other words, current tight inventory conditions are a function of new supply trends for the past 18 months! This did not happen overnight.

This is probably why buyers out there continue to bid, and bid aggressively, for quality product that comes to market at a reasonable price. Add in that equity markets recently reached a 4-year high and you don't have that fear & uncertainty that typically motivates a whole new class of sellers to list property for sale to either a) liquidate to raise $$, b) sell what is perceived as a near term depreciating asset, or c) sell out of general market fear.

I'm not saying its party time again and prices are higher than peak in 2007, they are not, Im simply reporting on real-time production data and how we got here over the past few years. Price discovery on deals signed in April will likely become available between mid-June and September. Generally speaking, certainty and confidence are very important buy side characteristics that take years to shape, and that's exactly what happened to Manhattan property buyers over the last 3+ years. So don't be surprised to see a pop in median/avg sales price trends in the Q3-2012 report that will be released on October 1st.

It is what it is, and I'll still be surprised if we can keep up this pace of producing over 1,000+ new deals signed as we head into June given tight inventory conditions and fewer new listings coming to market on a monthly basis. But, until anything changes the Manhattan market continues to experience a very active start to 2012 that will power strong Q2 and more likely, Q3 reports. Cheers!