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!