May in the Books -- Deal Volume Surges Again

Posted by urbandigs

Mon Jun 4th, 2012 11:43 AM

A: What's happening in equity markets is not rattling buyers of Manhattan property; at least not yet. With May now in the books, we can confirm that Manhattan produced 1,298 newly signed contracts for exclusive listings across the island. This is the highest monthly total that UrbanDigs has seen since we started keeping records back in January 2008. Over the last 3 months, Manhattan has averaged 1,225 new deals signed -- a pace that is fueling a surge in 'pending sales' that will later be reflected in quarterly market reports. Lets discuss.

First, let me show you the monthly pace of new deal volume for Manhattan since January 2008:


Quick Stats

-- May 2012 produced 1,298 newly signed contracts
-- This is UP 36% from May 2011
-- This is UP 12% from April 2012

The pipeline of pending sales is at its highest levels since late 2008. It typically takes 2-3 months to go from 'contract signed' to 'closed' and another few weeks to a few months for ACRIS to record the sale. Therefore we should expect sales volume to rise progressively over the next 4-6 months and ultimately reflect real-time conditions in Q2 and Q3 market reports.

Here is your basic look at Manhattan Inventory vs Pending Sales:


From this time last year:

-- PENDING SALES is UP 18.6%
-- SUPPLY is DOWN 17.7%

Note that this is NOT price action -- this is tracking inventory trends for Manhattan and it's submarkets in real-time. Nobody outside of the transaction will know the contract price of the deal until after the city publicly files the closing. This is why I say that Q3-2012's report, released on October 1st, likely will be the report that truly reflects market conditions that are happening today in Manhattan.

I just don't see how the market can sustain this kind of deal volume as we head into the summer months; there is a reason we discuss how seasonal Manhattan is. Add in the following signals:

a) selloffs in equities and oil are a big risk-off signal as global growth concerns are rising

b) money flooding into US Treasuries as yields breached 1.50% on Friday, before rebounding a bit today - get ready for some sick lending rate moves if this continues!

c) widening credit spreads

It seems some kind of event may be triggered at any time, likely from the Eurozone in regards to Greece or Spain. Kicking the can on Greece for 2+ years now has done nothing to solve the underlying problems. Therefore the talk has shifted to not if Greece will default, but whether that default will be 'orderly' or 'disorderly'.

It's a fools game to try to time these things so I'll stick to watching credit and bond markets for more severe warning signs in the weeks/months to come and how that is impacting our real estate markets here.

As for Manhattan, we are entering the statistically "weakest" 4- month stretch in the calendar year (JULY through OCTOBER). If history is any guide, equity selloff or not, Manhattan's active season is in it's ending phases as we conclude what I think was the strongest 'active season' since 2007! Let's look to the future quarterly reports and Streeteasy's Manhattan Condo Index in the months to come to see how price trends turned out for the first 6 months of 2012.