June in the Books -- Manhattan Mid-Year Review

Posted by urbandigs

Tue Jul 10th, 2012 09:41 AM

A: With the slower summer season now officially upon us, let us take a look at the bigger picture trends for Manhattan real estate and compare how the first 6 months of 2012 compared to the same period of time over the past 4 years. In short, this has been by far the strongest 6 month stretch of market action since the market peak in 2007. Due to the lag between contract execution and closing (2-3 months) + the lag for ACRIS to publish sale filings (2 weeks to 2-4 months), there is a gap between what we see in the field and price action trends. Therefore, we should expect the Q3-2012 market report (released Oct. 1st) to reflect what has been happening in the field over the last few months.

Lets get right to it. To keep things simple, lets take a look at Supply (inventory) versus Demand (pending sales) trends for the Manhattan market as a whole over the last 4 years. The main point for this selected time range is to show you how the market has performed since 'all bids disappeared' in early 2009, and how far we have come over the last 4 years.

I added #s to the chart below that will correspond to a few comments on each 'active' season since 2009.

ADD-ON (3:46pm) - I would define the Manhattan "Active" season as the first 6 months of the calendar year. Typically our markets are most 'active' in terms of new deal volume between the months of February through July:

july_10_2012.jpg

1. The 2009 Active Season: Non-existent. The chart will clearly show surging supply & pending sales nearing its bottom after a devastating plunge in late 2008. Early 2009 was the height of fear post-Lehman and the period of time where the best deals were signed by those buyers brave & lucky enough to get deals signed. Deal volume hit its lows in January 2009 which saw 317 deals signed. Sellers signing contracts during this time had to deal with bids which were pricing in future downside risks that hadn't occurred yet. So called "fear trades" took place mostly between Jan - March, and there is evidence of deals for classic 7s and 8s trading some 35%-40% below peak during this time. Deal volume started to come back in April & May, and finally popped in June when it became clear the world would not end. Early 2009 is considered to be the trough for Manhattan's exposure to the credit crisis.

2. The 2010 Active Season: Strong but short-lived. Both supply & pending sales had sustainable up-trends in 2010, which was welcome considering how many thought Manhattan would take years to recover from the credit crisis. Some good deals were still to be had during this time as many prospective buyers still hadn't regained full certainty that rough times were behind us. Nevertheless, sellers were happy to hit bids in early 2010 at noticeably higher levels than only 1 year prior when 'Armageddon' fears were taking over. This bonus season didn't last too long, seeing a slowdown begin in mid-May.

3. The 2011 Active Season: Strong. This was a great year for the higher end price points as the $2M+ market finally saw lending markets open up and regained confidence by these buyers to pull the trigger. The market remained quite active for a bit longer than we did in 2010, as we started to slow in July -- a few months later than in 2010.

4. The 2012 Active Season: Very Strong. The chart clearly shows supply levels falling while pending sales trends consistently rise. The last four months in particular have seen the market produce more than 1,150+ new deals signed. May saw the highest # of deals signed since UrbanDigs started keeping records in 2008. What makes this active season so different is how this very high level of deal volume is occurring at a time when supply is progressively declining. I wondered a few months ago how the market can keep up this pace of activity with dwindling inventory? I have seen buyers compete in 7 multiple offer situations so far this year, only two of which we won. Downtown markets have been especially hot and the general theme is that there is a lack of quality product that is priced correctly to trade in today's market. Right now I see signs of topping out and tI would guess that the best part of 2012 already happened in terms of deal volume and bidding frenzies. Typically the market slows considerably once we get into July & August and I expect no difference this time around.

I think the chart above speaks for itself and paints a very clear picture of what the Manhattan market has experienced since the dark days of early 2009. It's been quite a run!

As for how June ended up, here is a Monthly Deal Volume chart for Manhattan that shows just how strong the last 4 months have been compared to past years production (2012 in light purple):

july_bar.jpg

JUNE 2012 --> produced 1,091 new deals signed
JUNE 2011 --> produced 988 new deals signed
JUNE 2010 --> produced 866 new deals signed
JUNE 2009 --> produced 1,148 new deals signed

It is ironic that June 2009 was the only year that outperformed this past month. The main reason for this is that deal volume in the months of Jan-May in 2009 was so anemic, that buyers finally jumped back into the market in June 2009 to start the 3+ year reflation to where we are today.

As for daily/weekly trends, the real-time market ticker is showing a slowdown from the highs in activity we saw back in May. This is both expected and normal for this time of year. Sellers will have to deal with a marketplace that simply has less fish biting at the lure. Buyers may have less buy-side competition to battle against, but they still find inventory levels quite low with few high quality options that are priced correctly.

There you have it, the mid-year Manhattan market report after what turned out to be a very strong start to 2012!


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