Manhattan Slowing Since May -- What are Treasuries Signaling?

Posted by urbandigs

Tue Jul 24th, 2012 01:51 PM

A: Manhattan's worst performing months since 2008 has been the period between July and September. So the first thing we should point out in terms of new deal volume is that we are right in the beginning of the slowest 3-month stretch that Manhattan typically sees during the calendar year. With that said, the market right now seems to be slowing from higher deal volume levels 2-3 months ago, yet we are still stronger than what we typically see for the month of July. Lets discuss where we are at now and what may be brewing over in Europe/China that is scaring money into safe havens like US Dollars and US Treasuries.

First, lets get updated on whats happening in real-time in the field of Manhattan real estate by looking at the 30-Day Market Ticker. The ticker captures daily market production by analyzing every REBNY member's apartment status updates for all the exclusive listings in Manhattan. The tool is engineered to only display 'unique status changes' so that we can accurately count:

ACTIVE - the # of new listings to come to market daily
CONTRACTS SIGNED - the # of active listings to enter into contract
OFF-MKT - the # of active listings that have been removed from the marketplace

ticker_july24.jpg

I can see by the ticker above that Manhattan has produced 964 new contracts signed over the last 30 days. The last time I reported on the daily ticker, this same 30-day deal volume pace was at 1,296 on May 24th. The market ticker is the one tool that will allow you to pick up on market tick-ups and tick-downs as they occur in real-time. The monthly pace of deal volume seems to be down around 25% from the peak 2 months ago.

Now that we know the month-to-month trend is down, lets take a peek at the year-over-year trend to filter out seasonality and answer the question, "how have past July's performed in Manhattan?". By comparing any month to the exact same month in years past, we can get a sense of whether or not this year's production levels are relatively strong or relatively weak. The ticker above tells us that so far the month of July is on pace to produce "964 new contracts signed" - so this is our starting point.

Below is a chart showing you Monthly Contracts Signed production for Manhattan since 2008 - I circled the month of 'JULY' so we can focus on production in this month for years past:

bar_july_2012.jpg

By knowing the real time 30-day pace of deal volume as we head into the last week of July, we can easily tell that Manhattan is still producing at a very high level considering the time of year it is. All of the activity over the last 3-4 months should have a solid impact on Q3 and Q4 results, as signed deals ultimately close and become public record.

As for looking ahead, equity markets are still worried about the Eurozone as the sovereign debt crisis spreads from Greece to Italy & Spain. Government bond yields in Spain are starting to soar and it's only a matter of time until the markets take matters into their own hands and write a new playbook on what happens next. Another bailout coming? At some point the bond markets wont react at all and equities will follow suit.

That has been my concern throughout this whole Eurozone debacle. It's like we have been pushing the soda machine from side to side for 3+ years and at some point, it's gonna fall!

What worries me now is what US Treasuries might be signaling with a 10YR yield at 1.4%?

10yr-july2012.jpg
*chart below courtesy of CNN Money

This signals a risk-off marketplace where money is looking for safety. The two places money will flock into are a) US Dollars and, b) US Treasuries. And that is exactly what is happening again now.

It's just another sign of how fragile things are overseas as slowing global economies on top of EU sovereign debt concerns elevate uncertainty. We should keep our eyes on this and sellers should be aware that the 'frenzy'market they heard about a few months ago is no longer in play today -- yes, we are still active but compared to May we are about 25% slower. If you have been on the market for 90 days or more and you failed to receive acceptable bids or sustainable foot traffic, my advice is to adjust your asking price accordingly. In the end, the market dictates the right price!

In terms of major shifts in price action for property, I don't think Manhattan will see much of a negative impact until equities really start to roll over. I'm talking 15%-20%+ corrections and the media effect that comes with it. Should this occur, the UrbanDigs Daily Market ticker will be the first place to pick up on any warning signs that the market may be experiencing a shift. But as of now, all seems quite fine and we still have 4-5+ months of very strong deal volume in the pipeline waiting to close & get counted in the reports. Expect improving #s in the upcoming quarterly reports regardless of what wall street decides to do in the near future.


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