Tutorial #2: Tracking Hyper-local Manhattan Submarkets

Posted by urbandigs

Fri Aug 31st, 2012 11:32 AM

A: As we work to finish off a brand new website, I wanted to take a crack at another video tutorial on how to use UrbanDigs.com to track sections of Manhattan real estate in real time. Im hoping the practice and feedback will help for a future video tutorial section when the new site goes live. Thanks in advance for any thoughts on the tutorial, how it can be improved, or if I should touch on another topic. Happy & Safe upcoming Labor Day to all as well!!

TUTORIAL #2: Tracking Hyper-Local Neighborhood Trends in Manhattan
**to unlock all UrbanDigs Manhattan charts, please subscribe now**






Our First Glimpse of Rising Price Action

Posted by urbandigs

Wed Aug 29th, 2012 08:07 AM

A: Since all of us are always so curious about which way prices are headed in Manhattan real estate, lets keep today's discussion on price action tools to watch. Lets also define price action as the general trend in closing prices as they become public record giving us the first glimpse of "where bids came in" for deals signed into contract 2-3+ months ago. The first place I look to find quantifiable trend changes in Manhattan price action is the Streeteasy Condo Index. Then I expect the brokerage's in-house quarterly market reports will confirm or disprove what UD real-time inventory trends have been signaling for months and what the Streeteasy Condo Index is showing for sales prices. With the latest info in on the SE index, we get our first glimpse of rising price action as deals finally close and become public record.

I want to be clear I am talking about general market price trends here for all of Manhattan by analyzing same unit repeat condo sales. There are a bunch of ways we can further slice and dice Manhattan up, whether its:

a) by prop type, coop versus condo price trends
b) by price point
c) by neighborhood
d) by bldg service level or age
e) by quality tier (think rooftop PH condos in Tribeca w/ Hudson river views, etc)


The fact is that in Manhattan every building is its own local marketplace and that is where you should focus when a target unit needs to be priced out. So for this discussion lets just keep it simple and focus on the recent uptick in broader market price trends for Manhattan.

Below is a chart showing the SE Manhattan Condo Index from 2005 to July 2012 (using the downloaded data), with a little formatting to the range on the left side vertical axis so the market changes are a bit easier to visualize:

se_condo_index_july2012.jpg

Lets recap the major trend changes this price action index for Manhattan experienced since 2005:

2005 Pre-Euphoria --> This is when sales offices for a host of new dev's started to open up. Inventory was very tight back in these days and I recall buyers' rising excitement over new projects that weren't even close to completion as they wanted in on first level pre-construction prices. Most sales offices would only release batches of units which often sold out in weeks and then was followed by higher prices as sponsors filed new amendments to take advantage of the rising demand for new dev supply. Tight inventory, rising demand.

The Peak --> Supply builds as 100s of sales offices are kicking into high gear. I put the peak of the Manhattan marketplace at deals signed into contract between early and fall 2007. The brewing credit crisis was yet to have any meaningful impact on bids. Growing inventory, high demand.

The Credit Crisis --> All bets are off as buyer confidence plunges and so do bids. Buyers start to price in 'future downside risks' in their bids and deal volume plunges as sellers fear the worst. The best deals were had in the early months of 2009. Rapidly rising supply, plunging demand.

Stabilization --> We see a progressive reflation starting in the lower price points and moving to higher end price points as we go through 2010 and 2011. Buyers start to realize the 'end of the world' isn't happening from Armageddon fears in 2009. After a quick pop off the bottom, Manhattan prices tend to stabilize in a trading range for much of 2010 and early 2011, before the high end sees a big uptick in activity in mid 2011. Supply starts to decline, demand starts to return.

The Recent Up-Trend --> The last 5-6 months saw very strong contract activity with the peak occurring around May. These deals are starting to close and the Index is beginning to reflect the rise in "price action". I still expect this trend to continue as the pipeline of pending sales remains high. Inventory is very tight, demand continues to be relatively strong compared to years past.

It makes me so excited to see the UrbanDigs real-time tools accurately predict future price action trend changes by tracking inventory shifts in this fast paced craziness we call Manhattan real estate. In the end, nobody knows where those bids are on a mass level until the City Register files the closing; and that could take anywhere between 2 weeks to 5+ months. In the meantime, we are all screaming for this information so that we can properly advise our clients and manage both buy side and sell side expectations on market changes that may be occurring in real-time. No easy task.

But this uptrend that started 3yrs ago and went into overdrive over the last 5 months, was easy to interpret using UrbanDigs tools. Now comes the price discovery part -- expect more to come.


The Hottest Year Since '07

Posted by urbandigs

Fri Aug 17th, 2012 11:32 AM

A: Ok the year is not over yet, but at this point I can confidently say that this market is quickly shaping up to be the hottest market I have experienced in Manhattan real estate since the peak back in 2007. This is a combination of sustained new contract activity, declining inventory trends, and "price action". Out of these 3 micro market forces, only "price action" is measured at a lag as we wait for price discovery on deals that were signed months ago. Therefore, all the activity from April through July should start to reveal itself in the upcoming quarterly reports. Expect these reports to show positive price trends..

Lets get right into the data and put the pieces together on where Manhattan is right now and where we came from. I am a big fan of keeping it simple, so lets look at what Manhattan is producing on a monthly basis over the last 3 years; both new contracts signed and new supply coming to market.

MANHATTAN MONTHLY NEW DEAL VOLUME SINCE 2009 (contract activity)

aug_dealvol.jpg

Conclusions: I chose 2009 as the start point for this monthly bar chart to show you just how far Manhattan has come since the height of the credit crisis and how long the market has sustained recent high levels of new deal volume. As a seasonal marketplace, the months of March through June typically sees the highest levels of deal volume throughout the calendar year -- but this year, the months of March through July have blown past prior years production! Most of these deals (either still pending sales or closed but not filed by the City Register yet) will eventually get filed, become public record, and populate the quarterly reports. Since I am a buyer's broker working on the front lines of Manhattan real estate I can tell you that today's marketplace, while still active, is not as "frenzy-ish" as it was 2-4 months ago -- but overall, this is the strongest 6 months of action I have seen since 2007! The chart shows this month-to-month "tick-down", but we must acknowledge that compared to the same period in years past we are still solidly outperforming; and August so far looks to continue that trend.

Let's move on to monthly supply trends since 2009.

MANHATTAN MONTHLY NEW SUPPLY SINCE 2009 (listings new to market + back on market)

supply_aug.jpg

Conclusions: If it were a few months of declining monthly supply that would be one thing, but what we have seen since 2009 is entirely different. Try to wrap your head around this as you view the above chart:

OF THE 43 MONTHS OF NEW SUPPLY DATA SHOWN ABOVE SINCE JAN 2009, 35 MONTHS SAW YEAR OVER YEAR DECLINES.
Since September 2010, Manhattan only had 1 month where we saw more supply come to market from the prior year same period. In other words, there has been a sustained trend of "less stuff" coming to market for 3+ years now!

Today's tight inventory is not a recent thing, and rather has been a work in progress for years. This impacts the psychology of buyers that have been waiting, watching Manhattan real estate since the 'sh*t hit the fan' in 2009. To me, these buyers have been thinking along these lines:

-- 2009, "no way I am buying Manhattan real estate until it falls 50%..."
-- 2010, "I don't buy into this rally, it can't last..."
-- 2011, "wtf!, where are all these bids coming from! I'll wait until things change and I have more options..."
-- 2012, "that's it, I'm starting to believe this market is the real deal..."

I've had a number of old buyer clients finally pull the trigger and buy in recent months -- taking years to rebuild confidence. Sellers are you listening? This is not a market to try to time a new listing. If you know you are going to list your property for sale, I would get it up while deal volume remains at very high levels and inventory trends reach their lowest point since January of 2008!! Take a look:

MANHATTAN SUPPLY SINCE 2008 (actively updated inventory)

suppl_augu.jpg

I've been singing this tune since April and while it gets boring writing about the same thing, the data is what it is -- and in regards to real-time inventory trends, its strong! A few thoughts as we go forward and future reports reveal just how hot the market got:

-- When the Q3 report comes out October 1st, will the market continue to see bids and deal volume at levels seen earlier in 2012? The media effect of a very strong market is yet to be determined.

-- With inventory so tight I would think brokers have excellent ammunition when pitching new sellers. But I am wondering how this might affect pricing strategy? Will sellers be tempted to price too high as strong reports come out and strong bids for comparable properties ultimately close and give us price discovery? Can the market sustainably absorb listings if sellers keep lifting asking prices and anchoring themselves to recent strong data?

-- Will we see stalled development projects come back to life as future Manhattan reports are digested and the #s behind these projects start to make more sense? I am especially curious to see where "new projects" trends go from here, I would think only up. Will this ultimately change the trend in declining supply that we are so used to? Will the market be able to absorb higher asking prices if price trends do rise noticeably?

-- Finally, whats with the narrowing wall street compensation fears, EU sovereign default fears and U.S. "fiscal cliff" fears? So far all have been a non-event as the data confirms sustained market strength for Manhattan real estate. In regards to wall street comp, I think that is a force that will gradually impact Manhattan for years rather than a 1-time sharp impact that many expected. So far, the depth of wealth interested in Manhattan property has proven to be too big a force for narrowing of wall street compensation and its impact on high end sales. In regards to an overseas event or US fiscal fears, it only matters when our equity markets start to care about them again. Who knows when that will be. As long as equity markets are juiced by the fed/govt, bids will come in for Manhattan property. Its only when we see a 15%-20%+ sustained correction in stock prices that we see deal volume in Manhattan come to a noticeable halt as buyers sit back and sellers try to cash in before any impact. So far we haven't seen a downturn turn into anything really worrisome; but time will tell how long that trend continues!




3-Month Manhattan N'hood Performance Check

Posted by urbandigs

Tue Aug 7th, 2012 10:38 AM

A: Lets check in on the 3-MTH pending sales trends for all Manhattan neighborhoods tracked by the UD system. We should keep in mind that the start point for this 3-month trends check will be early May, which saw record levels of contract activity. So consider this discussion a focus on just how much slower individual neighborhoods across Manhattan have gotten since peak contract activity in May.

Notable Neighborhood Moves since the last check on April 24th:

-- Battery Park City continues to see rising demand, +38% over past 3-months
-- Chelsea cools down big time seeing demand go from +91% to -1.9% over past 3 months
-- Gramercy sees 3-month demand slide from +59.1% to -19.5% from the last nhood check in late April
-- Midtown East sees demand stable, still +13.6% over the last 3-months
-- SoHo/NoHo/W Village & Tribeca markets continue to see rising demand over the last 3-months
-- Harlem/Morningside Heights was the only submarket to see a rise in supply (+10.3%), over the last 3-months

Here are all the Manhattan neighborhood trends we track; I added supply trends after each neighborhood's 3-month pending sales #:

3-MONTH PENDING SALES TRENDS -- SUPPLY TREND

Battery Park City: +38.1% -- supply down 21.5% over this time
Inwood/Wash. Heights: +21.1% -- supply down 22.1% over this time
Harlem/Hamilton Heights: +16.3% -- supply down 17.5% over this time
Midtown East: +13.6% -- supply down 12.8% over this time
Harlem/Morningside Heights: +11.6% -- supply up 10.3% over this time
Soho/Noho/West Village: +8.9% -- supply down 21.5% over this time
Tribeca: +8.3% -- supply down 32% over this time
Murray Hill/Kips Bay: +7.1% -- supply down 16.7% over this time
Midtown West/Clinton: +4.8% -- supply down 14.3% over this time
Fidi/Civic Center: +4.4% -- supply down 10.4% over this time

--- BASELINE PENDING SALES ALL MANHATTAN = +2.1% ---


Upper West Side: Pending Sales Flat -- supply down 27% over this time
Upper East Side: -0.2% -- supply down 21.1% over this time
Chelsea/Midtown South: -1.9% -- supply down 25.1% over this time
East Harlem: -2.7% -- supply down 32% over this time
LES/East Village/Union Square: -6.7% -- supply down 5.7% over this time
Gramercy/Flatiron: -19.5% -- supply down 21.3% over this time

These 3-month neighborhood performance discussions easily tell us where the market is today, in real-time, and where we came from three months ago. In general, its clear that both contract activity & active supply is down in most neighborhoods across Manhattan compared to early May. This jives with general data trends as well discussed last week. The main questions & answers go something like this:

Q: Is the market still active out there?

A: Yes, but not nearly as active as it was in May and it seems peak activity for 2012 has already occurred. Typically we see deal volume slow for the summer and supply to fall further as sellers who didn't procure acceptable bids take their listing off the market. The next bump in demand tends to occur in October, as listings come back on market after the Labor Day holiday.

Q: Where are the bids? Is there a correlation between deal volume & price action?

A: Generally yes. While real estate is an illiquid asset class, generally speaking, sellers will have an advantage when deal volume is high while buyers will have more leverage when deal volume is lower and there is less buy side competition. Factor in supply trends & macro economic conditions that may affect buy side confidence and we can start to get an idea of the trend in price action. Based on UD data and what I have seen in the field, I would expect price action to rise for the next 3-4 months as pending sales in the pipeline ultimately close and get counted in the reports. The SE Condo Index already is starting to show this.

The median sales #'s should be in the beginning phases of telling us just how strong the Manhattan market was between April & July. We already know that deal volume was off the charts during these months, and continues to be much stronger than what it normally is for the month of August. The real-time market ticker continues to see 30-day deal volume over 1,000+; signaling an active marketplace.

In terms of price points, over the last 3 months Manhattan Pending Sales trends are as follows:

PENDING SALES ALL MANHATTAN = +2.1%
PENDING SALES <$1M = +5.3%
PENDING SALES $1M-$2M = -4.7%
PENDING SALES $2M-$5M = +5.4%
PENDING SALES $5M+ = -11.3%


So we can clearly conclude that the luxury price point across Manhattan has seen demand dry up over the last 3 months, while the most action has been occurring in the <$1M & $2M-$5M segments of the market.

Seller's should be ecstatic that Manhattan continues to see above average levels of contract activity for this time of year, even if today's market is slower than three months ago. The broad decline in active supply across most neighborhoods continues to put pressure on serious buyers whose rental alternatives are seeing rates at 2007 record levels.

As for macro economic worries, sure they still exist but unless we see US equities take a sustained tumble of 15% or more, I don't see any major impact on buyers' confidence towards Manhattan property. If the market were to be in the process of shifting, we would see daily deal volume plummet as bids for property either come in too low, or don't come in at all. So far this has not happened so lets continue to let the data speak for itself.


July in the Books -- SE Condo Index Starts to Reflect Past Market Strength

Posted by urbandigs

Wed Aug 1st, 2012 10:58 AM

A: With July in the books, let's take a quick peek at how this 'typically slow' month performed. We must remember that UrbanDigs' tools are showing us inventory trends as listings come to market, go into contract, close, or are removed from the market. If you are looking for the latest #s on Manhattan price action, I would refer you to the Streeteasy Manhattan Condo Index - which is kind of like the Case-Shiller for Manhattan. I think this repeat-unit index on Manhattan price action is in the very beginning phase of an uptrend that will continue for another 4-5 months as past deals close and become public record. Lets discuss.

Manhattan produced 952 "new contracts signed" in the month of July. This is:

- down 12.7% from June
- up 33.5% from July of 2011


With July finished, we should note that the last 5 months in Manhattan produced the following # of "new contracts signed":

July --> 952 new deals signed
June --> 1,091 new deals signed
May --> 1,298 new deals signed (highest on UD record)
April --> 1,164 new deals signed
March --> 1,213 new deals signed

That is a lot of deals over a 5-month stretch and most of these are still waiting to be captured and counted in the market reports we follow so closely. This is why I am confident the Q3 & Q4, as well as the SE Condo Index, is yet to fully reflect just how active the first half of Manhattan has been.

All of this is happening with less inventory coming to market every month.

For the month of July, Manhattan managed to bring 1,140 "new units/back on market units" to the marketplace. This is:

- down 13.5% from June
- down 2.3% from last July


Here is an interesting stat:

If we look at Monthly new inventory that Manhattan produces, only once in the last 22 months did we see a year-over-year rise in "new supply" to come to market!
This tells you that the current tight inventory levels have been a story in the making since late 2010! This did not happen overnight! Serious buyers who have been watching the market since then have not seen a sustained rise in supply at all. You can imagine how this impacts the mentality of a serious buyer when they do in fact find a property they love in their price point. That has been the story of this marketplace for the last 5 months as both new buyers + those who have been waiting/monitoring, came out with a frenzy between mid-April and early-June.

Add it all up and your basic Manhattan ACTIVE SUPPLY (blue line) vs PENDING SALES (red line) trends over the last 2 years looks like this (chart below does not require subscription):

supply_pending_aug2012.jpg

This shows you where we are right now in terms of supply & demand, and where we came from. We would expect the torrid pace seen a few months ago to slow down as we get into the heat of summer (happens every year!), and that is what seems to be happening now; noting that current deal vol is still higher than what we typically see for this time of year.

Finally, lets discuss Manhattan price action. It takes time for real-time inventory trends to translate into changes in price action. For example, even though the bottom of the market after Lehman failed was very early 2009, most reports put the 'bottom' closer to the end of 2009. This is due to the lag between when the deal was signed and when it closed. In the field, we know that: WHEN THE DEAL WAS SIGNED TRULY REFLECTS THE MARKETPLACE AT THAT TIME - NOT MARKET CONDITIONS WHEN THE DEAL CLOSES.

If you view how market conditions were at the time of the property's actual closing, you are interpreting the wrong market conditions! It should always be 'how was the market?' when the deal was signed into contract!

I think Manhattan already experienced its peak in terms of price action back in May and early June. Those were the times when multiple offer situations were happening everywhere and buyers were submitting "gap up" bids to get desired property. While the market is active right now, I don't see these kinds of situations nearly as much.

The Streeteasy Condo Index is the only tangible tool I see out there to accurately track Manhattan price action -- subject to the delay of deals closing.

Streeteasy Condo Index RIGHT NOW --> 1.941
Streeteasy Condo Index in JANUARY --> 1.890
Streeteasy Condo Index JUNE 2011 --> 1.900
Streeteasy Condo Index NOV 2009 (stated bottom) --> 1.790

So, this index is saying that today's marketplace is roughly up 8.4% since the bottom in late 2009, and slowly ticking up since January. I expect this to continue for another 4-5 months as past deals close and populate future #s in this index. Just understand that what's going on in the field at that time may be very different than what the future reports are telling us on what already happened in the past! That's where UD reports come in.

Cheers!