A: A glimmer of hope is starting to appear in the daily Manhattan supply numbers. Its way too soon to call this a trend, but the past 7-8 days has seen a welcomed uptick in new supply coming to market. Anyone tied to the market on a daily basis has probably felt the comfort of "more options". With inventory reaching its low point only a week ago, we need to see months of rising supply...not just weeks to satisfy what seems like endless demand for quality Manhattan property. Lets discuss and look at the real time data and hope the uptick in supply continues for a while longer.
First off, lets check in on the UrbanDigs Daily Market Ticker -- this is the only real-time ticker Manhattan has to accurately track production as it counts daily status updates flowing through the Rebny Listing Service. The purpose of the ticker is to provide a quick and easy way to measure if the pulse of the market is ticking up or down over a weekly and monthly pace.
Here is a snapshot of the ticker as of 9:30pm this evening:
Notice two main things:
1. Weekly pace of supply is 431 new units to come to market (red box), indicating only a recent surge that has not yet impacted the 30-day pace of new supply which totals 964 new units (blue box).
Conclusion --> the surge in supply is only now starting to happen and is still significantly less than what we normally see at this time of the year. A good sign but we need this rising trend of new supply to continue.
2. Weekly pace of demand is at 210 new units to go into contract and pending a close; that puts us on a monthly pace of around 800 units to go to contract.
Conclusion --> the pace of new deal vol continues to produce at levels above trend for this time of year, even with tight inventory. This tells me that buyers are chasing after quality new supply to come to market, pushing overall days on market trends lower.
Now that we know the real-time, weekly and monthly pace of supply & demand, lets see how that compares to what we are used to seeing for the entire month of January.
JANUARY 'NEW SUPPLY' HISTORY (subscription required)
January 2009 --> 2,013 new active units came to market
January 2010 --> 1,829 new active units came to market
January 2011 --> 1,688 new active units came to market
January 2012 --> 1,539 new active units came to market
January 2013 --> not yet avail -- on pace to end the month with 1,344 new active units
JANUARY 'NEW CONTRACT ACTIVITY' HISTORY (subscription required)
January 2009 --> 317 new deals signed into contract
January 2010 --> 665 new deals signed into contract
January 2011 --> 647 new deals signed into contract
January 2012 --> 615 new deals signed into contract
January 2013 --> not yet avail -- on pace to end the month with 810 new deals signed
The real-time data is showing that market production for January is trending lower for new supply and higher for new deal volume when compared to past January's production levels.
Serious buyers and sellers, as well as the brokers out in the field should relate to this data very easily. The main theme is that we have the lowest inventory on record since UrbanDigs started tracking the market in Jan 2008. We hit our inventory low-point on January 1st, 2013 with a total supply of 4,476 units; and have since seen a slight tick up in supply to 4,611 active units on the market today.
In Fred Peter's recent article titled "Nowhere to Go" he offers the following observations as he manages all of Warburg Realty's agents:
In both the Manhattan and Brooklyn markets, inventory in most neighborhoods has plummeted in the last few years, and there is not much indication that the situation will be changing any time soon.That last part is so important in this type of environment. While its clear buyers are hoping for more supply, sellers would be wise to listen to what the market is saying if they decide to try and test the market at an unreasonably high asking price. That strategy rarely works as fewer buyers will produce few offers and even if one happens to be realistic it likely will get 'passed over' by a seller who is waiting for a higher #. The end result of the strategy is usually light traffic, low bids, and an upset seller.
Of all the neighborhoods, inventory seems to be thinnest on the Upper West Side. For example, buyers for large prewar co-ops on Central Park West quickly learn that there is literally nothing to see. And there was also nothing to see last month, or the month before. Asking prices all over town are escalating in response to this scarcity, and it seems increasingly likely that buyers will be responsive and pay more to obtain a place to live when there are so few options. That said, and while 5% to 10% year over year increases seem steep but possible, I doubt that most buyers will purchase properties which are coming on at 20% over last year's prices. Even in today's scarce inventory environment, pricing still needs to have some relationship to the comparables and price history of similar units.
In a seller's market like this one, well priced inventory moves fast.
As brokers, its our job to educate our clients on the fast changing market trends and advise them accordingly so that they are best positioned to take advantage of the leverage that the market is currently offering. Sellers would be wise to price listings properly, perhaps 5%-7% over what is deemed fair market value. Buyers would be wise to take on a more aggressive bidding strategy when a highly desired property does hit the market; know your fair market opinion range and go right to the top of it! Don't waste time testing to see if the seller will hit your bid 10% below perceived market value. That strategy likely will be met with a "no response" and leave the buyer bidding against themselves and with no control in the negotiations.
I'll keep an eye on the pace of new deal vol and new supply as we get into the meat of the "active season" and report if anything drastic changes. Its hard to imagine anything other than what we have seen over the past year without any negative outside macro force to change how buyers look at Manhattan property.
A: Manhattan rings in 2013 with 4,495 active listings marketed for sale by brokers in the Rebny Listing Service, and 2,334 units in contract awaiting closing. I would look back at 2012 for Manhattan residential real estate and call the year 'the strongest since 2007'. The story is really all about the sustained decline of inventory with strengthening levels of new deal volume. Add it all up, and Q4 market reports from the big firms are all confirming what the real-time UrbanDigs tools have been saying all year long. Lets discuss the year in review and touch on the recent surge in 10YR treasury yields and whether that may ultimately drive lending rates higher.
First, lets take a broad look at how Manhattan-wide Inventory & Demand trends have fared over the course of 2012:
So, 2012 saw Manhattan inventory drop from 6,319 units on market Jan 1st, 2012 to 4,495 units active on the market right now. We also saw the number of deals 'in contract - awaiting closing' jump from 1,936 to 2,334 that we see today.
With inventory so tight and demand not only holding up, but strengthening, its no doubt that leverage is in favor of the sell side for quality property that is priced correctly. In all real estate markets, its all about pricing. An ask is just an ask, and if a high quality product hits the market at an inflated asking price then the sell side won't experience the traffic or demand that the data seem to be conveying to us. Thats why its extremely important for brokers and their seller clients to be cognizant of building trends and pricing the apt based on relevant comparable sales. Otherwise, the sell side will be disappointed. Price right, price realistic and the market should produce traffic/bids. If it doesn't, re-check your pricing and marketing efforts.
On a neighborhood level below 96th, here is a list of the top performing neighborhoods by Pending Sales Performance in 2012 (strongest to lowest):
1. Tribeca --> pending sales up 54.2% in 2012
2. SoHo --> pending sales up 25% in 2012
3. Lower East Side / Union Square --> pending sales up 24.8% in 2012
4. Upper East Side --> pending sales up 24.1% in 2012
5. Midtown West --> pending sales up 22% in 2012
6. Upper West Side --> pending sales up 16.4% in 2012
7. Midtown East --> pending sales up 16% in 2012
8. Battery Park City --> pending sales up 13.3% in 2012
9. Murray Hill / Kips Bay --> pending sales up 3.7% in 2012
10. Chelsea --> pending sales up 1.1% in 2012
11. Gramercy --> pending sales down 8.2% in 2012
12. FiDi --> pending sales down 21.4% in 2012
Manhattan is in desperate need of inventory so I hope this message is getting out to potential sellers as we head into the 2013 'active season'. I can't think of a better time to list a Manhattan property for sale since the 2007 peak.
Fears of a EU breakdown, an Asian slowdown, Fiscal cliff, etc., still exist but clearly are not impacting Manhattan real estate the way some thought it would. The reason is because there has been no selloffs yet! Nothing has gotten in the way of stopping demand for Manhattan property. Its been a progressive 4-year reflation now and we are sitting close to the highs of that long move. Two macro events that would disrupt this trend are:
a) a stock market selloff -- excluding unexpected disasters, a stock market selloff of say 20% or more is guaranteed to push potential buyers of Manhattan real estate to the sidelines. Serious buyers tend to either re-think how to price in the 'uncertainty' of the future into their bids or move to the sidelines altogether. Sellers dont want to make rash decisions so they either say no to these lower bids or remove their listing from the marketplace until things calm down. The combination drives pending sales lower and off-market trends higher -- exactly what happened in mid/late 2008.
b) a surge in lending rates --10YR treasury yields jumped from 1.59% to 1.94% over the last 30 days. We really dont know how our markets will react if/when rates rise noticeably, but there are new warning signs that this may start happening sooner rather than later. While lending rates are derived from movements in the mortgage bond markets, in low credit stress environments there is also a relationship between 10yr treasuries and lending rates; albeit at a lag. Right now I see yields on both 10yr treasuries and mortgage bonds surging.
Bloomberg is reporting, "Mortgage-Bond Yields Soar to Highest in Four Months on QE Doubt":
Yields on mortgage securities that guide U.S. home-loan rates jumped to the highest in almost four months as the minutes of a Federal Reserve meeting signaled the central bank's bond buying may end this year. A Bloomberg index of yields on Fannie Mae-guaranteed mortgage bonds trading closest to face value rose 0.07 percentage point to 2.34 percent as of 3 p.m. in New York, the highest since Sept. 12.If history is any guide, lending rates will rise at a slight lag to these two market forces. So it begs me to ask the question, what happens when the conforming 30yr rate is 4.5% instead of the current 3.5%? What happens when the jumbo rate is 5% compared to the current 3.875%? We all knew rates couldnt possibly stay at record lows forever; yet the sustained surge in rates that many predicted is yet to come to pass. Time will tell, but for those that are in contract and expecting to close within 60 days, I would re-check those rates with your lender now and hope they haven't moved too much higher on you!
Timing any market event is a fool's game, so for now lets just stick to what the real-time data is showing. The demand is there, the inventory is very tight, and buyers are bidding up for views & full renovations. If anything changes with real-time production, I will report about it here on UrbanDigs.com.
Cheers and wishing everyone a happy, healthy and successful 2013!