Depleted Manhattan Finally Sees An Uptick in New Supply -- But Will it Last?

Posted by urbandigs

Mon Jan 14th, 2013 09:30 PM

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

(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.

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.
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.

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.