A: Most brokers are bombarded daily by their buyer & seller clients asking "How's the Manhattan market doing right now?". It's not such a simple question to answer because price action doesn't reveal itself for a good 4-6 months or so when deals signed into contract today ultimately close and become publicly available. That sales lag alone should be enough to convince anyone that looking at median or average price trends is similar to looking in the rear view mirror at a marketplace that existed close to six months ago. Add in the flaws of median/average price trends, mainly that both are exposed to what "types" of properties close and "their recorded period", and even that lagging data could paint a very misleading picture. This is why the only way to track Manhattan performance in real-time is to track inventory trends on a daily basis -- that is, how is daily deal volume? How are daily supply trends? And how are different segments and price points of the market performing relative to the broader trend. Lets try to answer some of these questions today.
Every REBNY broker must maintain their exclusive listing in the RLS sharing system and update their listing at least once in the last 14 days -- otherwise the agent can get locked out from managing their listings internally until updates are provided. The UrbanDigs tracking system parses/cleanses those internal "broker status updates" and notes only the worthy changes in our Market Ticker tool so that users can track daily, weekly and monthly market production. This allows us to keep a pulse on the marketplace on a daily level and see tick ups & downs in real time; although, it takes sustained data to identify a noteworthy trend.
The ticker tool also allows us to check in mid-month to see how Manhattan is performing, relative to that month's prior production history. That's the key because in seasonal marketplaces it's always best to compare any month of production to that same month in past years to interpret relative performance levels. By doing so you will eliminate the noise that affects month to month or quarter to quarter trends.
Lets do that now and first take a look at Monthly Contract Activity going back to 2009 with the goal of understanding what pace of new deal volume Manhattan is used to seeing in the month of February -- then we can determine what level of Contract Activity is normal for this time of year:
I outlined the data bars for the month of February in the above chart, which show's us total deal volume over the past 4 years. To sum:
February 2009 (credit crisis) --> 484 contracts signed
February 2010 --> 849 contracts signed
February 2011 --> 844 contracts signed
February 2012 --> 871 contracts signed
February 2013 --> not yet available
Excluding February of 2009 for obvious reasons, I am fairly confident when I say:
The month of February normally sees Contract Activity in the "mid-800s"So we now have a baseline to compare to. Now lets go a bit deeper and look at the daily market ticker tool to see what the market is producing over the past few weeks:
*ticker snapshot taken at 5:45am
Deal volume for February 13th (yellow box) --> yesterday, the market put 45 deals into contract
Deal volume for February 12th (red box) --> the market put 64 deals into contract
Weekly pace of Deal volume (blue box) --> the market put 270 deals into contract over the past 7 days
Monthly pace of Deal volume (orange box) --> the market put 1,049 deals into contract over the past 30 days
Those #s update every 3-4 hours as brokers throughout Manhattan put new status updates for all exclusive listings into the sharing system.
Right now, February is on pace to put over 1,000 deals into contract if the month ended today. Which allows me to draw this conclusion:
With everything we know about how tight inventory levels are, the market continues to see deal volume solidly outperform on a year over year basisNow very important, strong deal volume doesn't necessarily mean rising price action. I think price action has been on a steady, progressive upswing for the past 4+ years now but that is only because I am actively in the field servicing clients and seeing where bids are coming in throughout Manhattan's neighbohoods/price points. But for where bids are now and how that relates to say 6 months ago, well, we have to wait for that data to become public record (probably in the June-July time frame we will get public record confirmation of where the market is performing today).
Every building is its own local marketplace and right now even the price points are performing at different levels. We know from yesterday's discussion that the lower end price points are not seeing as 'robust' deal volume trends as the higher end. We also know that Chelsea, BPC, and FiDi are under-performing the broader market trends and may not be seeing the kind of action that Tribeca & Gramercy/Flatiron is currently seeing.
Manhattan is highly segmented which means sellers need to be informed on what is really going on in their hyper-local submarket and building before testing the market with a unrealistic asking price. A high asking price is a sure-fire way to miss the advantage that the market is currently giving the sell side.
But hey, I guess that is what makes a market and I can't think of a stronger time to list an apartment for sale since the peak in 2007. Just know that in today's market buyers are paying up for full renovations, views, and a building that is financially sound and being lent on by the major banks. The buy side "herd-like" mentality that sellers love so much seems to be in full gear for those types of "desirable" property. How long it lasts remains the question of the day.
A: Lets take another look at the rolling 3-month trend for all 16 Manhattan neighborhoods/submarkets that the UrbanDigs' system tracks in real time. Shown below are each neighborhoods' pending sales trends (a measure of deal volume/demand) and active inventory trends (a measure of supply). The baseline for Manhattan as a whole over the last 3-months has Pending Sales down 4.9% and Supply down 12.3% -- this baseline should be used to determine relative strength & weakness as we focus on each neighborhoods performance over this time period.
Before we get into the Manhattan neighborhoods, lets take a quick peek at how the broader Price Points are performing over the last 3 months:
ALL MANHATTAN --> Pending sales down 4.9%
MANHATTAN <$1M --> Pending sales down 11.8%
MANHATTAN $1M-$2M --> Pending sales up 2%
MANHATTAN $2M-$5M --> Pending sales up 5.3%
MANHATTAN $5M+ --> Pending sales up 13.9%
Conclusions: Its clear that the higher end price points are seeing more robust deal volume over the past 90 days than their lower end counterparts. The $1M and under price point is the clear under-performer right now and is not seeing the kind of frenzy that is occurring in the tighter, higher price points.
Now, here are all the Manhattan neighborhood trends we track so we can see where the action is happening; I added supply trends after each neighborhood's 3-month pending sales #:
3-MONTH PENDING SALES TRENDS -- Supply trend
Tribeca: +32.4% -- supply down 10.4% over this time
Gramercy/Flatiron: +22.2% -- supply down 17.8% over this time
Midtown East: +5.6% -- supply down 13.2% over this time
East Harlem: Unchanged -- supply down 9.2% over this time
Soho/Noho/West Village: -0.8% -- supply down 9% over this time
Murray Hill/Kips Bay: -1.5% -- supply down 15.4% over this time
Inwood/Wash. Heights: -2% -- supply down 12.1% over this time
Harlem/Morningside Heights: -4.7% -- supply down 32.8% over this time
------- BASELINE PENDING SALES ALL MANHATTAN = -4.9% -------
Upper West Side: -6.4% -- supply down 13.9% over this time
Upper East Side: -6.6% -- supply down 10.5% over this time
LES/East Village/Union Square: -7.6% -- supply down 17.8% over this time
Midtown West/Clinton: -8.3% -- supply down 12.2% over this time
Fidi/Civic Center: -9.8% -- supply down 1.6% over this time
Harlem/Hamilton Heights: -15.4% -- supply up 1.1% over this time
Chelsea/Midtown South: -20.6% -- supply down 4.3% over this time
Battery Park City: -54.8% -- supply down 32.8% over this time
-- Supply trends as a whole are down in most areas of Manhattan, with the exception of Harlem/Hamilton Heights which saw supply increase 1.1% over the last 90 days.
-- Tribeca & Gramercy/Flatiron are the clear out-performers right now
-- Battery Park City & Chelsea/Midtown South are under-performing the broader market trends right now
-- In the field, tight inventory is resulting in multiple offer situations across most neighborhoods. As discussed above, this is more so the case in the higher price points so buyers should adjust their bidding strategy accordingly. Sellers should be cognizant of hyper-local trends so as to take full advantage of leverage that is currently on their side -- pricing too high will immediately result in a much different experience than what the data is suggesting.
A: With January in the books lets take a look at the monthly Contract Activity and New Supply and see how we performed when compared to January production in years past. In seasonal markets, its best to measure monthly performance on a year-over-year basis so as to filter out the noise of seasonality.
January 2013 saw Manhattan produce 859 new deals signed into contract. For perspective, please consider this Monthly Chart of Manhattan Contract Activity:
The past 3 years saw January deal vol in the mid 600s, so when I see this January's print at 859 it's further confirmation of the strong activity that is currently enveloping the inventory laden Manhattan marketplace. It's safe to assume that buyers are quickly snapping up new supply that comes to market; a stat we will be able to quantify once the new urbandigs.com site goes live by April.
Lets move on to supply trends. January 2013 saw Manhattan bring 1,538 new listings to market -- that is 1 shy of last year and noticeably lower than what we typically see come to market for this time of year. To visualize this, please consider this Monthly Chart of Manhattan New Supply trends:
Add it up and we continue to see buyers outbid each other for new listings offering desirable features that are priced right. When I say desirable features I am mostly talking about full renovations & views/exposures; low or mid floor cookie cutter apartments with little to no natural sunlight and has little to no view is not experiencing the 'activity' that the data suggests. With inventory the tightest its been in years, apartments with that 'wow' factor or unique feature (think outdoor space or fireplace, etc) can really take advantage of the shift in leverage to the sell-side right now.
In the field, my team is experiencing several best and final situations across the city, in various price points. The constant being that the products offer desirable open city views and are in move in condition.
Some tips for Sellers
1. Leverage has definitely shifted to your favor so it would be wise to take advantage of current demand and the lack of competition by pricing right! The quickest way to be behind the curve and miss it is to overprice and not listen to what the market is telling you. In the end, it's all about the price.
2. If you have been on market for 3+ weeks (assume 3 open houses thus far) with less than 20 visitors and no bids, your price is wrong. The main reasons your price may be wrong are:
a) the comps analysis to price the apartment was too euphoric. This could be because the listing broker that pitched to get the exclusive promised a 'high price' knowing a price cut will have to come at a later time. Or it can be because the seller is testing the market with the understanding the price will be chopped after a month or so.
b) your hyper-local submarket is currently performing below market trend. The UrbanDigs chart system lets you dig into real-time pending sales and inventory trends to see which sectors of Manhattan are under/over-performing; for example, the Upper East Side under $1M market is not seeing the tick up in new contract activity that the high end price point is seeing. You can unlock all the real-time Manhattan tools here.
Some tips for Buyers
1. Manage your expectations. Know the market that you are bidding into right now and tweak your strategy when you find the right apartment. Present your offer in writing via email/fax clearly detailing your employment situation, financial condition, financing plans, attorney contact details, and closing terms.
2. Do a comparable sales analysis using relevant in-bldg sales and adjusting for time, views, condition, etc. to come up with a fair market opinion (which is usually a part of your buyer broker services). Since most buyers go into a bidding process with some knowledge of where they are willing to go to get the deal, I am here to tell you to skip 'the dance' of negotiations and put your best foot forward right off the bat. I am not saying to overpay given opinions from a comps analysis, I am simply saying not to employ a low-ball bidding strategy when you find 'the one' in this marketplace.
3. Consider taking out less of a mortgage if its feasible to do so. I am not saying to stretch yourself too thin, rather, if you can afford to put 30%-35% down that may separate you a bit from other financed offers
4. If you find yourself in a multiple offer situation and you are highly confident in your ability to secure financing, consider sending in the offer without the financing contingency; I strongly recommend that you discuss this approach with your attorney first so that you fully understand all the risks. The only way for a financed offer to match up against a cash offer is:
a) be 2%-3% or more higher than the cash offer, and
b) remove the financing contingency in the contract.
Having two similar offers at $2M, one cash and one financed but removing the contingency, is really a no-brainer for the seller. The cash deal wins every time as the comfort of skipping the whole financing process is too difficult to overlook. However, if that financed offer without the contingency was $2,060,000, then the seller has a decision to make.
5. Know the signs that a deal may be running away from you; a good read for any broker or buyer that is new to Manhattan real estate.