A: I want to get away from the red-hot Manhattan real estate story today, not only because its been the same story for so long now and I'm tired of talking about the same thing over and over, but more so because of the silliness taking place in Cyprus this weekend. That's right, that little island-country floating east of Greece, may cause some bigger problems down the road. It was reported this weekend that the EU will force a bailout of Cyrus's banking system at the expense of savers in the form of a "tax on deposits" up to 9.9% for deposits over 100,000 euros; 6.75% tax for deposits under that amount. Cyprus banks were still struggling from assets held after the restructuring of Greek debt. To avoid a full fledged run on Cyprus banks, officials "took immediate steps to prevent electronic money transfers over the weekend". Now Cyprus's Parliament is in emergency mode, postponing a session to approve the new tax on deposits, but in my opinion, the damage is already done and who knows if this little spark can cause a bigger fire later.
How are investors/savers in Spain, Italy, etc. going to react to this ridicoulous penalty imposed by the EU on Cyprus deposit holders? How does the EU not consider these unintentional consequences of such actions?
Mish states it best in his discuss "Contagion-Begging Actions; Expect Bank Runs Following Cyprus Idiocy":
In Cyprus, a decision was made to screw savers with a 6.75% to 9.9% "Tax" on deposits.I am wondering the same thing. How can this not cause 'deposit fear' as Mish calls it, to spread throughout the weakest parts of the EU?
Supposedly this move was made to "avoid unsettling investors in larger countries and sparking a new round of market contagion." In reality, the action was mandated theft, imposed by EU officials to protect senior bondholders.
How can such an action do anything but cause contagion? Why would any rational thinking Spanish person keep any money in Spanish banks? They shouldn't and I suspect they won't.
Rest assured there is going to be vengeance over this action.....and deposit fear will spread everywhere.
I don't know, this just seems like a really really bad call from the EU. Forbes already has a title out that seems to agree, "The Botching of the Cyprus Bailout: Worse Than Lehman Brothers":
Hank Paulson badly botched the Lehman Brothers crisis of 2009. But at least he had an excuse. Panicked by the speed of Lehman's meltdown, he had no time for second thoughts. By comparison the German-led group of EU officials who engineered this weekend's Cyprus bank bailout don't have a leg to stand on. Although they had years to consider their options (Cyprus's problems are closely related to, and have long been almost as obvious as, those of Greece), they have opted for a "solution" that amounts to probably the single most inexplicably irresponsible decision in banking supervision in the advanced world since the 1930s.At a time when US equity markets reached new highs and Manhattan real estate "couldn't be hotter", this news brings a few unwelcome storm clouds. Will this be another "non-event" or is this potentially the trigger to something more? It may be worthwhile to keep our eyes on this given the levels of complacency out there (the VIX is at its lowest levels since early 2007).
As my colleague Tim Worstall has pointed out in a well argued contribution yesterday, they have weakened - perhaps catastrophically - the principal pillar sustaining modern banking. This pillar is deposit insurance.
A: And the deals just keep on coming! If it feels like its very active out there, your right, and the data shows it. This February saw another high in 'deal volume' (contract activity) as we booked 1,099 new contracts signed -- the previous high was February 2008 which booked 1,041 new deals signed. This blows past previous February production levels that averaged in the mid-800's. All of this is coming as inventory remain at very low levels. Add in how equity markets are reaching record highs, and there are no forces out there to get in the way of this Manhattan run. Until something changes, buyers will have to deal with competition for well priced property that has desired features (views/renovations/outdoor space). Lets go to the real-time data.
First, lets take a look at Manhattan Monthly Contract Activity to see how February performed compared to past years:
FEBRUARY 2013 SAW 1,099 NEW DEALS SIGNED -- THIS IS:
+26% over FEBRUARY 2012
+28% over PRIOR MONTH
Conclusion - We are putting more active listings into contract than we have in any other February since we started collecting data in 2008. This is all coming at a time when Active Supply in Manhattan is 29% lower that it was this time last year. The gap between the # of listings coming onto the market & the # of listings going into contract continues to narrow. This shifts the leverage to the sell side as buyers continue to be frustrated with the lack of options and the competition when a good new listing does pop up.
The only way sellers can mess up in this market is by pricing too high and testing the market; if you are testing the market I would not be so quick to discount a low, but realistic offer that comes in.
Here are a few general conclusions I can pass on after reviewing all the real-time data on UrbanDigs.com:
-- The higher price points are outperforming the low end. Specifically, the $2M-$5M price point is very hot right now. The under $1M market continues to be the laggard, but is still on an upward trajectory over the past month
-- 1,436, the # of new active listings to hit the market in February. This is the lowest February of new supply to hit the market since we started keeping records in 2008. This total is also down 3% from the total # of new listings that came to market last February and down 7% from the total that came to market in January.
-- The 3 Hottest Neighborhoods (contract activity) in February are: Midtown West +32%, Soho/Noho/WVillage +30%, and Chelsea at +29%
-- Tribeca & Midtown West saw the biggest drop in supply over the past month; down 11% and down 12% respectively. This at a time when supply is supposed to be rising.
-- The pace of Active listings coming OFF-MKT is at the lowest levels since the peak. This is further confirmation of market strength as sellers are either (a) keeping their listings on the market longer or, (b) are seeing their listings go to contract. In weak markets, sellers tend to pull their listings off market in droves to wait for better times; something that happened in September & October of 2008 after Lehman failed and the market shifted down.
In a few weeks I will start to post articles with the new chart system and should be able to delve into much more detail on what segments of Manhattan are hot and which are underperforming.