Reflecting on Manhattan's Record 2013 Performance

Posted by urbandigs

Tue Dec 17th, 2013 02:44 PM

A: As I look back on 2013 phrases like "a lack of fear in the market", "multiple offers in", "record pace of deal volume", "inventory shortage", "is this contingent upon financing", come to mind. All of which favor sell side. But does the data back that up? This post will cover my thoughts on what happened in 2013 as well as some stats that the UD system provides.

I would describe 2013 as a combination of two other markets I experienced when I first began my real estate career. In early 2005, I recall a much different Manhattan market before the condo boom began and before Streeteasy.com existed. These were the days when the NYTimes ad generated listings systems ruled the day. Transparency was non existent and the reason I founded UrbanDigs.com and built the Manhattan tracking system we provide for the brokerage industry.

Inventory in early 2005 was dull to say the least. Supply was tight, barely anything good came on with any consistency and brokers couldn't wait for more planned developments to start sending out their offerings so we could kickstart frustrated buyer clients and 'get our buyers in first'. A sense of urgency began in 2005, that sense strengthened in 2006 and ultimately peaked in 2007.

It was the early stages of a 2+ year condo boom. Developers would take advantage by scaling back new units and release only batches of apartments at a time; a few 1brs, a few 2brs and a few 3brs would consist of a typical batch. They would sell like hot cakes and the sponsor would then file an amendment with the attorney general and release a new batch of units at a higher price level. Buyers quickly learned how aggressive they needed to be and what would happen if they wait it out. This situation continued for most of 2006 and ultimately peaked in 2007 which saw record levels of deal volume.

I would describe Manhattan's 2013 as a combination of 2005's tight supply and 2007's record pace of deal volume & buy-side sense of urgency; that's how crazy it has been in the field this year.

To me it seems that 2013 saw Manhattan prices rise approximately 11% to 14% or so from a year ago.

Looking ahead to 2014, I have trouble seeing the pace of deal volume or such strong price action sustaining itself. I would expect to see prices rise at a slower clip; perhaps in the 4% to 7% range for 2014.

The only thing that stops it will be a sustained disruption in credit that causes spreads to blowout and fear levels to rise; usually this is accompanied by falling stock prices, rising bonds and a rising US dollar as money seeks safety. If this should occur, all bets are off as deal volume would plummet with buyers pausing and/or going to the sidelines. One thing I learned from late 2008/early 2009 after Lehman failed is: first the bids withdraw, then the bids adjust lower & price in future risks, then sellers deny it, then sellers accept it, and only then will deals start to happen again. In the end its all about the buyers and their confidence in Manhattan property. UD systems will tell me in realtime if there is any disruption in deal volume trends in the field.

Now, Back to Manhattan & The Data!

A few basic but key stats regarding Manhattan's Production Levels in 2013:

-- MANHATTAN INVENTORY DROPPED -13.4%
, from 4,476 units to 3,876 units on the market today

-- MANHATTAN PENDING SALES (the pool of listings in contract/awaiting closing) ROSE 16.4%, from 2,342 units in contract to 2,726 units in contract today

-- MANHATTAN ON PACE TO PUT 13,400 UNITS INTO CONTRACT IN 2013, for perspective that is about 2,000 more units signed into contract than all of 2012

-- MANHATTAN ON PACE TO HAVE LISTED 17,300 NEW UNITS FOR SALE IN 2013
, for perspective that is about 1,200 more units than we saw in all of 2012. This is the first time in 4 years that we saw an annual tick up in new supply. A good sign, but this market still needs a lot more supply month after month to normalize and shift leverage away from sell-side.

--*MANHATTAN DAYS ON MARKET PLUMMETS FROM 83 to 29
, *this chart is still in beta on our development site, but confirms all other datasets and what we have been seeing in the field with our buyer clients.

-- STREETEASY CONDO INDEX HAS MANHATTAN PRICES UP 10.92% FROM 1 YR AGO

Finally a quick look at the neighborhoods across the city that saw the strongest pending sales trends throughout the year: Manhattan's BIGGEST % GAINERS FOR PENDING SALES LIST OF 2013 (below 96th -- subscription required for chart link):

FiDi: +50%
Murray Hill/Kips Bay: +45.1%
Chelsea/Midtown South: +40.1%
Midtown East: +38.8%
Tribeca: +28.9%
Gramercy/Flatiron: +25%
============ MANHATTAN BASELINE PENDING SALES +16.2% =================
LES/E. Village: +12.8%
Midtown West/Clinton: +12.3%
Upper West Side: +12.3%
Battery Park City: +11.8%
Upper East Side: +9.2%
SoHo/NoHo/W. Village
: +1%

Got to stop it here as Im swamped working on the next version of UD! Wishing everyone a Happy Holidays and a very safe and healthy New Year!! See you in 2014 when exciting new tools will be released!