A: What we have been discussing here on UD for months is now starting to hit the mainstream media in a big way, with articles like "In a Sellers Market, Every Minute Counts" starting to come out. Perhaps a sign that the craziness has run its course? Who knows. When I look at deal volume I see that we are at the strongest levels of the year and blowing away production from past years. Hard to believe that in terms of contract activity, Manhattan is actually getting stronger! But it is. Today I not only want to reflect on this "first half surge" in Manhattan deal vol & decline in supply as I often do, but I also want to add in a view on Manhattan Price Action using the Streeteasy Condo Index as well. I don't like to look at median or average sale price trends because that is more a function of what types of properties are closing/filed and when; and less a barometer of 'price action' for the broader Manhattan housing market over time. Lets dig in.
TREND #1: Manhattan Deal Volume continues to Surge
There are a few reasons I haven't been writing much lately. One is because we are in the final stages of development for our new site, which turned out to be a complete re-engineering of our Manhattan market report system. The 2nd is because honestly, I'm tired of talking about how strong the market is! There is nothing new to report.
Inventory is still tight, although we are starting to see signs of an uptick in new supply -- Deal volume is through the roof, blowing away what we are used to seeing even in this "active" time of the year. I don't want to sound like a broken record every few days but in general, there continues to be a lack of quality product that is priced correctly on the open market -- in historically strong parts of Manhattan like West Village, Soho, Tribeca, etc., this translates into continued bidding wars for the 'best new stuff' that hits the market and plenty of "contracts out + backup" responses from listing agents.
Sellers are starting to change their approach in pricing strategy, to test how high a price the market might be able to absorb for their property. I'm starting to see some crazy pricing out there, but hey, if the seller chooses to take this approach then they have every right to do so. In the end, the market will dictate value.
Manhattan booked 1,486 new deals in May, that is +2.6% compared to a very strong prior month and +14.4% from May of 2012.
Here is Manhattan Monthly Contract Activity Since 2009, clearly showing how strong 2013 has been thus far:
TREND #2: Manhattan Supply continues to be Very Tight
The broader conclusion for general Manhattan supply is that it has been declining progressively since mid 2009 or so. Manhattan saw 4+ years of declining supply as "less stuff" was coming onto the active marketplace each month compared to past years. The chart below confirms this as the monthly supply bars take a downward trajectory over time.
However, the last two months saw "more stuff" come to market than what we saw the prior year -- which basically tells us that when factoring in seasonality, new supply is actually "ticking up" over the last few months. It's no where near the point where buyers have options again and more leverage in negotiations --for that we will need to see a macro or micro reason for buyers to pause, get less aggressive with bids, and perhaps go to the sidelines. Today's market is nothing like that and real-time deal volume trends continue to rise, although likely topping out for this active season.
Here is Manhattan Monthly New Supply Since 2009, showing the longer term decline & the recent tick up on a year-over-year basis:
TREND #3: Manhattan Price Action (SE Index) continues to Rise
The SE Index is a repeat sale regression algo that focuses on same unit transactions over time in an attempt to narrow down market price action. It's a barometer of Manhattan Price trends. By doing it this way, it removes the variables and flaws that come with grouping "all" property sales into 1 bucket and then simply looking at the median #. What I'm trying to say is that its the best tool available for the specific purpose of tracking Manhattan price action. Only thing is, it will be at a lag to what's happening in the field as there is a difference between when the deal was booked (the "contract execution date") and when the deal closed.
To show you this, I highlighted what I call the "Peak" period in yellow (mid-fall 2007) and what the UrbanDigs system shows as the "Bottom/Trough" period in orange (early 2009).
*Click here for UrbanDigs Chart showing Pending Sales bottoming in early 2009
With the latest April reading just released, the progressive reflation since 2009 becomes clear and the index puts us back to mid-2007 levels. We still have 2-3+ months of strong deals in the pipeline that are yet to (a) close, and (b) be counted in this index. Based on what the UD real-time system is telling me combined with what I am seeing in the field, I would expect the SE Index trend to continue to rise for another few months before topping out.
Hot products continue to be those with views, full renovations in prime areas, and unique features like outdoor space. I look forward to tracking Days on Market trends and Listing Discount trends in the new UD system soon; two metrics that should be added to this conversation to quantify Manhattan's frenzy first half of 2013, but are not completely engineered yet. In time.
A: Deal volume across Manhattan continued to surge as we finished up the month of April, rising 15% from the month prior and booking 24% 'more deals' when compared to April of last year. Supply on the other hand is showing its first signs of "ticking up", as sellers may finally be heeding the call to list property to meet current demand. All in all, its been a crazy active season so far in 2013 especially in the submarkets that typically outperform the broader trend; i.e., Tribeca, Soho, West Village, etc.. Price action is on the rise but at a lag to real-time inventory trends, so expect the Q2 and Q3 market reports to show higher median sales #s. Lets go to the data.
First, lets take a look at MANHATTAN MONTHLY CONTRACT ACTIVITY since 2009:
-- Deal Volume rose +24% from April of 2012
-- Deal Volume rose +15% from March 2013
April is typically an active month for Manhattan real estate and sees around 1,000 - 1,100 new deals signed into contract. So far this April, we fell just short of putting 1,500 new deals into contract -- indicating a feverish kind of marketplace.
Where are the deals happening??
According to the UrbanDigs.com real-time pending sales system, the following 5 Neighborhoods saw the biggest % change in Total Pending Sales during the course of April:
1. Battery Park City - pending sales +82.4% in April
2. Murray Hill / Kips Bay - pending sales +30.6%
3. Harlem / Hamilton Heights - pending sales +26.9%
4. Tribeca - pending sales +26.3%
5. SoHo / NoHo / West Village - pending sales +25%
Moving on to New Supply trends, let's first check in on Manhattan-wide and talk about something that hasn't happened in a while -- A TICK UP IN NEW SUPPLY!
-- New Inventory hitting the market rose +18% from April of 2012
-- New inventory hitting the market also rose +18% from March 2013
This is a welcomed sign although it probably won't feel like more stuff is coming on unless this trend continues for at least a few months longer.
Which neighborhoods saw the biggest % change in new inventory over the course of April? According to our system these are Top 5 Neighborhoods in Manhattan that saw the highest % change in Active Supply over the course of April:
1. Lower East Side / E Village / Union Square - active supply +20.6%
2. Harlem / Hamilton Heights - active supply +18.9%
3. Fidi / Civic Center - active supply +13.6%
4. SoHo / NoHo / West Village - active supply +13.1%
5. Gramercy / Flatiron District - active supply +11.6%
The tick up in supply is welcome but in its infancy regarding it being a trend. It seems sellers are starting to listen and the real-time Manhattan market ticker continues to show the pace of new supply coming on at strong levels; so expect that pace to continue for the time being.
I am still finding buyers frustrated at the options available to them and in competition with other buyers for quality product that is priced right. This is especially true in the downtown markets like Tribeca, Soho, Village, etc.. With equities soaring to new record highs, there simply is a lack of fear out there and no external force to push new demand to the sidelines.
Sellers would be wise to take advantage of the leverage that has shifted to their side by pricing properly. Pricing too high is a sure-fire way to miss the action that seems to be underway.
If I were to throw out a #, I would say today's market is trading up roughly +9% to +12% from year ago levels and perhaps in the +15% to +18% range from 2 years ago -- largely a function of tight supply as most other asset classes continued to soar. From the lows in early 2009, all price points have recouped much of their losses that were realized at the height of the credit crisis. I would argue most price points in the midtown area & north are still trading below peak levels from 2007, while the typically desired neighborhoods like Tribeca, Soho, and West Village are seeing pockets of strength that are testing new highs -- it all depends on the property's unique characteristics.
Buyers are paying up for renovations and views and not bidding up for combination sales or low floor/dark apartments. So it is critical that you understand the product you are selling and how best to take advantage given current market conditions out there. Expect price action to rise for another 3-4+ months as the pipeline of deals start to close and filter into the firm's market reports.
A: Manhattan active inventory stands at 4,826 units, down 30% from this time last year. At the same time Manhattan's Pending Sales, the measure of real-time demand, stands at 3,154 contracts awaiting closing; this is up 24% from this time last year. On a monthly basis, we continue to see 'less new stuff' coming onto the market and 'more listings' than usual going to contract. It seems Manhattan is a tale of two markets; one kind of market for lower quality/higher priced listings that aren't experiencing the activity being discussed here and the other is a fierce market where buyers are competing each other over quality product that is reasonably priced. Either you are priced right or you aren't. This combination is leaving buyers frustrated as they pass over the over-priced stuff and deal with 'best & final situations' for the quality, well priced listings. I'll repeat what I said earlier this year, "I can't think of a better time for a seller to list their property in Manhattan". My advice to sellers that are considering listing but are waiting for whatever reason, list now and take advantage of current conditions! Lets discuss and show you the real-time data.
First I would like to show you Manhattan Monthly Contract Activity that should easily allow you to visualize the reflation this market experienced since 2009, and where we are trending today:
March 2013 saw 1,254 new contracts signed
This is: +14% from FEB 2013 and +3.3% from MARCH 2012
Q1-2013 saw 3,212 new contracts signed
This is: +19% from Q1-2012
In terms of deal volume, Manhattan continues to produce at a very high level compared to prior month, prior year and the prior year's first quarter. Now that you have a sense of real-time deal volume trends lets move on to supply trends.
Manhattan Monthly New Supply trends look like this:
March 2013 saw 1,623 new listings hit the marketplace
This is: +13% from FEB 2013 and -8% from MARCH 2012
Q1-2013 saw 4,597 new listings hit the marketplace
This is: -4% from Q1-2012
Combine Active Supply trends & Manhattan Pending Sales trends over the last year and you get the following basic chart on where we are today and an explanation as to why it feels 'so tight but strong' out there:
Manhattan is a highly segmented marketplace with activity varying across neighborhoods, price points, and property type. I can deal with the bidding wars as that is simply a side effect of a strong market + a properly priced quality listing. What I can't stand are the sellers that are stubbornly over-priced and simply "testing the market" to see if they can get their #. Of course these sellers are "looking for cash offers" or "non-finance contingent" offers because of concerns their # won't appraise. It's frustrating but in the end, the seller has every right to do what they want with their property; and today's market certainly is seeing leverage shift strongly to the sell side. My advice would simply be that if you have a high quality listing and are testing the market, at least be cognizant of the level and terms where bids are coming in and hopefully you will ultimately listen to what the market is saying regarding value.
To close today's discussion I leave you with the 16 Top Producing Neighborhood's of 2013 in the UrbanDigs Manhattan residential real estate tracking platform (subscription required for links and full access to the chart system):
*sorted by Strongest Pending Sales %chg Year-to-Date
1. SoHo/NoHo/West Village +83.6%
2. FiDi/Civic Center +72.7%
3. Chelsea/Midtown South +58.8%
4. Gramercy/Flatiron District +53.6%
5. Tribeca +48.4%
6. Murray Hill/Kips Bay +40.7%
7. Upper West Side +38.6%
8. Upper East Side +37.7%
========== MANHATTAN BASELINE +36.2% ==========
9. Midtown East +31.6%
10. Midtown West/Clinton +23%
11. Lower East Side/East Village +28.2%
12. Inwood/Washington Heights +24.5%
13. Harlem/Hamilton Heights -1.9%
14. East Harlem -4.9%
15. Battery Park City -11.8%
16. Harlem/Morningside Heights -16.2%
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.
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.
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!