Thanksgiving Manhattan Market Update

Posted by urbandigs

Tue Nov 22nd, 2011 09:55 AM

A: As the reporters get their mid quarter stories in on the state of the Manhattan housing market, here are some charts from the UrbanDigs platform on what we show is happening out there.

Bloomberg recently reported, "Manhattan's Luxury-Home Supply Dwindles as High-End Apartment Demand Jumps":

Sales of Manhattan luxury apartments, defined as the top 10 percent of all condo and co-op transactions by price, jumped 17 percent in the third quarter from a year earlier, according to appraiser Miller Samuel Inc. and broker Prudential Douglas Elliman Real Estate.

Prices haven't returned to peak levels. The third-quarter median price in the top 10 percent of the market was $4.17 million, down 16 percent from the high of $4.99 million in the first three months of 2008, according to Miller.

A "herd-like mentality" has spurred luxury buyers in the past several quarters, said Noah Rosenblatt, founder of UrbanDigs.com, a real estate analytics and consulting company in New York. Data compiled by UrbanDigs show demand for apartments priced at $5 million and above began to rise in February. Pending sales -- the number of properties that moved from an active listing to a signed contract -- jumped from 70 in February to 152 in late April. That was the biggest resurgence in that price range since 2008, Rosenblatt said.
I reported on Q3 back in early October and stated:
"In short, sales volume is noticably higher from last quarter and we saw a slight uptick in Average Sales price due to rise in pending sales for the $5M+ market that was discussed over the summer. As these deals ultimately close, the reports catch them at a lag. "
So what's happening right now? Well first we need to understand a few items:

#1: In normal markets, demand usually follows supply - First the 'new stuff' comes to market, then at a lag buyers sign contracts. The data quantifies this kind of statement under normal market conditions. While some people think its all about the supply, or the inventory, I have been public arguing that instead its "all about the bids". Its "the bids" that make the market and when the "the bids" disappear, well, the market shuts down and the sellers have to deal with the pressures of having to lower their asking prices to get a deal done - this is exactly what happened in late 2008 until early 2009.

Take a look at this chart showing you very simply Manhattan PENDING SALES vs ACTIVE INVENTORY over the past 1YR:

nov_22manhattan.jpg

#2 - Manhattan Real Estate is Highly Seasonal - Without a doubt, our seasonality looks like this:

Strong Months in Calendar Year --> February through May / November
Transition Months in Calendar Year --> January / June / July / October
Weak Months in Calendar Year --> August / September
Holiday Months --> December

The 'transition months' are those periods that usually mark the transition from a seasonally weaker market to a seasonally stronger one; and vice versa. For example, in January we start to see the signs of activity after a holiday driven slowdown in December. In June & July we tend to see the signs of weakness following our active season; etc..

Here, take a look at MONTHLY CONTRACT SIGNED totals to see what I mean:

mthlycsgn.jpg

November is kind of in-between and when we typically see the peak of late year action before the December holidays. This is a result of buyers ultimately snapping up new active supply that generally comes to market after Labor Day - check the above line chart to see what I mean. The peak of late year action usually comes sometime in November and right now is no exception. The market has picked up from lows in September and transitioned during the month of October to lead us to a more active month of November - that's how this all ties together.

#3 - To know whats happening right now, as in the past few weeks, we must look at the UrbanDigs Manhattan Market Ticker - This is the only tool on the market that tallies up daily listing status changes in Manhattan so we can see how many deals were signed today, how many listings came to market today and how many listings were taken off market today. Add those totals up over a 7-Day and 30-Day period and you can see the market tick up or down in real time. Right now I see the following:

7-DAY --> Manhattan registered 190 new deals signed over the last 7 days
30-DAY --> Manhattan registered 834 new deals signed over the last 30 days

Those trends are a far cry from October 5th, 2011 when I reported on Q3 report releases. Take a look at the difference in the real time ticker today as opposed to early October:

SNAPSHOT MARKET TICKER BACK TO OCTOBER 5, 2011
7-DAY --> Manhattan registered 143 new deals signed over the last 7 days
30-DAY --> Manhattan registered 598 new deals signed over the last 30 days

Both the weekly and the monthly trend for new deals being signed is up noticeably over the last 7 weeks; signaling to us the change in the pace of demand over this time. This is as real time as we can get on what is happening out there right now in the marketplace. This is also quite normal for this time of year and I would expect that we are peaking right about now as we head into Thanksgiving holiday and the generally slower month of December.

We must use caution when looking how equity markets or macro events may be affecting the Manhattan markets, because its not a 1:1 relationship and it will come at a lag. Recall that Manhattan didnt adjust to the credit crisis until late 2008 the first time around. Its no different now. Right now there are a lot of uncertainties around EU and global growth - time will tell how equity markets digest future events. When it comes to stock markets and bond markets, things don't matter until they do! Only the markets can determine when existing events start to cause 15-20%+ selloffs - like a bankrupt Greece, or widening credit spreads, or Eurodollar swap spreads or something simpler as rising borrowing costs in Italy, Portugal and Spain. And only that kind of sustained selloff, with the media effect and all, will disrupt the Manhattan markets enough to cause a shift down in price action. We have only seen temporary waves down so far in stock markets, nothing close to the prolonged fear that blanketed markets in 2008 and 2009.

Back to Manhattan RE, to me this is just plain old seasonality and November is seeing an uptick in action and I dont expect it to last much longer. In terms of price action, I dont see any significant changes from this summer other than the fact that next quarters report likely will have less 'uumph' in it due to the decline of pending sales that ultimately fuel future closings. Today's market seems to be trading around the late 2005 to early 2006 levels or so, still down from 2007's peak. The market was a bit stronger earlier this year, and the months of March through June saw bidding wars and other frenzy-ish deals. We've deflated a bit since and today's level of action is likely to be the best you'll get the rest of the year; so buyers and sellers should set expectations accordingly.


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