A: Was chatting with some colleagues a week ago how even with the upcoming holidays that there were still plenty of listings with offers accepted and contracts out, waiting to be signed. I wrote about it last Wednesday stating, "I lost out on two deals recently for two separate clients, both of which had multiple offers. On another note, when setting up appts for a third client, at least 3 of the 8 desired properties are no longer showing because they have contracts expected to be signed any day". Over the past 2 days, our real time market ticker is picking up on these new deals. Let me show you.
It is what it is, and the data doesnt lie. There were 84 new deals signed in the past 2 days as I believe we just got our last update in. Here is a quick snapshot showing you the real time listing updates via our 'market ticker'; direct from the ROLEX broker sharing system:
November's tally should report soon in the Broker YoY section and Ill try to publish that before I leave for 3 days break out of the city. But it looks like we are in line to beat out October's total of 749 new contracts signed.
In short, the action the brokers and buyers have seen in the past few weeks are finally getting signed; and the ticker is picking up on it. Market is still moving. I'll report on it if a seasonal slowdown starts to kick in as 2010 closes out.
A: We have seen it a few times, with Greece and now Ireland, as worries infect the impenetrable bond rally as money searches for yield. But now, its hitting corporates as well as Italian and Spanish bonds. Its worth keeping an eye on because of the unstoppable rally we have seen in both equities and high yield. Fixed income lately has seen some cracks, especially in the munis. But is this it? Is the game over?
Well, good times last until they don't. Its quite challenging to time perfectly especially since markets are not rational and can stay irrational for way longer than any one speculator can stay solvent. But the warning signs are flashing again (munis, sovereigns) and if it continues, equities could see a sizeable correction. Lets get to the news first:
Via Bloomberg, "Italian, Spanish Government Bonds Plunge, Sending Spreads Wider":
Italian and Spanish government bonds slumped, driving the extra yield investors demand to hold the securities instead of German bunds higher, as Europe's debt crisis intensified.Munis saw a very volatile month with a sharp selloff a few weeks ago. The WSJ.com reports, "Muni Tumult Ends a Fund-Inflow Streak":
The drop pushed the yield spread between 10-year Italian securities and similar-maturity German debt to more than 2 percentage points for the first time since 1997. Spanish bonds fell yesterday by the most since the start of the euro era as a bailout for Ireland failed to assuage speculation that the debt crisis will spread. The cost of insuring the debts of Italy, Spain, Portugal and Ireland surged to records and the euro slid.
The price volatility in the muni market was compounded by the effects of the Federal Reserve's bond-buying efforts, which have driven the yields on 30-year Treasurys higher. Rates on long-term municipal debt generally move in sync with long-term U.S. Treasurys.Herds rule the markets and the herd has tons in the highest yielding asset classes. Selling causes volatility, losses, and triggers more selling. Its a negative feedback loop and we never know when its going to fade on its own or build into something bigger and badder. Thats why we should keep our eyes on it when the warning signs flash. Will concerns really hit the corporates and junk? I still worry about how this world will adapt if/when the selloff in bonds sustains itself, causing borrowing rates to surge. This end game is being delayed by fed engineering and government backstops. Ill end this piece the way I started it --> the good times last, until they don't.
Also, some individual investors have been spooked by news of the fiscal strain facing states and cities that issue the bonds, says Guy Davidson, who oversees about $30 billion in muni bonds at AllianceBernstein. The magnitude of the outflows "just speaks to how nervous people are," he says. Mr. Davidson, however, believes the recent muni-bond selloff was driven primarily by the surge in supply, not concerns about the ability of municipalities to repay their debt.
"Retail is doing what retail always does," says Hugh McGuirk, head of T. Rowe Price's muni-bond team. "Once you get a little price movement in one direction, retail [investors] tend to chase performance or move out of the funds that are going down."
Muni-bond prices began to recover slightly late last week.
A: Ever wonder how to actually count the number of rooms a property has? Ever wonder why so many brokers mis-represent their listings room count? Its probably because either they don't know what technically makes up a room OR they are pressured by the seller to market the property above what it actually is. Either way, in the world of New York City real estate it is up to YOU the buyer to know what makes up a room so that you don't waste your time visiting a property that isn't what you thought it was! Originally Published July 9th, 2007
The number of 'rooms' in an apartment. A living area, a bedroom, and a walled kitchen count as 'rooms'. Therefore, a one bedroom apartment with a living room and kitchen has three (3) rooms. A studio with a separate kitchen has two (2) rooms. A studio with a Pullman Kitchen has one room.
Definition of Room for Major Capital Improvement (MCI) Purposes
Bathrooms, walk-in closets, porches, terraces and hallways are not rooms.Therefore, when you have a JR4 property with one bedroom, one living room, a walled kitchen and a separate dining/office alcove, there SHOULD be 3.5 rooms.
1. A windowless kitchen containing at least 59 square feet or a kitchen of any size with window. In either case, a kitchen must be enclosed by at least three sides, excluding the side(s) that contain(s) the entranceway; or
2. An enclosed area with window containing at least 60 square feet;or
3. An enclosed area without window containing at least 80 square feet.
1 Bedroom = 1 room
1 Living Room = 1 room
1 Walled Kitchen = 1 room
1 Alcove Space = 0.5 room
Total = 3.5 Rooms
You may wonder why you see two of the same types of properties in the same building being marketed to the public so differently. This is a widespread issue and one that obviously won't get resolved by industry watchdogs like REBNY. Instead, it is up to you to understand and learn about these things so you are educated on what you are seeing and potentially purchasing. If you get duped, chances are you will have a hard time re-duping others when you eventually resell!
Here is a great real life example at 245 East 93rd Street; Astor Terrace Condominiums. Take a look at the difference between how unit 14J & 22J (both Junior 4's) were marketed to prospective buyers:
Both units enjoy this very same JR4 layout and are correctly quoting the property size as 960 sft! However, the measurements vary for the alcove space and the living room space which could be due to the converted 2nd bedroom installed in the higher floor unit. One must also take into account the premium for the higher floor unit which brings more sunlight and better views, as well as the renovations done when doing a pricing anaylsis. In short, 22J should be valued higher for work done and better light/views and NOT for having 4.5 rooms! I would consider a 4.5 room property to be a 2BR/2BTH with dining area plus separate kitchen.
The fact that both units are quoted at 960 total sft and that the layout is virtually the same makes this argument one of marketed room count and NOT one of misrepresentation of total size or # of bedrooms; technically the 2nd bedroom is absolutely fine and has a window, hvac, and over 100 sft of space. Apt 22J at most should be marketed at 4 rooms with the alcove space converted to a walled bedroom. The original JR4 layout is 3.5 rooms.
UrbanDigs Says: This is NOT a rip on any of the brokers or firms they work at in the above example! This is a common mistake in the industry (as agents are responsible for filling in their own listings data, with rare backup checks on accuracy) and since room count is generally NOT a criteria included in most of the online real estate search sites, its something that often goes unnoticed. The point of this post is to educate you on how the number of rooms is calculated so that you are savvy enough to realize when a error like this one is marketed to you. In my opinion, misrepresentation of total square footage or a certain type of view is much worse than misrepresenting the number of rooms. Its even rare that a buyer will ask for a certain number of rooms unless they are aware of this practice and want a true two or three bedroom property. But still a good topic to discuss and pass on to you.
A simple guide for you (Living room assumed):
Studio w/ Pullman Kitchen - 1 Room
Straight Studio w/ Separate Kitchen - 2 Rooms
Alcove Studio w/ Separate Kitchen - 2.5 Rooms
Straight 1BR w/ Separate Kitchen - 3 Rooms
JR4 w/ Separate Kitchen - 3.5 Rooms
2BR w/ Separate Kitchen - 4 Rooms
2BR + Alcove Dining Area w/ Separate Kitchen - 4.5 Rooms
2BR + Dining Room w/ Separate Kitchen - 5 Rooms
2BR + Dining Room + Maids Room w/ Separate Kitchen - 6 Rooms (Classic 6)
3BR + Dining Room + Maids Room w/ Separate Kitchen - 7 Rooms (Classic 7)
4BR + Dining Room + Maids Room w/ Separate Kitchen - 8 Rooms (Classic 8)
If you are looking for more than 8 rooms you are too rich to care if the listing is right or not!
A: So, November will close out with the usual holiday slowdown as the past few days saw very low activity. It still appears that November is on pace to beat out October, a sign of solid action out there considering where we just came from. If your a buyer and ran into 'multiple bids' and 'contracts out' situations lately, your not alone. However, I would expect demand to stay somewhat muted for the next 4-6 weeks; opposite of what we have seen the past few months. For now, my eyes are on the seasonality of December where we usually see a surge in Off-Market trends.
Here is a chart showing you ACTIVE Inventory vs PENDING Sales for Manhattan since October 1st:
As the chart shows, inventory is down and the pace of sales is hovering at current levels after a nice move up - a strong sign considering the action we had the past few months. That increase in activity is building a nice pending sales pipeline that is more likely to get captured in the future Q1-2011 report, NOT the upcoming Q4-2010 report that is released Jan 2nd, 2011. The Q1-2011 report will reflect closings recorded from Jan-March.
I would expect a number of listings that have not sold and dont have a time pressure to sell, to be removed from the market as we get into mid December; usually to be brought back on the market around mid-January. So lets watch how that plays out. In the meantime, savvy buyers can try to utilize the usually slower month of December to try and nab a good property without interference from other motivated and qualified buyers.
Don't underestimate the psychology of many buyers out there. What I mean is, buyers tend to hate when they lose out on a great property to a higher bidder. However, when that happens it justifies the buyer's taste in property and their submitted offer; as well as the perceived liquidity for what appears to be a sought after product.
But when that same buyer finds a property on the market for 60+ days, that hasn't sold and has no other competing bids in, they tend to question why this property may not be gathering outside interest? In addition, they question their offer for what may be perceived as a less liquid, less desirable product. So, they want to get a great deal but they also want a product that is highly desired and where multiple bids are coming in right below theirs; justifying the level of their offer. This is a fantasy land situation that never happens in the field. It's always easier to conduct a one-on-one private negotiation where the seller risks losing the deal if you walk away. Getting that leverage should be welcome, so don't look down on it if you find yourself in that situation.
The contrarian in me loves to look at the slower times during the calendar year as opportunities to more effectively bid for desired property. And the upcoming 4-6 weeks is no different. I just hope the good stuff is not removed from the marketplace until after the new year!!
A: What Turkey Day slowdown?? Buyers are solidifying their deals before the Thanksgiving Day holiday - tells me they want things signed and sealed before we get into the slow part of the year.
I lost out on two deals recently for two separate clients, both of which had multiple offers. On another note, when setting up appts for a third client, at least 3 of the 8 desired properties are no longer showing because they have contracts expected to be signed any day. Take it for what it is, in the field observations. My experience is that buyers dont believe it, or take it slow, until they start to see highly desired property go to contract. When a serious buyer loses multiple desired properties to higher bidders, they tend to act more aggressive the next time around they find an apartment that meets all their needs. The cycle continues and experiences moments of seasonality throughout the year.
Here is the ROLEX Market Ticker that shows you newly signed contracts totals and updates up to 6x a day. If you have seen a bunch of listings go to contract recently, your not alone. Action has been solid for the past 6-7 weeks - notice how there were 60 deals signed yesterday:
**The screenshot shows the TODAY/YEST columns as links for my admin account only, where I did spot checks for data integrity for 10 months in development. So subscribers will not have those updating columns as links.
A: Its interesting when you look at some of the submarkets and how the pace of sales has kept up compared to the general market. When I look at Lower Manhattan, the pace of sales certainly has not kept up with the general market trends; especially for the past year. Instead, we see a slow and steady rise from the lows of early 2009 without and surges or sluggishness that comes with Manhattan seasonality.
We have not yet enabled a neighborhood to be compared to general market trends (we have it on our list), so for now I chose to use the UES as a proxy for the market - as the UES follows the general market trend quite closely.
PENDING SALES Lower Manhattan vs Upper East Side
Looks to me like the pace of sales in Lower Manhattan is stable and steady, but lagging behind the rest of the market that saw a sharper reflation from the lows in 2009 and a surge in demand early in 2010.
This would make sense after the shock Manhattan experienced post-Lehman. Lower Manhattan is one of those high risk/high reward segments of the market that were more exposed to speculative activity and condo conversions than other neighborhoods. This segment lacks the core buyer pool that makes areas like the Upper East and Upper West, more stable and subject to general market surges in activity.
What are your thoughts? Why would Lower Manhattan lag behind the general market?
A: If possible, lets try to help out the very great, the very wise, the one, the only, Ana Maria from The Apple Peeled - who is looking for as large a dataset as possible on her new NYC Buyer + Seller Sentiment Survey.
Take the NYC Sentiment Survey Now.
From The Apple Peeled:
Thanksgiving is upon us and it has inspired us to want to give back and provide true value to our readers, above and beyond our monthly content. Not one day passes in which we don't hear a buyer ask "what are sellers thinking?" or a seller ask "what's the buyer sentiment out there?". We want to be able to answer these questions and we need your help to do so.Go Ana Go! I always wanted to see a credible Buyer Confidence Index of sorts for the Manhattan markets, so I love seeing someone go ahead and do it. Please find a few minutes to take the survey, and provide any feedback about how to enhance the idea to Ana Maria. Thanks and Happy Turkey Day all!!
We are launching what will be a periodic survey of buyers and sellers, to shed light on the ever-elusive thoughts of the other side, how they feel about the economy, the housing market, and their own personal buy / sell decisions.
A: Expect Active & Pending to fall for the next 4-6 weeks or so, until we get into 2011. Also, we should expect Off-Market trends to rise, as listings are removed from the active market and "freshened up" for the upcoming bonus season. Lets take a look at this seasonality in the charts.
Here we see new ACTIVEs by month in bar chart form. The methodology for this is simply:
- All Brand New Listings
- All Listings Updated to an ACTIVE 'state' from a prior OFF-MARKET' state'
- Only unique addresses
- Counts the Most Recent broker updated 'state' as of the last day of the month
So, we can count the number of New Listings that hit the Manhattan marketplace by month, and view how that month compared to the same period 1 year and 2 years earlier:
Here we see that August, November & December are the seasonally slowest months for new Active listings to come to market.
At the same time, listings are being REMOVED from Active inventory to take a 'breather' of sorts after not selling for "X "months. This is captured by viewing the cumulative total of listings changed to OFF-MARKET, from a prior Active 'state':
*we will fix the legend blocking the chart in upper right
So here you see how the trend of taking listings OFF the active marketplace rises as you near the end of the year, and falls as you get into the active season - as you would expect, sellers control their inventory in conjunction with the relative pace of demand.
When the market gets real crazy, like after Lehman, sellers tend to take inventory off the market until some perceived level of stabilization occurs. Interesting stuff.
A: While the recent tick up in action is likely to come through in Q1s report, lets take a peak at how November has been shaping up so far.
Monthly Pace of Contracts Signed w/ Estimated Novemeber
The reason I can estimate November is because of the subscriber tool Real Time Listing Updates - which shows us how many contracts are signed each day, as well as a 7-day and 30-day moving window of total contracts signed. Here is the latest screenshot of this innovative tool:
You can see that the CONTRACTS SIGNED 30 day pace is around the high 800s; which basically tells us how many deals were signed from October 19th - November 19th; before today's newbies come in. Given the turkey day holidays next week, I would expect the last 7-10 days in November to be quite light while filtering OUT the strong end to October we had. So I would not be surprised to see November's total (published December 2nd) come in around the low 800s; continuing the uptick since the lows in September.
A: Seasonally, Q4 ends up being slower anyway - no rocket science here. But I wanted to show you how the pipeline of future Manhattan closings is at a lower level, than it was for last quarter's report. Lets hit the charts...
Here we can see Manhattan Pending Sales over the last 6 months:
We show a 32.1% decline in pending sales when tracking it from the peak of the active season earlier this year; some 6 months ago. The pace of new contracts signed lulled out around September and October, which means there will be little fuel to fire any surge in sales in the fourth quarter. We do show a recent tick up that was discussed a few weeks ago, but with seasonal delays its likely that most newly signed deals will close in 2011 and be included in the Q1 report released April 2nd of next year.
For the same 6 months, my system shows a 30.6% decline in ACRIS sales volume and a 32% decline since September 1st - so the sluggishness for the first month of Q4 is in the books. The decline in recorded sales started around the beginning of September.
Here I took a 6-Month ACRIS Sales chart and boxed out Q3 sales in orange and the first batch of Q4 sales in red - you can see that Q4 is at a lower level already and from the looks of pending sales above, there is no surge in the pipeline to follow through:
A: Warning, the WSJ.com article is looking in the rear view mirror. So do not make the mistake of thinking this article published today corresponds to the market today. Rather, the rise in condo sales reported for August was more a function of contracts that were signed in the April-May period; when sales pace was quite more active than it is today. Since that 'active' period, pending sales actually declined steadily for the entire summer, and only started to tick UP in the last 6-7 weeks or so. Lets discuss.
WSJ.com reports, "Condo Sales Rise in Manhattan":
Manhattan's condominium sales began showing signs of recovery in August after posting steep declines in July with the end of federal tax credits for first-time home buyers. The number of condo sales increased by 12.1% in August from the month a year earlier, representing a recovery from the steep drop-off in July.Now, lets take a look at this period starting from the time where the deals that closed for August, actually were signed - likely the April, May, perhaps June time frame. Here is a chart showing Pending Sales vs ACRIS Sales trends from March 15th to the End of August:
Manhattan condo sales had declined by 34% in July--the largest drop during that month since Radar Logic began collecting the data in 2000--as the stimulus from the homebuyer tax credit wore off.
So YES, our systems show the rise in ACRIS sales (market wide - not condo only) in both July and August. If you are following UrbanDigs' pending sales trends, you can see in advance the pipeline of deals that likely will close and get recorded. This chart shows you the ACRIS Sales trends (red line) rising in July and August as a function of the pipeline of deals signed into contract 3-4 months prior. ACRIS Sales are lagging and paint a picture of a marketplace 3-6 months ago, not today!
Here is the thing you should know. While its good to have a general idea of price action in Manhattan and our submarkets for future comps analysis, use caution how far you take that information. If you are buying or selling any one property, that apartment is unique both on its own and to the building that it belongs! You should be doing an analysis IN-BUILDING, or at the very worst, in nearby buildings that are highly comparable with a unit that is highly comparable.
As you start moving outside your building, the integrity of the analysis starts to degrade. Every building is perceived by the buyers differently and valued in its own way. Things from building aesthetics, how well run the building is, building financial reserves, building amenities, school zone, what kind of retail tenants the building may accommodate, etc.. Every apartment also differs in layout, footprint, exposures, quality of views, amount of natural sunlight, etc.. In an ideal world, its always best to do appraisals and property valuations using same line sales in the same building as the target apartment! Always!
Then its a matter of doing a few adjustments like an appraiser would do:
1) Time Adjustment - how has the general market changed since last comps used. I look at contract signed date, not the sales date to do the time adjustment
2) Floor Adjustment - generall ranges between 10k-25k per floor. More for drastic changes in view/light, less for no changes in view/light
3) Renovation Adjustment - Have to do a renovation adjustment if the comparable sale was in a different state than the target apt.
4) Special Features Adjustment - Think outdoor space, well done duplex PHs, fireplaces, etc..
I discussed "Valuing Manhattan Real Estate" back in 2009 - its a detailed look at how I perform comps analysis for clients. For now, what you need to know is that the decline and recent tick up in Pending Sales, shown right here on UrbanDigs.com, is the pipeline that fuels future ACRIS sales and future quarterly market reports by all the big firms. Generally, volume leads price action. What I see now is a sluggish upcoming Q4 sales volume reflecting the slow summer that will ultimately decline from Q3-2010, and be released January 2nd, 2011.
Christine Toes posting here.
I had several customers contact me in absolute shock after they saw last week's NY Post Article on the recent closings at the Apthorp. From the Post article:
In case you didn't notice, the apartments that sold for really low prices were all "Penthouses". What the article didn't mention was that these Penthouses were originally built as staff apartments. They have low ceilings and none of the beautiful architectural detail that the building is famous for. Most of them are not accessible by the elevator, you have to take the elevator to the top floor and then walk up a flight of stairs to get to them. They were also not renovated and in need of a complete makeover.
"...one-bedroom penthouse went for a mere $228,900 -- down more than 88 percent from the asking price of $2,025,765, a source revealed. The 763-square-foot home had been on the market for 13 months..." "A 405-square-foot penthouse sold for just $123,717 in July -- down 86 percent from an asking price of $895,000. And a 964-square-foot penthouse also closed in July for $417,177 -- down 84 percent from an asking price of $2,559,420."
Even still, most of us would love to buy a condo, even one that needs a gut renovation, for $123K-$229K. So what happened that these buyers got such great deals? The building had been in litigation for months and had a limited period of time to sell 15% of the units required by the Attorney General's office to declare the condo offering plan effective. So they cherry picked the least desirable, smallest units in the building to get rid of in order to meet the 15% requirement. If they had not done so, they would have had to wait another year to sell the units. Hence the number of "penthouses" selling for low prices and no larger units selling for similar prices. Everything else seems to have gone for $1350/sq ft.+
I had buyers offer $1,250/sq ft for a 2 bed, 2 bath at Apthorp in the late spring/early summer of 2009 and we barely even got a counter-offer. So if you feel like you "lost out" - don't! I suspect that the sweetheart deals probably went to "friends and family," or possibly investors who had a relationship with the developer. The summer of 2009 was one of the worst times in the market - almost no one was buying anything - and the Apthorp had had such problems that my buyers were not interested in paying more than $1,250/sq ft when there was no guarantee they would be able to get financing or close on the apartment. They needed a home and didn't want to wait an indefinite period of time while their deposit was tied up. So we moved on to another building with less risk.
There was a lot of risk at Apthorp for these early purchasers, and risk often equals reward. Of course, it could have also equaled disaster (i.e. developer going bankrupt, someone potentially running off with your deposit, lawsuits, having to live in a construction site for months and possibly years...). Think about the saga at One Madison Park!
Now that the Apthorp plan is effective, there is no reason for them to unload units for low prices. Apartments are apparently back to selling for $2,000/sq ft. One to four bedroom residences are available for immediate occupancy - for $2,000,000 to $7,000,000!
A: This site was designed to be 'all about the interpretations of trends' for all Manhattan - and the trends are always shifting! So lets continue from the last post comparing pending sales (which measures the pace of Manhattan demand as buyers sign new contracts) in both Midtown east and west. This time, lets look at Active inventory trends for both and then a more detailed look at the midtown west submarket.
This is a continuation from Thursdays post, "Midtown East Demand Sluggish?"; which compared pending sales for midtown east vs west in the last quarter. A reader was asking, "I think that there would be a big difference between the different neighborhoods of Midtown East. Would you ever consider breaking them out individually into Sutton / Beekman / etc?". So basically we are talking about separating out 48th - 59th, East River to about First Avenue. Is there really enough data there for real time trends to be meaningful? My response was...
....with a unique real time tracking platform like this we always worry about granularity. Now midtown east has more data so we could possibly break it down, but on that note, shouldnt we separate say 81st and EEA with say the area around 76th and Madison/5th? Those are both the UES? Same with UWS? There are always streets and avenues that are more desireable and at some point its gotta end, hopefully with a good amount of data to track. With annualized reports you can get away with more granularity, but with real time, its better to have submarkets contain more data to show meaningful trends.Maybe that is why midtown east is acting differently compared to midtown west. Maybe the buyers/sellers there behave differently because midtown east boundaries are 'tighter' than in midtown west, changing how they perceive property? Perhaps not breaking the two down, is what allows us to make these kinds of interpretations.
Here is a look at Active inventory trends for the same two submarkets and time period:
A quick breakdown:
MIDTOWN EAST --> 1594 Active listings
MIDTOWN WEST --> 637 Active listings
*note - these numbers update daily and can be found by hovering your mouse over the most recent point on the chart
Now, that move DOWN in the red line above shows a trend down in Midtown West's inventory, which happens to coincide with the trend up in pending sales we saw from Thursday's discussion (chart below will compare that soon). It seems reasonable to conclude that active inventory in midtown west is trending down as a function of demand, and not because listings are being taken off-market. Midtown east is seeing a steady rise in inventory over the past quarter, with no comparable rise in demand to remove properties from the active marketplace.
Which brings us to the next way to create a chart using our new platform. Lets compare Active Inventory vs Pending Sales for the Midtown West submarket ONLY, and see if we can see the negative correlation:
I'll leave further interpretations up to you guys!
A: Just browsing through all the submarkets and pending sales trends, and noticed that for most neighborhoods below 96th there was a nice tick up in action from this summer's lull. Except for Midtown East. For today's chart, lets look at the last quarter between Midtown East and Midtown West.
1QTR - PENDING SALES Midtown East vs Midtown West
Most other neighborhoods below 96th saw a bounce in the last 4-6 weeks, but I dont see it for Midtown East.
We also opened up the COMMENT section to all users, like the old days, hopefully to get more actively engaged discussions back. We will add a spam control element to this in a few days. Thanks
A: I want to thank all of you who came to my crash course last night, for all the feedback and great questions raised about the new platform. I also wanted to devote this piece to the one guy that asked about the drop in sales pace of about 30%, in October. When I went and put the chart on the big board, I realize now that I only put the month of October in there when we should have used a two or three month chart instead to see the full decline in sales volume. So, let me put up that new chart now and it should make more sense.
One of the attendees wanted to see if my real time system caught the 30% drop or so in sales pace at the end of October, as reported by many media outlets. I should have showed a chart from September or August to the end of October so we can see the relative 30% decline in sales volume, but instead I showed only a chart of October and the decline was far less. My mistake. So here you go:
2-MTH MANHATTAN ACRIS SALES 90Day MA vs PENDING SALES
So lets interpret this a bit and recall Josh Barbanel's article, "Co-op, Condo Sales Drop Off" from late October:
The sales volume of Manhattan co-ops and condos fell sharply in October, and analysts said it was likely to remain subdued through the end of the year.I am showing a 31% decline in sales volume from Sept 1 to Nov 1, as the slowdown continued into October - in line with what the attendee in last night's seminar was expecting. This is NOT surprising because our real time pending sales measure has declined steadily from a level of 2,553 on June 25th, 2010 to a bottom level of 1714 on October 7th, 2010 - a decline of 33% or so.
The pace of closed October sales reported to City Hall as of Wednesday was down 16.5% versus September and about half the pace of sales during a comparable period in June, when sales were booming.
This decline in pending sales will LEAD Manhattan recorded sales by about 3-5 months or so as deals that were signed into contract ultimately close and are recorded by the city register. So...
1. Expect a weaker Q4 --> With pending sales bottoming for much of Sept & Oct, we don't have much fuel to fire a surge in sales for Q4. The pipeline of sales is significantly lower than it was in June-August.
2. Recent Tick UP will hit in Q1-2011 --> Our market usually slows down as we get past turkey day and into the December holidays. However, the recent tick up of new deals being signed in the last 4-6 weeks likely will close in January, and be reflected in Q1s report released April 2nd, 2011.
The good news is our real time ACRIS sales charts should show you any rise in volume as it happens so you don't have to wait until April to know what's going on in Manhattan today!
A: It is what it is. After a slow summer, October saw newly signed contracts up about 28% from September. To be fair, the pace was down from the same period in 2009. My only response to that would be that 2009 was a crazy year, with a delayed seasonality due to the adjustment process that came with a general market shutdown after Lehman's failure.
Here is your Broker YoY Monthly Bar Chart showing the tick UP in the pace of new Contracts Signed for October (the hover effect will show the exact value):
So here are a few stats for PACE of Newly Contracts Signed:
OCT 2009 -- 931
OCT 2010 -- 749
SEPT 2010 -- 583
The delayed seasonality in 2009, the adjustment year following Lehman's failure, resulted in large YoY gains early in 2010 (compared to a dismal early 2009) and YoY declines for the summer of 2010 (compared to a reflation in summer of 2009). We should take that into account when interpreting YoY numbers against the year that saw major volatility from Oct 2008 to February/March 2009.
For now, deals are being signed and its definitely more active out there than it was in the past few months. Usually the market tapers off as we get past Turkey-day and into December, only to come alive towards the end of January until April/May or so in what is usually our 'active' season.
A: I just want to announce a few enhancements we made to the site this weekend. As we work to exit the 'soft' launch (I have not officially launched yet), we are splitting our efforts 50/50 between subscriber tools upgrades and front end design to maximize the user experience. The UX is something we will be working on for the forseeable future as this site releases all tools in development to complete the vision of the new UrbanDigs.com. Please be patient as these things take time.
Let me get right to the upgrades.
New REGISTRATION/SUBSCRIBE Pages displaying all features + a QUICK PREVIEW TOUR (new features page below - click to re-direct where you can start the QUICK PREVIEW TOUR):
For subscribers, we added a Cursor Hover Effect for all bar & line charts that allow you mouse over a specific point in time and confirm the exact value displayed in the chart. Depending on the TIME SERIES selected, longer term charts will have a granularity of 2-3 days. Shorter term charts will have daily points. Here is an example of this new feature:
I'm listening to all feedback. Next on our list is:
1. Research adding 'Only Coops', 'Only Condos' to separate these two markets
2. Research adding a 'Townhouse Only' market chart
3. SUBMARKETS - we will separate out Tribeca, Battery Park City, and fine tune Gramercy/Flatiron from Midtown East submarkets to fit in better with how brokers and consumers define these boundaries
All of these upgrades will require a full db regen, so we are holding off a bit to see if there are other upgrades that fit into the 'regen required' category. We only want to regen once.
As for the site's UX (user experience), this will be an ongoing challenge to tackle. When you launch a real time analytics system with data integrity as your number one concern, the end product will always be a bit confusing to people. Charts, data tables, submarkets, flow algorithms, etc., are not the simplest things for people to use and interpret. Please give this site time! We believe we have something very special here and this system is excellent at what it does --> tracking Manhattan real estate in real time as inventory moves from one listing state to another. The innovation is in the engineering and data integrity algorithms we designed. It was an extremely difficult task and making the site user friendly for everyone, is even more challenging. I know the site is different for many old UD readers, but when you put some time into the new tools you will start to see the value in what we built.
I am thinking of holding a monthly CRASH COURSE on this new tracking platform, and my first one is TUESDAY, from 5:00pm to 6:30pm. I still have 12 slots open if anybody wants to RSVP - email me and Ill send all details. Thanks.
A: I haven't linked out to Yves Naked Capitalism in a while, and this felt like a good opportunity. Although I found this link on NC, it was originally published on Washington's Blog.
Via Washington's Blog, "Even Greenspan Admits that Moral Hazard and Fraud are the Main Problems", (hat tip Naked Capitalism):
Specifically, Greenspan said today in a panel discussion at a Fed conference in Jekyll Island, Georgia (where the plans to form the Fed were originally hatched):Its funny how Greenspan's conference was on Jekyill Island, home of the so called secret meeting that ultimately created the Federal Reserve. There is a lot of truth in these statements from the former fed chief. Dick Fuld had chances to raise capital, and he and/or his team made pure bets when they loaded up on CMBS prior to failing. I'm highly confident that they were sure the fed would NEVER let them fail; they were wrong and many people call this the biggest mistake of the crisis - I call it one of the better plays of the crisis and something that had to occur. Even with Lehman failing, the world did not end. The problem is that only 2 years later, it seems as if the fed & the gov are guaranteeing everything and that no big firm would ever be allowed to fail again.
Banks operated with less capital because of an assumption they would be rescued by the government, he said. Lehman Brothers Holdings Inc. wouldn't have failed with adequate capital, he said. "Rampant fraud" was also an issue, he said.
Lack of Trust
"Fraud creates very considerable instability in competitive markets," Greenspan said. "If you cannot trust your counterparties, it would not work."
The article continues:
"As leading economist Anna Schwartz, co-author of the leading book on the Great Depression with Milton Friedman, told the Wall Street journal in 2008: The Fed ... has gone about as if the problem is a shortage of liquidity. That is not the basic problem. The basic problem for the markets is that [uncertainty] that the balance sheets of financial firms are credible."Now this was 2 years ago, so you have to go back into time & place when reading these statements. It was a solvency issue back then, that became a liquidity issue when no financial firm trusted which counterparty was about to go bust and who held the most trash on their balance sheets. Today, the market DOES know how to value the toxic crap that is still being held and hidden on and off banks balance sheets, but there is no trade at these levels. As Barry Ritholtz likes to say, there are no toxic assets only toxic prices. I guess this can apply to mis-marked bank assets too.
So even though the Fed has flooded the credit markets with cash, spreads haven't budged because banks don't know who is still solvent and who is not. This uncertainty, says Ms. Schwartz, is "the basic problem in the credit market. Lending freezes up when lenders are uncertain that would-be borrowers have the resources to repay them. So to assume that the whole problem is inadequate liquidity bypasses the real issue."
Today, the banks have a problem on the asset side of their ledgers -- "all these exotic securities that the market does not know how to value."
"Why are they 'toxic'?" Ms. Schwartz asks. "They're toxic because you cannot sell them, you don't know what they're worth, your balance sheet is not credible and the whole market freezes up. We don't know whom to lend to because we don't know who is sound. So if you could get rid of them, that would be an improvement."
Given the fed engineered carry trade and bank recapitalization environment, why would banks sell at low bids when they can chip away and carry trade their toxic assets closer to the reflating bids with time? Think about it. If the bank carries an illiquid toxic bond at 50, when the bid is 20, why not carry trade and make $10 a year for 3 or 4 years and write down the asset a little bit more each time around, while still being able to show a profit; or minimal loss. As long as the environment doesn't change, and the fed made it clear it won't, in time you would have written the illiquid toxic bond down to market. So, the buyer raises the bid to 25, and 30, but the bank still doesn't sell. Food for thought.
A: We finished #1 on our To-Do List and now subscribers can fully take advantage of our Sub-Market Trends tab in the Charts section. Lets play a little.
Pending Sales UES/2+Baths/$1-2M (green line) submarket vs UWS/2+Baths/$1-2M (orange line) submarket:
Looks like in this little segment of the Manhattan market, those that must have 2 baths and up to $2,000,000.00 to spend, the Upper East is a bit more in sync with the general market tick UP than the Upper West. Looks like this slice of the UWS market started to move up earlier, in late September, and came back a bit in past few weeks.
Perhaps its because inventory is tighter in this submarket of the UWS, and buyers acted a bit quicker to take property once inventory came on post Labor Day?? That would be my interpretation of this.
A: Why not. I did my best to overlay our Pending Sales chart with a US Dollar Index chart to see how the two forces related to each other. Personally, I think 'wealth effect' and credit expansion and speculative euphoria are more tied to pending sales than the simple movement of our currency relative to foreign currencies. Certainly, the rise and fall of the US dollar may trigger an emotional buy or sell decision here and there, but I don't think it moves entire markets. But that could just be me.
GREEN LINE --> Manhattan Pending Sales, left y-axis
ORANGE LINE --> US Dollar Index, right y-axis
A: 'Asset price inflation' is what the fed is hoping for, and it seems to be working. Its nice to know that when underlying fundamentals and market forces signal one thing, the fed can simply come in and re-engineer the environment to something else. What we have here is a continuation of a fed-engineered bank recapitalization environment, where a steep yield curve will help banks profits and wall street will push money towards anything risky that offers higher yield. Crazy times indeed.
Bernanke's Op-Ed in The Washington Post says it all, "What the Fed did and why: supporting the recovery and sustaining price stability":
The FOMC intends to buy an additional $600 billion of longer-term Treasury securities by mid-2011 and will continue to reinvest repayments of principal on its holdings of securities, as it has been doing since August.The reason hyperinflationists have it wrong is because they think this money printing fed is dumping '100 dollar bills' onto the streets for all of us to pick up and spend! Not so. Instead, the fed is buying assets from Primary Dealers at the POMO desk of the NY Fed, buying these assets with funds that didnt exist before. Its called monetizing the debt - as the government is issuing the debt (treasuries) to finance operations and the fed is then buying these assets with a mouse click via Permanent Open Market Operations. The money is being hoarded by banks and money centers in excess reserves, and its not being lent out and multiplied (think credit creation) by our fractional reserve fiat based system. This is why hyperinflationists have it wrong, why credit creation is non-existent, and why money is simply not sloshing through our main street economy.
This approach eased financial conditions in the past and, so far, looks to be effective again. Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth. For example, lower mortgage rates will make housing more affordable and allow more homeowners to refinance. Lower corporate bond rates will encourage investment. And higher stock prices will boost consumer wealth and help increase confidence, which can also spur spending. Increased spending will lead to higher incomes and profits that, in a virtuous circle, will further support economic expansion.
Here is a chart showing Excess Reserves of Depository Institutions, with just under $1,000,000,000,000.00 hanging around:
The fed is trying to reflate asset prices, so we can grow our way back to prosperity that way, and engineer an environment where banks can recapitalize and carry trade their bad assets away. Period. Wall street is riding it BIG TIME and all this liquidity is looking for higher yielding assets. There will definitely be new bubbles blown and future bubbles burst as an unintended consequence of these policy actions to stem deflationary pressures. In meantime, consumers continue to delever and pay down debt while businesses that can, are scrambling to raise new capital. The party goes on until it doesn't. My concerns are commodity inflation that crunches wallets/margins and ultimately, what happens when the masses take a rush for the exits. Who will be holding the bag when the music stops?? In the meantime, all the stuff that we need to live and the metals will see higher momentum at a time when unemployment is high and debt levels still a burden.
A: Im at 60% capacity for a free seminar I will hold November 9th, from 5:00-6:30pm, which will be a crash course of sorts for this new Manhattan inventory tracking platform we built. You must RSVP by emailing me if you wish to attend. I'll open this up to the first 30 that get back to me with the hopes that those truly interested in this innovative new platform attend. Thanks.
Here is the flyer for the seminar:
Some new site features, including a static Quick Tour of the chart tools, will be rolled out in coming weeks. Always remember, this site is not done yet (especially the front end UI/UX), we are listening to our subscribers, and will improve the site based on user feedback for as long as it takes! The project 'never ends'!! Always post requested features in our TALK forum so I can easily reference them. Thanks. Hope to see 30 of you next Tuesday!!
A: Subscribers would have seen this tick up over the course of the last 4 weeks with out daily market ticker (updating up to 6x a day as brokers change the status of their exclusive listings). Here is a toned down version showing you the TICK UP in the pace of contracts signed from September to October.
Even though sales volume is down (ACRIS - recorded sales), our market has seen a nice pickup in action over the last 4 weeks.
You can see this in the TALK Forum Chat about the Broker YoY Monthly Bar Chart: "CONTRACT SIGNED Q1'10 to Q4'10"