April's Pace of New Manhattan CSGNs Down 12.5% YoY
A: Ok, April is now in the books and our monthly charts went through their final 'data cleanse' to eliminate duplicates and other listings exposed to integrity issues. The final number for new contracts signed in April 2011 came in at 1,006. This is down 12.5% from performance in April of 2010. It's always better to look at monthly performance on a year over year (YoY) basis so as to remove the noise from seasonality. Lets discuss.
Manhattan: Pace of Monthly Contracts Signed
The real-time market ticker gave us an indication that April's performance will be over the 1,000 mark as it captures daily updates for ALL Manhattan property listings shared by REBNY member firms. In other words, the ticker IS the ultimate reflection of how this market is performing in real time as brokers change the status of exclusive properties from ACTIVE to OFF-MKT and to CONTRACT SIGNED. In fact, the entire UrbanDigs analytics platform was engineered to track the movement of Manhattan inventory from one listing state to another; while adapting for known data integrity breaches that otherwise result in over-counting of the statistics.
KEY FACT OF URBANDIGS PLATFORM - The key element of our algorithms are that no one listing (active, off-mkt, pending, closed) can occupy more than one listing state at any given point in time.
Now, if you read my discussion last week you would know that:
"The main differences between this years active season and last years, is that this year we are seeing fewer listings come to market and fewer listings being removed from the market."Let me show this to you using the Monthly New Active's Bar Chart:
MANHATTAN: Pace of New Actives & Listings Back on Market
As you can see in the above monthly bar chart, this is now the 7th consecutive month where we have seen fewer listings come to market compared with the same period exactly one year earlier. If it feels like there are less options to choose from on the market, your not day dreaming. That is truly the case. The reason ACTIVE inventory trends have not fallen further is because off-mkt trends are so much lower than where they were a year ago. With fewer listings being taken off the market, the upward pressure cancels out the downward pressure that comes with fewer listings coming onto the market.
As far as I'm concerned, anything over 1,000 new deals signed into contract when less product is coming to market for 7 consecutive months compared to year ago periods, is still a sign of a strong market! If there were double the amount of new listings coming to market, yet demand stayed the same, then that would be a sign of weakness. For now, let's hold off on saying the market is slowing down a bit until we see a clear move down to the 800-850 monthly new deals signed level.
Demand must always be interpreted relative to supply, and vice versa:
At all times, ACTIVE inventory trends should be interpreted relative to PENDING SALES trends. Think about it, if the pace of inventory falls and the pace of demand rises that is quite a different story than if both the pace of inventory and the pace of demand rise together. Its relative. If pending sales trends fall but at the same time inventory levels fall too, then the decline in the pace of demand is somewhat muted by less inventory out there!
Posted by mm
Mon May 2nd, 2011 12:02 PM
Any thoughts on why there is lack of inventory.
Posted by urbandigs
Mon May 2nd, 2011 01:26 PM
Well the first thing that pops into my mind is the elimination of developer friendly policies, such as the 421-a exemption program combined with a never before seen contraction in credit and bust in housing. First the former.
http://www.observer.com/2011/real-estate/lesson-need-421
Here you can see Knakal's recent views on the topic. Here is one part that sticks out that I agree with:
"The elimination of the 421-a program will likely be devastating to our housing stock. "
In regards to the latter, that is playing a bigger role since this "HIT" came in late 2008 and lasted for a good 10yrs. Sure equities and other asset classes reflated, but willingness and ability to fund big developments has not. As the dev boom inventory started to get absorbed, you just see a continuous decline in new stuff coming to market.
Which brings us to existing resale. Looking at asset class performance in last 2 years, its easy to understand why the need to delever or trade out of fear is just not there right now. If markets saw some blood on the streets, Im sure you would see a rush of new stuff come to market from a fragment of the seller pool thats not there right now - those selling out of macro economic and market fear.
Bids clearly did not rise enough to motivate those sellers that really dont want to sell, but would if the price was there. Says something about price action. Yes all price points reflated, but we are still not near peak levels.
Thats all I can think of. I would expect inventory to be seasonally low unless we something discussed above change. Hard to think another new dev boom is near though