Ok, Summer Market is Over...We Need More Listings!
A: The summer slowdown should be, and I stress should be, coming to an end as historically August is one of the slowest months for new inventory to come to the active marketplace. In terms of the monthly pace of demand, August & September tend to be the slowest months in the calendar year and this year seems no different. In my experience, sellers take their unsold listings off the market in July & August only to put them back on the market post Labor Day for a second try. The brief time off is supposed to 'freshen up' the listing; listings tend to get stale after 3-4 months and no price reductions. So, September historically tends to be a good month for new and old inventory to come back on to the market, and right now, we need the supply!
Sellers --> make sure to talk to your brokers about the proper pricing strategy using selected comps in your building that most closely match your property. Once you start going outside your building to justify a higher asking price, you are introducing more variables into the equation which ultimately degrades any comps analysis. So, as you interview potential listing brokers who show off their marketing skills and personality, also make sure they have a sound pricing strategy using relevant comps. In the end, pricing right is most important as the market ultimately dictates value!
With that said, we now have the ability to measure with a high degree of accuracy how many new listings are coming to market every day and every month with the UrbanDigs real time tracking system. If we were to add up the total new listings to hit the Manhattan marketplace every month, it would look something like this chart (I squared out the months of August & September and averaged them out so you can see the sharp contrast):
As you can see, over the last 4 years the month of August saw an average of 1,113 new/back on market listings to hit the marketplace. Over the last 3 years the month of September saw an average of 2,110 listings to come to market. The defining day is Labor Day as the usual trend is to take the listing off the market or hold off marketing a new property during the summer, and then list the market for sale in September.
The UrbanDigs Real-Time Market Ticker is confirming this trend so far, with 83 new listings to hit the marketplace today alone! Take a look:
BLACK BOX --> Shows you the daily count of new listings to come to market today in an ACTIVE state, so far 83 listings already came to market in a clear sign that it's back to business on Day 1 after Labor Day; and there are still 1-2 more updates left in the day. The 30-day moving total of new ACTIVEs is only at 955, so we have a long way to go if we are to reach the 3YR average of over 2,000+ listings to come to market this September.
RED BOX --> Shows you the 30-day moving total of new CONTRACTS SIGNED, in this case its at 628, down significantly from the 900s and low 1,000s back between March through June. Remember, this ticker was designed to show you the market tick ups and downs in real time; and that 30-day column is what subscribers should be monitoring.
But take another look at that first big bar chart above again and this time focus on the purple bars (2011) versus the red bars (2010) for the more defined trend -- Manhattan has seen declining year over year new monthly supply for about 11 consecutive months now. This has put continued pressure on Manhattan Active Supply, which is now around the 6650 level; that's down 16% in the last quarter, down 7% over the past year and down 11% over the past 2 years. To put that into perspective, Manhattan Active Supply hit a high of 9,524 on April 3rd, 2009 as the height of the crisis hit our marketplace.
The data doesn't lie and this market certainly is not pressured by excess supply right now. Sure there are those plain vanilla apartments with high price tags attached to them that are just sitting, but there is also a lack of high quality well priced units right now with those desirable features that buyers tend to bid up for; think city/river views, private outdoor space, unique layouts, etc..
The last 3 months looked like typically seasonality to me where we saw:
Pending Sales decline 22%
Active Inventory decline 16%
Off-Market Trends rise 23%
Even in the face of rising volatility and falling stock markets, we saw a decline in supply. This is important to note because if our markets were to experience a shift down in price action due to external macro factors, we should see a surge in active supply. Makes sense right? In the face of fear and liquidation needs, the seller pool in Manhattan should swell as sellers that never planned on selling start to list their apartment on the active marketplace for whatever reason.
Remember what happened in the 3-month period after Lehman failed in September 2008, where the Manhattan markets saw:
Pending Sales decline 51%
Active Inventory rise 16%
Off-Market Trends rise 4.5%
In times of stress, we should see a) rising inventory, b) rising off-market trends, and c) plunging pending sales trends at the same time sustained for 3-4+ months. Just like we saw in late 2008 and early 2009.
In times of seasonal slowdowns, we should see a) declining inventory, b) rising off-market trends and c) declining pending sales trends at the same time - and that is what I see right now.
Equity markets are rattled, but its simply too soon to go out and say that there is a shift down in price action in the works. The uumph from a very active high end market from March through June should also be reaching its full impact on our industry's quarterly sales reports soon; so I wont be surprised to see a decent Q3 report in terms of median price trends. If Q3 does reflect most of the high ends action from earlier this year, there won't be much uumph left for Q4s report down the road given what Im seeing in the data right now for the high end over the last 3 months.