April in the Books - Pending Pipeline Strong For Future Reports
A: With April in the books, lets take a look at how Manhattan produced in the month and how it compares to past April performances and where we came from since March. With the market continuing to see a very strong pace of new deal volume, the pending pipeline of closings will likely power solid Q2 and Q3 reports -- Due to the lag in ACRIS filings, I would put my money on Q3 being the 2012 report that truly captures what Manhattan is experiencing right now in the field. Lets discuss and quantify these statements with charts.
First, lets take a look at how many contracts Manhattan managed to produce in the month of April, 2012 -- and how that compares to past April's going back to 2008:
Now, lets break down how the month of April performed compared to past April's, and see how much supply we had at month's end -- we should always look at pending sales in relation to active supply trends because the two are related.
Quick Tip: If supply rises big time and the market produces 1,164 new deals (as it did in April), it's not as strong a market signal than if supply fell big time and still managed to produce the same amount of new deals signed! In the case of rising supply conditions, more inventory somewhat mutes the effect of rising deal volume. Whereas in tight inventory conditions, it will get more & more difficult for the market to sustain monthly deal volume this high; higher than 1,100+ new deals signed a month which is a very strong pace.
APRIL New Deal Vol Since 2008 - Active Supply at the Time
April 2008 --> 1,182 new deals signed - 7,072 active units for sale at time
April 2009 --> 642 new deals signed - 9,455 active units for sale
April 2010 --> 1,150 new deals signed - 7,791 active units for sale
April 2011 --> 1,006 new deals signed - 7,886 active units for sale
April 2012 --> 1,164 new deals signed - 6,905 active units for sale
It really helps to put our market trends in perspective when you look at both supply and demand trends in relation to each other, over time.
Now, lets take a look at monthly new supply for Manhattan since 2008:
This monthly new supply bar chart since 2008 should clearly show you how since late 2010 (red bar), Manhattan has seen less supply to come to market on a monthly basis for every month except February of 2012! In other words, current tight inventory conditions are a function of new supply trends for the past 18 months! This did not happen overnight.
This is probably why buyers out there continue to bid, and bid aggressively, for quality product that comes to market at a reasonable price. Add in that equity markets recently reached a 4-year high and you don't have that fear & uncertainty that typically motivates a whole new class of sellers to list property for sale to either a) liquidate to raise $$, b) sell what is perceived as a near term depreciating asset, or c) sell out of general market fear.
I'm not saying its party time again and prices are higher than peak in 2007, they are not, Im simply reporting on real-time production data and how we got here over the past few years. Price discovery on deals signed in April will likely become available between mid-June and September. Generally speaking, certainty and confidence are very important buy side characteristics that take years to shape, and that's exactly what happened to Manhattan property buyers over the last 3+ years. So don't be surprised to see a pop in median/avg sales price trends in the Q3-2012 report that will be released on October 1st.
It is what it is, and I'll still be surprised if we can keep up this pace of producing over 1,000+ new deals signed as we head into June given tight inventory conditions and fewer new listings coming to market on a monthly basis. But, until anything changes the Manhattan market continues to experience a very active start to 2012 that will power strong Q2 and more likely, Q3 reports. Cheers!
Posted by dc10023
Tue May 8th, 2012 08:14 AM
I find it sometimes missing when looking at pending sales to active units. At least from a trend stand point, would be interested in seeing sales to additional active units. Are sales exceeding new listings or lagging number of new listings?
Posted by ms
Tue May 8th, 2012 09:23 AM
Interesting question posted above.
When I look at the graph of "Active Units", I see that it is relatively flat for the past few months.
Is Active Units equivalent to inventory? Does it go up when new listings are posted, and down when there is a pending sale, or a listing goes off-market?
Does the fact that it is flat mean that units are being sold or are going off-market at about the same pace that new listings are being added?
Thanks
MS
Posted by urbandigs
Tue May 8th, 2012 10:48 AM
dc10023 - when you say sales, do u mean actually closings or pending sales counts per month?
ms - Yes it is an interesting question, and we used to have a Active to Pending Sales ratio chart that we removed years ago because with 2 metrics with two data methodologies, it would be unfair to relate the two on a 1:1 ratio. With that said, when we did have the ratio, it was very interesting because it accurately was able to pick out when a notable market shift was ongoing, and when one was more seasonal in nature. We might bring it back.
As for your other questions:
1) Is Active Units equivalent to inventory -- assuming you are asking about the chart in the discussion above. No, that count of New Active Units per month simply tallies up how many a) brand new listings came to market and, b) how many off-mkt listings came back on market for each month going back to 2008. It does not rise or fall with pending sales, rather it only rises and falls with the amount of supply that comes to market on any given month
It affects total Manhattan inventory levels, which we show as 6,925 right now in Manhattan, but so does the pace of pending sales and the pace of off-mkt trends, as u mention.
So basically, Total Manhattan Inventory which is at 6,925 right now is affected by:
a) pace of monthly new supply, which we show as 1,624 for April
b) pace of new deals signed, which we show as 1,164 for April
c) pace of listings taken off-mkt, which we show as 461 for April
PLUS
a) active listings that are not updated within past 30 days fall out of counted inventory
b) active listings that are 2yrs on market fall out of counted inventory
At all times the front end is bringing in fresh data as stale data falls out of the tail end in addition to monthly pace of new supply, new deals signed, and new listings removed from market.
Add it all up and you have the +- net change in inventory per day.
Posted by dc10023
Thu May 10th, 2012 06:22 PM
Either pending sales or actual closings. As they should generally be a one-to-one relationship (hopefully).
One way to look at sales as a % of inventory, but the other way is to look at new delivery of product and what happens to them. (Net new active listings vs how many goes off-market and how many get sold)
So we hear about increased sales but flat active listings. But what I see from your April numbers is more than quarter of new supply is matched by listings taken off the market. How are those numbers in Jan, Feb, Mar.. in May?