"Very Strong" Pace of Deal Volume Continues

Posted by urbandigs

Thu Feb 14th, 2013 08:50 AM

A: Most brokers are bombarded daily by their buyer & seller clients asking "How's the Manhattan market doing right now?". It's not such a simple question to answer because price action doesn't reveal itself for a good 4-6 months or so when deals signed into contract today ultimately close and become publicly available. That sales lag alone should be enough to convince anyone that looking at median or average price trends is similar to looking in the rear view mirror at a marketplace that existed close to six months ago. Add in the flaws of median/average price trends, mainly that both are exposed to what "types" of properties close and "their recorded period", and even that lagging data could paint a very misleading picture. This is why the only way to track Manhattan performance in real-time is to track inventory trends on a daily basis -- that is, how is daily deal volume? How are daily supply trends? And how are different segments and price points of the market performing relative to the broader trend. Lets try to answer some of these questions today.

Every REBNY broker must maintain their exclusive listing in the RLS sharing system and update their listing at least once in the last 14 days -- otherwise the agent can get locked out from managing their listings internally until updates are provided. The UrbanDigs tracking system parses/cleanses those internal "broker status updates" and notes only the worthy changes in our Market Ticker tool so that users can track daily, weekly and monthly market production. This allows us to keep a pulse on the marketplace on a daily level and see tick ups & downs in real time; although, it takes sustained data to identify a noteworthy trend.

The ticker tool also allows us to check in mid-month to see how Manhattan is performing, relative to that month's prior production history. That's the key because in seasonal marketplaces it's always best to compare any month of production to that same month in past years to interpret relative performance levels. By doing so you will eliminate the noise that affects month to month or quarter to quarter trends.

Lets do that now and first take a look at Monthly Contract Activity going back to 2009 with the goal of understanding what pace of new deal volume Manhattan is used to seeing in the month of February -- then we can determine what level of Contract Activity is normal for this time of year:


I outlined the data bars for the month of February in the above chart, which show's us total deal volume over the past 4 years. To sum:

February 2009 (credit crisis) --> 484 contracts signed
February 2010 --> 849 contracts signed
February 2011 --> 844 contracts signed
February 2012 --> 871 contracts signed
February 2013 --> not yet available

Excluding February of 2009 for obvious reasons, I am fairly confident when I say:

The month of February normally sees Contract Activity in the "mid-800s"
So we now have a baseline to compare to. Now lets go a bit deeper and look at the daily market ticker tool to see what the market is producing over the past few weeks:

*ticker snapshot taken at 5:45am

Deal volume for February 13th (yellow box) --> yesterday, the market put 45 deals into contract
Deal volume for February 12th (red box) --> the market put 64 deals into contract
Weekly pace of Deal volume (blue box) --> the market put 270 deals into contract over the past 7 days
Monthly pace of Deal volume (orange box) --> the market put 1,049 deals into contract over the past 30 days

Those #s update every 3-4 hours as brokers throughout Manhattan put new status updates for all exclusive listings into the sharing system.

Right now, February is on pace to put over 1,000 deals into contract if the month ended today. Which allows me to draw this conclusion:
With everything we know about how tight inventory levels are, the market continues to see deal volume solidly outperform on a year over year basis
Now very important, strong deal volume doesn't necessarily mean rising price action. I think price action has been on a steady, progressive upswing for the past 4+ years now but that is only because I am actively in the field servicing clients and seeing where bids are coming in throughout Manhattan's neighbohoods/price points. But for where bids are now and how that relates to say 6 months ago, well, we have to wait for that data to become public record (probably in the June-July time frame we will get public record confirmation of where the market is performing today).

Every building is its own local marketplace and right now even the price points are performing at different levels. We know from yesterday's discussion that the lower end price points are not seeing as 'robust' deal volume trends as the higher end. We also know that Chelsea, BPC, and FiDi are under-performing the broader market trends and may not be seeing the kind of action that Tribeca & Gramercy/Flatiron is currently seeing.

Manhattan is highly segmented which means sellers need to be informed on what is really going on in their hyper-local submarket and building before testing the market with a unrealistic asking price. A high asking price is a sure-fire way to miss the advantage that the market is currently giving the sell side.

But hey, I guess that is what makes a market and I can't think of a stronger time to list an apartment for sale since the peak in 2007. Just know that in today's market buyers are paying up for full renovations, views, and a building that is financially sound and being lent on by the major banks. The buy side "herd-like" mentality that sellers love so much seems to be in full gear for those types of "desirable" property. How long it lasts remains the question of the day.