Good urban digs post

It's interesting, but the real indicator is INVENTORIES. Until they start to fall on an ongoing basis, prices will continue to drop.

And they are not falling, and we're entering into the slow summer months. "Activity" itself - even if it were true - is meaningless. It's looking at demand instead of demand in relation to supply.

Which, steve, is what Noah points out.

"I really don't get the fascination with month to month increases in activity as a foundation for making an argument that a bottom is in or that we are on the road to recovery. For housing sales numbers, especially Manhattan, there is a STRONG SEASONAL PATTERN! So, either you seasonally adjust the numbers OR you compare year-over-year to get the bigger picture! If you choose to ignore this, and instead focus on month to month trends or quarter to quarter trends, you are getting a very misleading picture! This is the exact type of spin that the NAR, and specifically David Lereah, used to argue against a falling housing market in 2006, 2007, and for most of 2008. And now, they lost all credibility. You want to see Manhattan sales trends, look at the bigger picture and understand that this is a seasonal market that must be analyzed year over year!"

He doesn't fixate on inventory like you do, but it is misleading to imply that Noah is making an argument in favor of activity as an indicator.

I'm not making that argument, evnyc. I have no disagreement with what UD says. I'm simply pointing out another - more important - factor.

"Fixate" isn't the right word. Inventory = supply. When supply increases and it is not absorbed, it means that the price at which the supply is being offered is too high. Econ 101. Noah's argument is like saying that more people are looking to buy potatoes, and more are buying potatoes. But as long as the supply of potatoes increases faster than the number of people who buy them, the lower the price of potatoes will have to fall to clear the inventory.

Well, I think you're misrepresenting Noah's argument. He's not looking at inventory in this piece. He's looking at how total sales are being misrepresented based on quarterly results. While yes, supply is up, not all supply is created equal. If you're looking for a 3-bedroom and there's 10,000 1-bedrooms on the market but not a single 3-bedroom, I'd say there's not really much supply.

I'm not misrepresenting anything, but thanks for sharing!

the piece was to explain the seasonal nature of our market which makes looking at month to month, ot quarter to quarter reports misleading. Either you seasonally adjust or you look year over year for a better glimpse into the health of the market.

Steve certainly has a point about inventory. Inventory is a function of demand, no, among other factors? And the fact that inventory has surged amidst all these reports of a pickup in activity is telling. Look at the classic 6, 7, and 8 market. There is more supply there than there was in the past 4-5 years.

In this business, brokers spin. Its that simple. Any ounce of good news or shade of green they can find, they focus on that and ignore everything else. Its the nature of this business, or any sales business with a vested interest in volume. The point of the post is to downplay that incorrect way of calling for a bottom or a recovery, when in the grand scheme of things, the first 2 quarters of 2009 will likely prove the most sluggish in the past 10 years. But you wouldnt believe that listening to many brokers or executives out there. Just once I want to see a firm tell it like it is! Even in the most dreadful of times, Im sure they can find 'green shoots'.

I think in the future there will be a place for honest consulting in buying or selling a home.

Intelligence Scale:

Data
Information
Knowledge
Learning

You have to go beyond data, but even information - interpretation of statistics - is short of what I want from a broker. That is why the UD site is so lacking.

I'd rather work with someone like Ali, who can say, this apartment is inexpensive on a price per square foot basis, and has nice light and layout, but here's why and what you should consider if you want to live here.

Steve definitely has a point, I was just lodging a minor protest that arguing that the writer SHOULD have argued something else isn't really engaging with the person's argument: it's going off-topic. When he wrote ""Activity" itself - even if it were true - is meaningless" it sounds like he's read your article to say that it's about activity. It isn't.

And Noah, I really hope you can get the consulting business going. I think it sounds like a great idea.

bouy- A lot of brokers don't have the first one, or don't accurately portray it.

bouy - i want both. ud isn't trying to tell you which apartment to buy.

I didn't say that he SHOULD have argued anything. I think, though, if you are going to argue that statistics need to be adjusted seasonally - which is fair, except the volume probably isn't big enough to do that meaningfully - then inventory needs to be accounted for.

BTW if you adjust the outdoor temperature seasonally it would be the same temperature all year round. Sort of like "wind chill": nice to know, but take it with a grain of salt.

It is also possible that activity is so minimal that there won't appear be such a "slowdown" as we head into the summer months. I don't think that will knock off a significant amount of inventory, just that it will be interesting to see the % drop in activity.

It may not drop nearly as much as in the past few years, simply because it is being compared to a very slow 5 months. It won't be as difficult to come closer to the number of buyers you would "normally" get in the 3rd and 4th quarters. The number will be off, but I am curious to see by how much.

waverly, even if you saw an increase it wouldn't necessarily matter. that's steve's point, i think. severe price corrections may bring out buyers, but the corrections will continue as long as there is excessive inventory.

AR - I agree with that. I was just curious to see how the activity plays out as the year goes on. For instance, if the past few years had seen 2,000 transactions in each of the 1st and 2nd quarters and then 1,000 transactions in each of the 3rd and 4th quarters, it is likely the activity going to be closer to "normal" in the 3rd and 4th quarters this year versus the 1st and 2nd quarters since the sales volume is typically much lower.

This will then be a part of the spin used by brokers to give the idea that the market is roaring back, but the price declines will still show through.

Just a theory....and it is a Friday morning, so that's fairly creative given the situation.;)

So the UD site is lacking because it doesn't go into detail on every apartment and the permutations on how each apartment may suit every type of buyer (or just buoy)? Please direct us to Ali's site so we may approach the holy grail of "Learning". Every purchase has a unique set of circumstances, but how can you address that on a web site? UD provides fantastic data analysis at a macro level and leaves the knowledge and learning to the reader. I, for one, am a big fan.

waverly, they'd continue to spin if apartments were being given away for $1. your question is a good one. studies of bubble market behavior would indicate that at some point buyers would flee, right about the time of the sellers' capitulation. an ugly confluence. will be interesting to watch.

OTNYC, i believe a broker is not allowed to post info regarding another broker's listings. lord, imagine having to use your little brain in the real estate purchasing process.

bouy - why do you assume I cant consult my clients in that capacity? That is rather shallow to just assume that, no?

evnyc - its coming. 3Q 2009 perhaps

http://www.urbandigs.com/2008/04/the_importance_of_views.html

Ive written in such detail on how I consult for my buyers in 2006,2007. I cant believe you think Im unable to do that. Its not like trading complex derivatives, its knowing what features procure the highest resale values and knowing the products in the market and how to discern between one view and another, one renovation and another, one level of natural sunlight and another, etc..

you think that is rocket science?

"I'd rather work with someone like Ali, who can say, this apartment is inexpensive on a price per square foot basis, and has nice light and layout, but here's why and what you should consider if you want to live here."

The problem is that currently words like "inexpensive" and "deal" get casually tossed around by brokers as if they're simple concepts. But to most brokers, inexpensive merely means that an apartment is priced less than comparable sales or apartments on the market. That's fine in a stable or appreciating market, but in a depreciating market like the one we are in now, you need to know a lot more than that. UD is unique in that he is actually examining what it means for an apartment to be inexpensive or a deal in the current market. That's a lot more valuable than 95% of the brokers who are screaming "OMFG. 5% market drop. Buy! Buy! Buy!" And seriously, why do I need a broker to tell me about the light and layout? Can't I, like, visit the apartment myself?

Noah, since SE had media coverage the usual posters here are being viciously attacked by new users, mainly angry brokers. Please don't pay attention to them Everybody here, including the permabulls, knows who you are and the blessing that you represent for the buyer side.

You go UD. congrats on the new venture, btw.

Exactly. Halstead is marketing $1,100 per square foot (with square footage inflated by at least 20%) at 2280FDB as "value." Literally. There marketing material is all about what a great "value" this massively overpriced for Harlem (and probably for some neighborhoods below 96th) development.

jason, the delusional pricing in Harlem is only second to that downtown. Kalahari cut early and deeply, but the others? this could be a thread of its own.

here is the unfortunate situation as i see it. no one, including me, has a clue about what is worth what at this point or into any kind of foreseeable future. given that context, any money put into illiquid assets such as real estate should be viewed as immediately sunk for the long haul. i feel for so many of the posters (and others) who want a place to live and want to own it but are not willing to accept the possible financial consequences and the need for significant add'l resources beyond down payment and a few years maintenance.

Jason brings up a good point. As has been discussed elsewhere, with so much square foot inflation it's extremely difficult to compare apartments on that basis.

Noah, we're looking forward to it!

Nice article, Noah, as usual.

So refreshing to hear it like it is rather than mindless broker chatter.

ud (or others if you're able): I went back to the original link that started this thread and I don't see a legend anywhere. Can you tell me if this is in 10's or 100's or 1000's?

It looks to me like what the chart is saying is that the number of coop/condos sold in Manhattan was relatively steady from '99 thru to '06 - some number a year slightly below 100K? I am guessing as 10K doesn't sound like enough to support all the brokers, and 1000K sounds like too many apartment changing hands every year in a sample the size of Manhattan.

The reason I'm asking is that I'm wondering about the correlation between the explosion of volume in '07 and the various "exotic" mortages that were around then. Depending on what the scale is, this graph might be telling us that some meaningful % of the 135K apartments that traded in '07 are now facing a baloon payment, or some type of other disincentive for the property owner, who is almost certainly under water on their purchase price to continue servicing the mortgage - much as has happened in other parts of the country.

Thots or comments appreciated as always.

The numbers are the numbers.

I have been startled in the past by how low the numbers seem given the size of Manhattan. But the bottom line is that Manhattan is a land of renters...largely because prices are (and have pretty much always been) quite high. And they are particularly high now.

Topper - wow - I would have gotten that wrong on a test. 10,000 apartments a year it is then. So be it. Thanks

liquid - the data is quarterly, for each year shown. Average is about 9,000 - 10,000 or so total sales per year from '99 - '06..2007 was the peak of the credit/housing boom and therefore you saw a HUGE runup in volume that is consistent with bubbles just before the peak. So, its an outlier. We saw closer to 14,000 sales that year and maybe 11,500 in 2008. This is now the year AFTER the peak. Lets see if we overshoot which is normal for after a bubble pops - this time its housing + credit, dragging along stocks with it

The average is 8,500 sales of apartments over 10 years.

tku noah

Noah,

Think the another relevant YOY data comparison is the average % increase in sales between March and April (historic) versus this year. A larger than increase in activity could/could not be an indicator of sales picking up. Also, breaking the data down by apartment category (size, location, type) would help as identify any anomalies/secular trends. Thx for the work....

good stuff robo...you should email that to noah@urbandigs.com, along with other things you would like to see. Soon enough Ill be working on that only

Well I for one thank yo urbandigger for writing stuff you don't need to.

This is nationally, but still relevant to this discussion.

From Zillow:

Homeowner Confidence Shrinks; Most Americans Now Believe Their Home’s Value Has Declined

As for selling activity, it’s clear a significant number of potential sellers are holding back due to the current market. When asked about future plans to sell, 31 percent of homeowners said they would be at least “somewhat likely” to put their homes on the market in the next 12 months if they saw signs of a real estate market turnaround(3).
…
Humphries continued, “Also interesting is the information we have for the first time this quarter on the levels of ’shadow inventory’ - homes that people would like to sell but that aren’t currently on the market, and thus aren’t captured in the official number of homes on the market. With almost a third of homeowners poised to jump into the market at the first sign of stabilization, this could create a steady stream of new inventory adding to already record-high inventory levels, thus keeping downward pressure on home prices.”

Noah, random question but any idea what caused the spike in sales in Q2 2002? Seems like an odd time to have a spike in sales given the overall economic situation or did this tie in directly with when Greenspan lowered rates. or did a rash of new construction come on the market at that time.

the second half of that....

from Zillow cont'd:

We’ve heard plenty of talking heads mention the loads of fence sitters, pent-up demand, and sideline buyers just waiting to jump into the market, but what about pent-up supply? Sellers on the sidelines, waiting for a better market to sell their homes? While pent-up demand creates a price floor, because buyers move in to the market when prices fall, pent-up supply causes a pricing ceiling, as sellers list homes when they see signs of price improvement. In the current market, the pent-up supply will do worse than cause a price ceiling, it’ll cause further downward pressure on prices.

According to the Zillow data, some 20% of homeowners surveyed in the Northeast would be very likely to list their home for sale, a percentage significantly higher than in any other area. Roughly 40% of those surveyed indicated some interest in selling? If even a half of those surveyed follow through, the amount of shadow inventory is staggering.

And yet another reason why we’re not at the bottom yet, and why home prices will not rebound quickly after the crash.

I was an equities trader with Tradescape working at 135 E 57th street at that time! I started real estate in 2004

oh that was still back in your day trading days.

I'm just surprised that post-9/11 (and in the middle of a recession) there were so many transactions. Every time I look at the graph, that red line keeps sticking up.

Any ideas out there as to why?

I just tried clicking on the link to Bracha's blog and got "Sorry, no posts matched your criteria". Did Bracha get so "face planted" he withdrew from the field of battle?

Well said billshiers! Who doesn't know how to look at comps? That's why we refuse to work with regular brokers.