Inventory Flatline

I believe it's my turn...

Buy now or be priced out forever

Bob Borker: I can feel the market changing in my day to day activities.

ME TOO! Especially after yoga class when I open the window and a plethora of sales wafts over my hot, sweaty body. I can smell them too. Bob, you should call me. Let's talk. I would love it if you would walk me through some sales. Are you conforming or Jumbo?

UD: "Pinpointing the exact reason for this reflation or saying it was due to the tax credit only, is in my opinion, to miss the severity of what this market did as a result of the credit crisis, and what markets normally do after such a severe event in a fed/govt engineered reflation environment."

And the sudden drop in Pending Sales in May 2010 both locally and nationally, after the expiration of the tax credit is because the market suddenly felt like taking a "breather" in the middle of what is normally the high season for RE!?

Oh yeah, the Fed took interest rates back up in May and that explains it. NOT!

Maybe half of the NYC market was invested in BP and they've lost a lot of their net worth!?

Come off it. The tax credit was a catalyst, that you have to take pretty seriously, albeit not exclusively.

never said it did not have an effect, I said its difficult if not impossible to differentiate it or measure it...so what are we arguing here? Yes it played a role, I never said it didnt. But so did five other variables.

And the sudden drop in Pending Sales in May 2010 both locally and nationally, after the expiration of the tax credit is because the market suddenly felt like taking a "breather" in the middle of what is normally the high season for RE!?

Could you please list those five other variables that have suddenly come into play since the end of April?

I'll give you one. The Euro crashed driving away European buyers. The 4 others?

your not understanding what Im saying and cmon now, I said '5 other variables' to make a point. Maybe I should have said multiple other variables.

Anyway, the other variables were meant in the context of the run up! That is the discussion, is whether it was from the tax credit only and Im saying you cant measure it or differentiate it from other variables that were in play..like lets see:

1. Seasonality - JAN-APRIL are typically our strongest months
2. General Market Forces - we happened to be 1 yr removed from the severe troughs and fear trades. Market forces tend to progressively improve and then have a runup phase (thrill/euphoria) towards the end of the move. Even in feb-march I had clients that got nice discounts from peak (not near lows of prior March), from peak and wanted to buy before the market improved further.
3. Equities / Wealth Effect - umm, prior to April, equity markets ran up about 70% or so from lows. The wealth effect typically hits it's sugar high towards the latter part of the move...outside of a respit in JAN, feb-march-april saw a pretty steady and nice move up (that is when the market was quite active)
4. Confidence - during that time, general confidence in markets rose. More buyers pulled the trigger after a long wait on sidelines and getting some adjustment off peak levels. Other buyers missed on out numerous desireable properties, and got more aggressive when they found the next one. Feb-Mar and early April this was happening alot, especially in 1.5m-3m market.
5. Herd Mentality - was it you that mentioned it? Buyers dealt with very tight inventory and strong demand with many buyers signing contracts. Many places actually did go to contract, and near ask. Listing discount and days on market pretty much fell off a cliff from levels in late 2009. Buyers see this, experience it, and deal with it. And their mindset changes.

There are buyers that need to buy and want to buy and will buy. Many on this board that are perma one way or another, may not have the same level of motivation as someone else out there. Its what makes a market and it is a fast changing one at that. Depressed at one time, mini frenzy 12 months later, cooling off 2 months after that. I say breather, because the sales pace was above normal in my opinion because of a multitude of forces - not just the tax credit. Any of these variables could have changed or trends ended, and had a similar effect.

UD: "1. Seasonality - JAN-APRIL are typically our strongest months"

Really! Everywhere else in the country, the peak is late Spring and Early Summer AND In your own pending sales data for Manhattan currently posted on your web site the peak month for 2008 was in May and the peak for 2009 was in June...

ok your right, our active market is from April May to June July. And clearly you missed why we left out earlier data which seriously frustrated me but was the right call and if you are looking at 2008-2009 for normalcy, you wont find it. 2009 was all about delayed seasonality

As I said in AUG 2009 when it happened:

"When I say 'delayed seasonality' what I mean is the first wave down distorted the period of time that our marketplace is usually more active - or the seasonality effect got delayed. The usual period of high action in Manhattan is right around the wall street bonus season, or the time between late January to late May or so."

http://www.urbandigs.com/2009/08/expect_quarter_toquarter_impro.html

You can keep on arguing your point though.

UD- Why do you say mini frenzy for a period when you say is the highest seasonally. Wouldnt an increase in sales be simply seasonality? Nothing more, nothing less. Why the need to act like its a mini frenzy, unless you say every year that time of year is

i dont say that every year...not sure the last time I used that phrase..i described it that way, because to me, for about a 7-8 week period between mid feb - April, we saw a vertical surge in deals (looks like an avg of around 1400-1450/mth or a total of about 4,200 listings going to contract..even at peak levels in 2007 we did not have that kind of pace...13,000+ sales (lets use the recorded amounts used by MS), means a pace of about 1,083 contracts signed a month..lets say seasonally strong months avg around 1283 and seasonally weak months around 883 or so; +-200.

It just seemed around feb-april that not only did see this surge in action, to me higher than typical seasonal active months, PLUS buyers everywhere and brokers everywhere saw psychological changes...buyers were chasing to get deals signed. They were NOT chasing from peak levels nor did they chase TO peak levels. Rather they chased after the 'sensed' reflation from distressed levels, gaining steam as it progressed. The thrill part of this mini move (lasting around 10 months), seemed like a mini freny to me around these months. Which never lasts too long before equalizing and shooting down somewhat sharply from the ultimate zenith in activity.

plus please know that I used that phrase "less frenzy-ish" back on April 22nd, when trying to describe to you guys what I have been seeing in the markets the most recent 4-8 weeks at that time.

http://www.urbandigs.com/2010/04/misinterpreting_bidding_war_st.html

on urbandigs, I try to give in the field observations when confident enough of the change in action from what I normally see. at that point I did not have this chart at my disposal, just speaking from regular business.

okay, got it. you saw it as more than just seasonal..

What's going on with this market? Record heat, dead of summer, and an inventory making a precipitous move in the opposite direction to accepted logic. This has to be bad data or brokers manipulating the UD widget.

60+ contracts yesterday for those keeping score.

An interesting trend appears to be developing. Another above average day, 48 contracts yesterday per UD. Inventory is down 3% in 3 weeks. Anybody have a good explanation/theory?

It is quite obvious that the solar eclipse is obfuscating the shadow inventory, creating the mirage you are seeing of declining inventory.

Or perhaps, like it did in even in the worst of 2009, inventory drops in the summer. Anyone who wants to sell but has held onto a property this long is willing to wait another couple of months until the summer is over. That part of the cycle has never changed.

Likewise a developer with shadow inventory won't list it until summer is over.

This is not bear or bull data, merely a cycle that has repeated even in the best and worst of years.

Are above average contract numbers bullish or bearish? Or neither if they happen during the hottest summer on record and after expiration of buyer tax incentives?

I though tax incentives were extended to Sept. 30th.

what do think is more important comparison: YoY peak inventory to peak inventory movement, or YoY trough inventory movement?

The extension was to allow for closings to complete on the Apr contracts.

Printer - 'xactly... last summer inventory was 14% higher in July.

Merely a cycle. Indeed.

Looks to me like it also went down 3% from April to May. Right before it went right back up again in June.

You're right malty, its probably nothing, just thought I'd point it out as I can remember quite a few calls for sales to drop off a cliff this summer.