Market firming up

As far as action is concerned I'm getting it as well. I got 3 offers this week on a piece I'm handling in Woodside.
But the offers are between $1.9 million and $2 million and 2 years ago it would have gone for $2.4 million.

I will send to your personal email. I can’t discuss the actual deals I am working on or worked on.

I will send to your personal email. I can’t discuss the actual deals I am working on or worked on.

Just sent.

Keith,
Saying things are busier in March than they were in August thru December? Name all the years that statement didn't apply?

The market went off a cliff starting in August, through the second week of January. September through Thanksgiving are usually fairly productive months. However seasonality slowdown is one thing, everything grinding to a halt is another, which may be a bit of an exaggeration but pretty close to what happened during that time.

My point is we're seeing a lot of activity and a lot of sales taking place, improvement happening. We're not seeing a cratering market across the board. Is it simply a head fake or will it be sustainable, time will tell.

Keith

Absolutely agree the markets corrected since 2015. Perhaps that's all it is, a correction that's finding a bottom.. I'm smart enough to know I could be wrong. I was lucky to be ahead of the curve in 2007 when I started the burkhart group to offer discounted rental commissions. At the time I thought it was perhaps better to rent than purchase, and I'm on record with that position in a real deal interview in 2007.

We'll see what happens as the year progresses...

Based on market wide data, sales didn't fall of a cliff August thru the end of the year so it must have been unique to your shop. So it's logical that the same can be said for whatever you are experiencing now. Which is why I tend to ignore anecdotal evidence cherry picked to prove a conclusion and prefer to examine statistics which the law of large numbers tells us have a better chance of representing the actual performance.

30, Speaking of pure data, do you believe that Streeteasy condo index is comprehensive? Do you believe that to be a reflection of how much the market is actually down on an average (new development is excluded).

Again 30, you're quoting data points, but on the ground brokers were crying, mostly to me including some pretty big movers. Even Ryan Serhant said 2018 was the first year he made less money than the previous year. Revenue wise we were pretty flat 2018 versus previous year.

There's a huge difference between "made less money than they year before" and "fell off a cliff."
But in a business where most brokers believe that all adjectives are interchangeable I guess it's hard to tell.

I think it's funny that just about every broker is giving lip service by saying that sellers have to be realistic and look at the numbers, but when someone points out that those same numbers lead to certain conclusions about the market a lot of those same brokers switch to anecdotal evidence and start to talk about how the numbers don't mean anything.

I think Keith is pretty realistic.

He has called that the market is down 5-10 percent in general (Streeteasy Manhattan condo index - the best backward looking measure of the market in my opinion - is down 4-5 percent and perhaps has another 1 percent catch up to do) and higher in certain segments on this board.

All I hear him saying now is that the market is picking up from the lower price levels and he is including BK in his comments where the market is actually up in certain segments. Even the contract numbers will lag by 2-3 weeks vs what Keith is seeing on the ground. Market pulse in resales is ticking up and remains to be seen how much it goes up or down in the next month.

Perhaps falling 'off a cliff' was a bit too dramatic for you, but that's what brokers were telling me during this time. And I think if we drilled down on the actual transactions that took place(properties going into contract not closing) from August 2018 through December 31st, you'll see a fairly thin amount of transactions taking place. Relative to where we'd been I felt like the market fell off a cliff. because of our deep buyer pool, a number of our clients were able to score some pretty good deals during this period relative to where things had been and what they had been experiencing previously.(many of our buyers have been looking since 2015).

And I think most of the people on this board realize we're all projecting opinions,in my case based on what I'm experiencing on the ground and with discussions with many brokers.

30 you're projecting a 50% decline in prices I'm assuming from 2015? That's quite a bit of drama (: but everyone's entitled to an opinion. If we had a true crystal ball I don't think we'd be wasting time on streeteasy forums. I know I'd be on my organic coffee farm in either Costa Rica or Kaui!

Keith

And just to be clear I never said that the numbers don't mean anything. I was wondering if there was a divergence in what the general numbers are showing and what's happening in the actual various sub markets in the New York City area that I cover.

I know it's just one data point, but here's a prime Manhattan listing that took 11 months and a 13% price cut to sell.

https://streeteasy.com/closing/10646170

Two units in my building went into contract last week after sitting on the market for the previous stx months.

11% discount from it's 2012 closing price.

A studio (configured as a 1br) in a midtown co-op I follow (as a proxy for "ordinary mid-range full-service" building) closed on March 4th for $5k over ask ($585k). A 1 BR closed at the end of Feb for $880k (vs $895 ask, -1.68%). That said, a number of other listings over the last few months have been pulled / relisted.

1st timer, to be fair to the brokers on that listing (who I don't know), it took eight months from listing to contract -- and then an additional three months to close. And remember that the building only allows 50% financing, so I'd assume that sales move slower there than they do in buildings that allow 75%-80% financing.

Not saying that last year wasn't slow - from my POV it was -- but I'm actually heartened that this one moved at the price that it did.

ali r.

Isn't the key question the pricing on the units that are closing? I don't doubt that there is likely more activity happening, but if the only units are those that are discounted vs. comps, that wouldn't necessarily be a positive for the market. I get the impression that units that aren't being flexible on pricing are just sitting in the market or having the listing pulled.

Thoth, I believe most units in Manhattan except perhaps in less than $1.5mm category are selling less than 1-2y old comps as evident from the streeteasy condo index condo being down appx 5 percent. I think the question is color on forward looking path.

Thoth,
Black Monday was October 1987. Around that time I took over as Sales Manager at JI Sopher's Village Office. In the first year I was able to increase the deal volume of the office by over 50%. But that anecdote doesn't change what happened to prices over the next 4 years that followed.

Any thoughts on 45 E85th's closing price in 2019 vs 2012? It declined 11% in value in that time while the Streeteasy price index has the Manhattan market up almost 25% over the same period.

I think that it can be partially explained by cash requirements and coop restrictions in general (especially in buildings with no particular cachet) are being hit hard in a world where the percentage of the market which is condominium is ever increasing.

While I do not know the situation this particular unit (maintenance increase is high but does not seem crazy, one would expect to make some updates to the apartment in 7 years which seem not to have been made), I can only think that stuffy coops - going by percentage down - have taken a hit relative to the rest of the market. 36% under performance is hard to explain by some one overpaying by 10% in 2012.

I only mean updates to account for wear and tear rather than an upgrade "one would expect to make some updates to the apartment in 7 years which seem not to have been made".

30 and I were posting the same thing at the same time.

And a building that requires 50% down will certainly have very high post-close liquidity requirements. Perhaps 1x sale price or more.

FWIW, its cost of carry was up about 7.5% over that period.

[Sold @ $2.425mm August 2012, so 50% mortgage $1.2125mm at 3.60 =$5,512 monthly mortgage payment + maintenance of $2,965 = monthly nut of $8477
vs.
Sold @ $2.150mm February 2019, so 50% mortgage $1.075 at 4.37 = $5,364 monthly mortgage payment + maintenance of $3,755 = monthly nut of $9,119]

That's somewhat of a thought exercise, of course, because 1) People who can afford to buy into a 50% down building might not take any mortgage at all, and 2) I don't know the delta of the SE cost of carry over the same time period.

Either way I feel like this particular home is a real outlier. I think you'd be hard-pressed to find many homes that sold in 2012 close for less money in 2019.

And just for the record, the title of this thread was 'market firming up a bit'. Not 'here comes the next seller's market ; )'

Manhattan’s active season is in full gear, so how is the market doing? Here are a few high level take-aways from UrbanDigs:

March Manhattan Market Update

Days on Market Hits 105
Condo sector Market Pulse 0.29 | Leverage shifted to buyers
Co-op sector Market Pulse 0.5 | Leverage is balanced
A sneak-peak into March’s Contract Activity pace

What does it look like for condo resales?

The Match/April data don't support any of this "anecdotal" gibberish.

Quit wishing up the market and deal with facts

Perhaps you would add some facts and make it a nicer discussion.

April deal volume does back up this talk:

https://www.urbandigs.com/marketwide-charts/monthly-contract-activity/?agentid=58

Although 1 month of good numbers in active season is not enough, especially after years of sluggishness. We still have way to go

Hoping this shareable link works, I know some had issues accessing. Let me know please

urban, When will you update May contracts? A few days after the end of the month?

Using Urbandigs' search function to get a peek at rolling 30-day contract activity, May looks weak ("on pace" for 927 Manhattan contracts if I'm doing it right).

June 1, may bar goes up

Noah: It's good on my end. I can see the chart.

And thank you for the data. It's interesting seeing the pattern for all of 2018 - looks like the year started off slow, then fell off a cliff in the summer, had a 1 month recovery in October, then fell back again.

if they don't print money like crazy again, there's no coming back

But mortgage interest rates have dropped back down to an insanely low level.

Level of rates is indeed insanely low.

And Clarida effectively said today that we now have a put from the Fed. It will be interesting to watch nyc real estate data for the next couple of months.

One other change: I suspect Chinese money isn't coming back into NY real estate anytime soon.

I think foreign money in individual apartments has been low for a while to money laundering checks. Chinese institutional money has been gone for a while and will reduce further. There is no stopping individuals Chinese looking for back up plan should things turn sour in China.

Unless they can't get the money out of China.

Too many ways to get money out of China. In an export oriented economy, getting the money out is very easy. You export goods and collect some payment officially going back to China and remaining staying in the US. “Hawala” Chinese equivalent is another way for people to get the money out. Hong Kong is yet another way. Big amounts $20-30mm are indeed hard. Jho Low investigation killed that size of dirty money flowing into US real estate and we all know what that did to ultra-luxury real estate.

I started this thread saying the market was firming up. However it never ignited into anything much deeper than that. If you're a seller times are difficult, unless you have the perfect apartment that's a perfect price in a top location.

We are getting deals done on the buy side, but that's because we have a deep bench. I'll just say I'm glad we have a terrific buy side business! I receive at least six emails with price reductions a day, many of these are very nice homes that would have traded 15%+ higher in 2015 in an aggressive multiple bid situation after the first open house.

A few of our former and current buyer clients decided to list with other firms, couple of these listings I really wanted, I thought they were slam dunks. Looks like we dodged a bullet, as they sit three months later priced below even where we indicated they would trade. One is very nice 2 bedroom 2 bath in Brooklyn that's now under 1.3!

If your a buyer pull up your boots as the market is on sale. So many people were stepping over themselves to pay a premium in 2014/2015. Now that the markets going on sale everyone becomes a nervous Nelly. If you truly want to own your home rather than rent it, this is your market. Be patient and you can find some very good deals. Interest rates are ridiculous, and as long as you're going to be there 7 plus years you mitigate short term to midterm risk, IMHO. Difficult to buy at the absolute bottom, difficult to predict when we have bottomed. But I know for sure you're getting a discount from the previous highs set in 2014. We just did a great deal on lower fifth Avenue!

And of course there's always the option to just continue renting, nothing wrong with that.

Keith Burkhardt
TBG

Keith, Will appreciate some examples.

I don't like to name names in public (;

At this point, I'm not even sure you can say the market is firming up: Latest UD data for May contracts shows it's down -11.4% YoY, for existing and -9.8% new developments. Lowers sales and lower prices is not a good sign.

@thoth that was my point with the most recent post.

Imagine if mortgage rates hadn't taken a nosedive.

thoth,
And remember, everyone has been harping on how badly last year sucked. So it's not just significantly down, it's significantly down from terrible!

I'm still sticking to my 35% to 50% off peak prediction even with the mortgage rate correction, but that is making me less sanguine about it (or should that be more sanguine?)

Thoth, May contract data is indeed worse than previous year. Supply (+6.8%) and pending sales (+8.4%) are holding up leaving market pulse, which fluctuates daily, in largely unchanged range for this type of measure.

So if Market Pulse is an indicator of Delta direction, market has been going down, Market Pulse is largely unchanged, how does market not continue to go down?

That would be too strong of an inference to draw in an open financial system. Market pulse stable could also mean stabilization in prices as demand as indicated by pending sales and supply increases are roughly matched for resales.

300: It would be nice if we could see a chart of market pulse over time. I think that would make it much easier to see how it was trending since it is quite volatile day to day.

30Y: Yes, that's what I was thinking as well re: comps to last year. If the stats for the summer months are negative YoY, that would be a horrible sign for the market, because Noah's chart showed last Jun-Aug was horrible - every month was either the worst or 2nd worst in terms of volume over the past 8 years.

The chart is on urbandigs - click below market pulse “expand chart options”. It is not really trending except it has stopped going down (I consider .02-.03 point change not meaningful.

Here it is

https://www.urbandigs.com/marketwide-charts/market-pulse/?agentid=58

Also, listing discount chart at new highs

https://www.urbandigs.com/marketwide-charts/median-listing-discount/?agentid=58

We are still at nearly historic peak, remember.

Some area in Queens such as forest hills, the price is still rising, pretty scary.

Thank you, Noah!

Based on the chart, it looks like market pulse has been on a slow upward trend since bottoming out in January 2019, but it has a bad pattern of setting new lows whenever it tests the previous high over the past 3 years. June is going to be a very interesting month.

I'm not too surprised at the listing discount chart, but I will say that there still seems to be a lot of units out there that seemed to be priced on pure hope rather than market reality. That likely explains this chart and the record number of listings pulled from market.

We are still seeing brokers paying lip service to the state of the market by saying that they are telling sellers that they have to put their asking price below the last comparable sale in the building, that "aspirational pricing is over," etc but continuing to take overpriced listings to featherbed their listings portfolio.

And again, the Market Pulse figures look a little better than they actually are due to record numbers of listings taken off market.

"And again, the Market Pulse figures look a little better than they actually are due to record numbers of listings taken off market."

Great observation and agreed. I would love to incorporate off market into the pulse somehow in the future. Hmmmm

Just spitballing, but you could try a "Market Pulse 2" where you added the off market units to the currently on market units in the denominator?

Problem hasn't been limited to sales price for many sellers, it's been about desirability as well. The emotional component of a purchase is much stronger in a declining market. Buyers are being much more selective and it's not just about purchase price.

harder to fool the buyers?

Keith,
I think part of that is the availability of too many choices. Remember the scene in Moscow on the Hudson where he goes to the supermarket?
https://youtu.be/VHIcmoY3_lE
A couple of years ago people would show up at an open house and say "I'll take it!" before they even got to the bedrooms for fear of losing out. Now, they can wait weeks or months and the property is still sitting there waiting for them.

A classic sales tool is to give people only 2 choices (Would you like to see it tomorrow at 5PM or Thursday at 4PM). The guy who ran the pizza place where I grew up took it one step further: when anyone asked for a soda, he would respond "Big or large?" And people would sit there thinking "uhhhhh...... large" or "uhhhhhh ..... big." Never heard anyone ever call him out on it.
Buyers clearly responded positively to the market where they had almost no choices and I think they are responding negatively to too many choices just like Robin Williams did.

Hmm hmm hmm I like it 30!

Bezos made up his mind!!

Great scene! I'll have to cue that up tonight and watch it!

I have no idea what Bezos criteria were, but I could easily see where they could have led to very few choices (condo, doorman, sole penthouse i.e. actually the penthouse and the only one, decent location - i.e. no highline, Hudson Yards, downtown not really Tribeca, etc)

Bezos must love the PH at the newly developed homeless shelter at billionaires row

I don't think I've mentioned this before (sorry if I already have):
If you look at UD Resupply Pace of 649 for May vs Monthly Contract Activity of 758 it says that new properties are coming on the market 86% faster than units are selling. Which implies that if someone puts their unit on the market it has only about a 54% chance of selling. That is the lowest amount I can remember since about forever. 3 - 4 Years ago the chances were close to 100%.

30 - this may be well-known by other active forum members, and I want to fully-respect your righ to anonymity on this forum, but would you mind giving some detail about your career and market experience to the extent you are comfortable doing so?

There are several posters on this forum who show an tremendous amount of experience and analysis of the market, and you are among that group. It would be interesting for readers like me to have some context to your experience. In the case of some other posters their background is a bit more apparent, but less so for you. Broker, developer, lender, writer, some combination, etc?

As a dealer I have been trading since 1982 - mostly single units but also some packages and buildings. Over 100 deals. I got my Salesperson's license in 1986 and Broker's license in 1989. After about 9 months of being a salesperson I was tapped to manage a sales office. Did that for about 2 years and then moved to where I am now. I've done residential and commercial leasing, residential and commercial sales, property valuation, consulting and expert witness (qualified as "An Expert in the Practice of Real Estate in New York"). Somewhere on the high side of $1 billion in transactions all told.
Is that what you were looking for?

30 - yes, thank you. You obviously have a tremendous amount of experience and insight in the sector, and I was curious how it all came together.

@30 I'll say this, the market did show signs of life 5 months ago. However things have deteriorated, and I don't need to read UD's charts to know that.

I would sum it up by saying, there's a limited amount of buyers chasing a limited amount of what I call AAA or Prime property's. On those properties we're seeing multiple bids at times. On the buy-side we're getting deals done, we currently have 15 deals in contract. I still think it's a good time to be a buyer, be selective and be patient.

However if you're a seller with a mediocre property, for lack of a better word, you've got your work cut out for you. On some properties it's almost like price doesn't matter, buyers are shunning them.

I think I saw a clip in my Google news feed of Ryan Serhant having a bit of a moment discussing the current stresses of the market.

My two cents for what it's worth.

Keith Burkhardt
TBG

I love to see a link to that Serhant interview. I did see one where he was giving examples of properties selling for 50% less than 3 or 4 years ago.

I do have to disagree with you about what's selling. We have been selling a significant amount of grade B or even C properties, and it's all based on price. I think the reason you are seeing what you are is that almost always on the way up lower grade properties out perform prime properties and end up trading at small discounts to prime. Then on the way down, they fall faster and further than prime properties. So what we are seeing is that prime properties which have made small price adjustments have some chance of meeting the new market, but very few of the subprime properties can even conceive of dropping their prices the amount necessary to transact. But the sellers who NEED to transact and are dropping their prices to "whatever it takes" to get a deal done are moving properties quickly because there are buyers out there for absolutely everything but only at the right price. We are moving some not very desirable houses in Bushwick, East New York and fairly seedy areas of the Bronx and West

Westchester, but solely because they are at "the right price."

Plus, it seems like just about everyone who is selling the top end of the market is saying that the spate of high end deals being done are all to buyers who have been sitting and waiting for over a year and they are only pulling the trigger on these deals because they are getting discounts.

I don't watch the show these days, I'm up to my eyeballs in real estate. I believe it's going to be featured on an episode this season.

30yrs_RE_20_in_REO, 54% chance of selling is not bad at all, if a property is not selling, simply pull it off market and relist it, then one of these 2 listings must hit one sell -:)

Even with low interest rates shift seems to be from owning to renting.
https://www.marcusmillichap.com/about-us/news-events/videos/2019/6/4/yahoo

Anton: I know you are joking, but I seriously get the impression that's how some people are thinking. You see the same unit being listed then pulled repeatedly with no real change in pricing. I'm not sure what these owners are expecting.

Thoth, I think they are all expecting Bezos to show up and buy their units outright, but unfortunately there is only one Bezos (two if counting his ex-wife) so these owners would need to form an extremely long line

I'm currently in the market to buy (3BR manhattan) and can speak personally that the decision to own rather than rent seems almost forced upon me due to the inconceivably high rental prices. I'm currently in a 3BR in the UWS and pay $8200. I've searched for over a year and can tell you the inventory at this price point is sparse and undesirable (I realize this is subjective). You have to go up to $10K/month to find a true 3BR in decent condition. When you're paying that much, putting down min 25% on a $2M property seems like the logical decision, even without factoring mortgage interest deductions and "building equity." If you have more than 25% it seems like a total no brainer.

What is the argument for renting vs buying at current prices. The sales and rental markets seem to be moving in different directions and interest rates are low and possibly going lower. Is it the fear of prices falling much further? What am I missing?

Nothing. At the price point and the area you are looking at, it makes great sense to buy if you have more than 5y horizon. Wells Fargo is giving away money at 2.50-2.75 percent 10/1 ARM.

I checked the Wells Fargo rates and I do not see 2.50-2.75% for a jumbo 10/1 arm. I see 3.125% with an APR of 3.709%. If the APR is that much higher than the rate there is origination points.
https://www.wellsfargo.com/mortgage/rates/

And yes rates will probably go lower. The great bond king, Jeffrey Gundlach is pricing in a 40-45% chance of a recession in the next six months and a 65% chance in the next year. People are renting and waiting for a nice bargain.

I have a friend who is doing 2.5% 10/1 arm new purchase. I am doing refi below 2.75. All jumbo with no existing private banking relationship. No points. Around 3k closing cost including underwriting. >1mm mortgage. People calling directly are getting these rates.

Another friend quoted 2.75 by direct call. Has to be 25 perfect down min.

in Rassler's case, he puts down half a million to buy a 3br, the ARM monthly payment say around $6000~$7000, the monthly fee plus RE tax about $3000~$4000, total payment still $1000~$3000 higher than his rent, and it's betting on years of things are in control...

A rate quoted by a lender has to mention the APR.

Street smart, I gave you total closing cost of appx $3k including appraisal and no points (mortgage tax if any extra). Please educate me (and perhaps Anton) what 2.75 quoted rate I/o 10y arm monthly payments are on $1.5mm loan. I can tell you that I got lower refi rate than than for low LTV from Wells.

Rassler,
If over the next 4 years the value of the $2 million purchase falls 20% and you have to sell (for whatever reason) and your transaction costs in and out come to 10%, how much per month did the apartment cost you?

And up 20 percent scenario!!

Streetsmart, If I am going to refi or prepay anyway within 10y, why does APR / index / spread over index matter?

Also, from what I can see, the good condition 3 BRs UWS which are renting North of $10,000 are more in the $2.5 - $3 million range.