[New New] Market Firming up threat

Noah, I assume last few years of historical data has been revised to include that. Meaning some apartment which were still 4 year old 2 years back are now in resales category as they are now 6 years old. So category size in terms of supply should keep on increasing if the same percentage of people list their apartments.

The new data clearly shows the huge difference between new development (for which data is not so meaningful as developers do not release the shadow inventory and sometimes even listings in contact) and resales.

For existing resale, what is the YOY % change in Monthly Contract Activity for each of the last 3 months?

Let's run some numbers:
Based on Market Wide Pending Sales 2505 up 4.3% YOY = increase of 103 sales.

Based on Existing Resale Pending Sales 2180 up 27.3% YOY = increase of 437 sales.

Based on New Development Pending Sales 330 down 23.3% YOY = decrease of 100 sales.

Where is my math wrong?

300 - answer is yes. We updated it exactly as you explain

30 - hmm I'll have to dig into the raw numbers. It's q4 report time and holidays, so more likely early next year I'll check this.

30 - outside of the whole yoy could be different than in it's parts yoy, I think maybe Jan 1,2019 date could be a factor as that is when buildings can switch from new Dev to resale and start point of yoy factors that in. Will look into an answer and file on this to verify

Olshan's 2019 report shows clearly a market having trouble for the last two years (if not longer). The last four weeks have been good, but it seems clear that this is because sellers have started discounting, not that buyers are more active. The long-term trend is negative, contrary to the breathlessly excited emails I've been getting from brokers lately (which continue to erode any trust I ever had in a realtor.)

Townhouses are the one market doing OK-ish, since you can never build another townhouse in Manhattan, but even here, my observation (on the lower end of the market) is that only well-located properties with reasonable property taxes are actually transacting, and often after large price chops.

https://www.olshan.com/marketreport.php

George, Was looking at this an hour back. What I found very interesting that most of the decline in total number of contracts across all categories is explained by decline in new development contracts.

Dollar volume down 32% from peak in 2014 (let that sink in, especially given the huge increase in the number of new construction units on or about to come on the market in this category). The best thing they could say was that Q4 volume was "only" down 7% from last year.

30,
If I'm reading the numbers correctly it looks like the number of Condo resales actually went up (by about 5%?)

BTW I think the reason for Condo resales in this category going up is that certain individual sellers have been a lot less reticent to take losses than Sponsors, driving traffic in that direction (example J-Law's penthouse: https://streeteasy.com/blog/jennifer-lawrence-asking-14-25-million-for-posh-penthouse/ )

New developments priced too high or paid too much for the land or built too high end of a product in terms of views (interior finishes are not a major driver as you can upgrade interior finish quality for 100-150 per sq ft) at $3k++ per sq ft. This will continue to be problem area.

But at some point that becomes the entire market's problem because when these projects get foreclosed on and dumped they make the market. Like the auction for Grosvenor House 22 West 15th St where 1 BRs were sold at $140k to $180k and 2 BRs for $260k to $320k (as well as similar projects/prices at the time).
https://streeteasy.com/sale/1416449 sold and closed for $309,500 2/28/1992

There such a gap between for example $5-8k per sq ft Central Park Tower and resales that even 30-35 percent down in Central Park tower will still leave it too expensive relative to most luxury resales priced at $1500-$2500 per sq ft.

Cooperatives didn't exactly shine. Volume of 222 is tied for the lowest recorded. When new dev condos are down, they can take the whole market down.

PS check out the price history on this listing to see how far designer upgrades can get you in these luxury new construction condos:
https://streeteasy.com/sale/1415919

George,
I've been trying to make that point here for about 2 years but people seem to think the market is so heavily segmented that no one ever crosses boundaries even though in interviews brokers have been actively saying they are getting resale buyers to look at new construction because deals are there to be had.

So 30 percent down from initial ask but still at $5k per sq ft. Most high end resales (not necessarily the same view) are half the price per sq ft. Just a completely different market segment in terms of affordability. I think absolute $ value of properties is a terrible way to draw meaningful conclusions for data.

BTW, George, you seem to keep slamming "all Realtors" for painting ridiculously rosey pictures when one of them seems to be about the biggest Bear on this forum.

That would be dear Anton.

300,
What's you feeling about this (not asking if you have any actual knowledge): did developers always feel these asking prices were pipedreams or did they, at least at some point, think they were actually going to get these numbers?

Personally I think they were fairly confident at some point that they were selling at or close to these asks.

@George - 30yrs was referring to himself. He is a realtor, and I agree with him (and Keith and Ali) that it is not fair to write off the entire profession. 30yrs, Keith and Ali have been on SE for years frequently making statements against interest. I have had also had the privilege over many real estate transactions in different jurisdictions of working with highly analytical and incredibly intelligent individuals who have chosen the field due to sheer love of the industry and the product. I personally feel good about every commission I have ever paid.

I think they knew it was a pipe dream. But they probably didn’t expect more than 10-15 percent cuts as they got excited by first few sales of 157 West 57th which didn’t trade at much discount if I recall correctly.

Look at 432 Park. They never expected to sell at ask. Almost all sale are 15-20 percent off the ask and they still made a killing.

300: You keep focusing on new dev, but Noah's data is pretty clear that the neighborhood has far more impact than whether it's new or existing. The pulse numbers are awful for certain neighborhoods, and whether it's new dev or not has a secondary impact at most.

There are indeed neighborhoods where resales are down more than Streeteasy condo index is (6-7 percent from the 2015 peak) - Midtown east and Fidi. Also anything with expiring/ed 421g. The price decline magnitudes are nothing compared to ultra luxury new development.

Steeteasy condo index.
-It is a fact that market has declined in 6-7 percent in the last few years in an average in Manhattan.
- Expensive resales $3-5mm but price still below $2k per sq ft have declined more but I think they are in 10-12 percent range on an average. I have no marketwide data for this.
- Resales in $10mm range are probably down more but not as much as ultra luxury new development.
- Any apartment needing gut reno is down 5-10 percent more than averages as construction material and labor costs are up 10 percent in the last two years and any one renovating needs to be compensated for their hassle vs when there is not enough finished inventory.

Current level. $1,095,00
https://streeteasy.com/blog/november-2019-market-reports/
Down from $1,1167,000

Current level. $1,095,000

Apparently the biggest drop volume wise in new construction condos is in the under $2 million segment.
https://www.wsj.com/articles/manhattan-condo-market-looks-bad-contract-data-show-its-even-worse-11572522638

300: Saying that some of the neighborhoods haven't been hit as hard as ultra luxury new dev is true, but they've still been hit very hard. Having a hand cut off isn't as bad as losing an entire arm, but it's still very painful. :-) And worse, those markets still have market pulses that are poor, which means there is more pain likely to come.

So it doesn't take a rocket scientist to look at the data over the last few years and recognize the fact, the market has declined since the most recent peak of 2014. So now what?

Very few people on this board recognized the market was going to start charging forward in 2009, many here thought the market would continue to fall due to all sorts of 'facts'. Bear/bull is all bs, unless you can provide information within a very specific time frame so a person can act on it. Very few can, probably count the number on one hand. And usually they're only right once or twice in a lifetime.

You absolutely do not have to know a specific timeframe. If you could tell anyone "the market has been going down slowly for 4 years, but it has been slowly. That is going to accelerate and although the market as a whole is only down 5% to 10% now, it is going to end up down 35% to 50%" almost no one is going to say "oh, but since you can't tell me exactly when that's going to happen I'm buying anyway."
I know the counter to this is going to be moving the goal posts by saying "but you can't say for sure the market is going down 35% to 50% " but that's the standard obfuscation for this argument.

In 2009 30, did you think the market would continue going down or was ready to turn up? What were you predicting then?

"If you have the facts on your side, pound the facts. If you have the law on your side, pound the law. If you have neither on your side, pound the table."
Keep pounding.

And you still haven't answered the question.

Have a great New year everyone! I'll be back in 10 days.

Best,

Keith Burkhardt
The Burkhardt Group

Here's the year-end open house report from Fritz:

Good morning Halstead Open House Index followers!

I don’t know where my head was yesterday. I kept on writing in the statistics part “since October 2018……..” – no one caught this?

We started this project in October 2017!! Hence, I am repeating the statistical part here, corrected:

"For all of you with patience to read all the way to the end of my weekly report, I am sharing here some statistics

· There are 24,123 open houses in my database, we started recording this since October 8, 2017.

· Since October 8, 2017, the average attendance on Sundays was 3.22. On Saturdays it was 2.99

· In 2019 alone, the average attendance on Sunday open houses was 3.16. On Saturdays it was
2.68.

· For properties above $5M, average attendance in the last two years and three months was 1.76. In 2019 it was 1.60.

· For properties above $7M, the average attendance in the last two years and three months was
1.65. In 2019 it dropped to 1.17.

· In Manhattan, the average attendance since October 8, 2017, was 2.92. In 2019 alone it was
2.88.

· In Brooklyn, the average attendance since October 8, 2017, was 4.25. In 2019 alone it was 4.08.

· In Queens, the average attendance since October 8, 2017, was 4.39. In 2019 alone it was 4.04.

· The average attendance for all first open houses since October 8, 2017 was 6.12. In 2019 alone it
has climbed to 6.64. I find this very interesting. It seems that the number of buyers who “saw it
all” have grown, and they are eagerly waiting for new properties to hit the market. For me, this
is another signal of the pent-up demand, that will improve the market in 2020 (pending no
some unforeseen madness on the political scene in the US).

Overall, the above numbers clearly show that the open house attendance dropped in 2019, compared to previous year. Was this a clear signal that the buyer’s demand dropped in 2019, as compared to 2018? Is open house attendance clear indicator of the buyers’ demand? I think so, but would love to hear your thoughts.”

And, as an extra bonus, for putting up with my hastiness, I am including this chart for all of you:

I wish you all the best and Happy Holidays! Thank you for participating in Halstead Open House Index project and have a joyful 2020, with your open house attendance always above the average!
Best regards,
Fritz Frigan
Sign Up to Receive Halstead’s Open House Index Report Click Here

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Do people always slam all car dealers?

https://www.wsj.com/articles/manhattan-real-estate-didnt-have-a-good-year-11577631600?mod=mhp

https://www.nytimes.com/2019/12/27/realestate/the-year-in-real-estate.amp.html

"For the year, closed transactions for all condos and co-ops was expected to reach 10,400, with sales totaling $21.2 billion, slightly lower than the 10,531 transactions in 2018 and $21.8 billion in sales, according to CityRealty. New-development sales edged higher, to a projected 1,225 totaling $5.8 billion, from 1,108 and $5.3 billion. Still, it was a far cry from the 1,848 sales totaling $8.9 billion in 2017."

And to kick that dead horse again, 9,000 new condo units selling at a rate of 1,225 per year = 7.35 years of inventory even if not a single new project is started.

“The issue is that the consumer feels the market is going to decline further,” said Pierre E. Debbas, a managing partner at Romer Debbas, a real-estate law firm that has represented condo buyers in Hudson Yards.

“What’s going to create urgency? A reduction in pricing or concessions,” he said. “That’s it.”

Thoth,
Re: neighborhoods/Fidi:
With a number of new projects slated to hit the market in 2020, including the mammoth One Wall Street (560 units, >1,200,000SF - more than double 220 Central Park South, about equal to Central Park Tower) there are going to be Thousands of unsold new construction condominium units in FiDi.
According to Urban Digs, the number of contracts signed on new construction condos in FiDi last month, December 2019 was ......... ONE!!!
(Same number for closed sales in October, too!)
https://www.urbandigs.com/newdev-charts/financial-district/

Something I don't understand:
There were a slew of reports about a mini-boom/"flurry of activity" in December, but at the end of the day the number of contracts signed was actually down 4.9% vs November (and in anticipation of someone saying that it was up 15.5% YOY,
1. That's not what those reports were talking about, and
2. At the pace of 716 per month/8592 per year, Contract Activity in January will have to increase 50% to really indicate a recovery).

30Y: But the existing market in FiDi is also in a bad spot, which is why I think the narrative that the problem is New Dev is misleading. The market pulse for Existing Dev in Fidi was 0.26, which is actually lower than for New Dev for all Manhattan at 0.28. That 0.26 is actually +86% from last year, which seems like good news, except it's been driven by a -18% on $/sq ft and +33% on median listing discount. In other words, price had to drop by a significant amount to drive mediocre demand. This is in-line with my anecdotal data, where the units that actually moved into contract in Q4 were priced at major discounts.

WIll be interesting to see how the properties that relist in the Spring price themselves.

30Y: Also, thanks for the NYT link. I thought this part was very much inline with how I view the market:

NYT: The urgency to buy remained largely absent in 2019, as it was the previous year. Listings continued to linger until sellers lowered prices or offered other incentives. Just over half of all properties sold below asking price, Mr. Miller’s data found, while only 6 percent exceeded the price. At the market’s peak, in 2015, nearly a third of all sales had sold above list price.

“We’ve had a bit of a correction, and prices are still correcting,” Bess Freedman, the chief executive of Brown Harris Stevens, said, adding that at all price points “buyers are looking for value and they’re almost insulted if you overpriced.”

Correct me if I'm wrong but think that was also the article that pointed out that even though everyone has been screaming that it's only the ultra-luxury market having problems that in 2019 the under $2 million segment did worse?

Urban Digs resales data looking much better for market overall. Pending sales +23 percent YOY. Market Pulse .44; +16 percent YOY. Some neighborhood such as UWS and Village doing much better than others as in Fidi. Let us see what Market Pulse looks like in a few weeks after Jan listings.

Upper West side (ex Manhattan Valley and Lincoln center) Market Pulse at 0.65. All Upper West side 0.53.

New Development data is much worse that the urbandigs number say as at least half the inventory is not listed. Hence, I only look at resales which is fairly meaningful and reflects market impact of new development unsold inventory.

UD numbers still don't add up:

New Development Pending Sales 288 @ -24.6% = 94 sales down
Existing Resales Pending Sales 2,181 @ +22.9% = 406 sales up
Market Wide Pending Sales 2,465 @ +7.7% = 176 sales up
The absolute numbers only off by 4 sales (288+2181=2469) but the percentages appear to be significantly off.

Perhaps if we could get those 3 numbers for 1/2/2019 we would have a clearer picture.

Will get you some raw data on this and let's dissect it and figure out what's up. Just need few weeks to get past q4 that's now done and few new projects we inked. I know there is a valid reason for this

How does inventory compare year-over-year for resales?

One factor that I wonder about when thinking about the market is how usable a lot of this new development inventory is for many buyers. While I hear about the "great deals" that people can get on new inventory, when I look at the actual inventory a lot of it is extremely unappealing for many families. It seems to be trying to sell itself on the basis of being shiny and new. When looking at family-sized properties, I found very little new development inventory that was of interest to me.

TeamM, Curious what you consider a family-sized property? I would think a large 3 bed room 2000-2500 sq ft or a 4 bed room with 2500-3000 sq ft will certainly meet most of the needs of a family with 2-3 kids. There are many new developments in decent areas with this size properties starting at $2500 per square ft.

For example, what do you think of something like this?

https://streeteasy.com/building/the-astor/1120

TeamM,
Month-to-month inventory is down 16.3% which I think is kind of staggering. And it's not because of strong sales, it's because people are giving up. Yet still YOY inventory is still up 5%. And that doesn't count for all the listings expected to come back on the mark soon.

Look at Off Market: the number of listings taken off the market just in the last 6 months is coming close to the number of units currently on the market. And most of the units taken off the market because they couldn't sell over the last 4 years are coming back on the market at some point. So in addition to inventory still being up, there is probably upwards of another 400% just waiting to come back on at some point.

And that's just Resales - it's not including the 9,000 units of unsold new construction condos.

30, Do you happen to have a link to actually Jonathan Miller report (not NY times quote) which breaks down the 9000 by area and finished and unfinished. Streeteasy report put this number city wide much lower at 4000 (finished only) of which 600-700 was 1 Manhattan Square alone.

streeteasy.com/blog/nycs-unsold-condos

streeteasy.com/blog/nycs-unsold-condos

New devs aside, I am seeing things in the dismal market I am following (1 and 2br/1 bath) in far midtown east continue to go into contract at a steady pace at flat/not unsustainable loss listing prices (still need to see actual closing prices if board approves whatever any given contract price is).

sorry trying again
https://www.google.com/amp/s/streeteasy.com/blog/nycs-unsold-condos/amp/

I don't think he has such a report, but it's not a one time quote: he's said it numerous times to numerous sources.

And if you think only totally finished condos can be considered on the market and ignore buildings like Central Park Tower and 35 Hudson Yards which are actually on the market now, but also buildings which are close to completion but being intentionally held of the market like Lantern House then there's nothing I can possibly say to disabuse you of that delusion.

I am fact based and clearly stated that Streeteasy is only finished inventory and included a link to the report.

What you wrote was:
"Streeteasy report put this number city wide much lower at 4000 (finished only) of which 600-700 was 1 Manhattan Square alone."
But the "fact" is that "this number" doesn't refer to finished units only, and just because you parenthetically say it does all you are doing is obfuscation.

Wow!! it is so easy to put you over the edge. Not my intention. I clearly stated the difference in what the Jonathan Miller quoted number without a report included and Streeteasy number with the report linked includes.

30yrs - I don’t think 300 is disagreeing with you; I think he is just wants to understand methodology/source/underpinning for the 9000 number. I think you both are in agreement that there is likely quite a bit of unfinished inventory in the shadow market; the question is the magnitude of that inventory. I think you both agree it is probably “a lot,” so not sure precise number matters that much.

And @300 - In the SE Blog you postes, I believe there is support for over 5000 inventory in the unfinished condo market per second to last paragraph, so 9000 seems like number, broken down as 4000 in finished inventory plus additional 5000 in unfinished inventory?

Mcr, 9k may be correct but no way to verify without a report less listings which are or were in contract at time of report publication, or have closed since with adjustment for double count of contract and actual sales. Streeteasy report is very good one and hope they update it periodically.

And 30 went into a tizzy despite never caveating his statement what 9000 unsold entails. How many years into the future are we looking? Are the units in contract counted as unsold etc? I do not intend on making him or any one “lose it”.

“And that's just Resales - it's not including the 9,000 units of unsold new construction condos.“

300 - that new Development you linked is exactly the type of apartment that I don't think is well-suited for a lot of families, in part because it is essentially one living area + bedrooms and bathrooms. Some variation of that is what an awful lot of the new development is, while a lot of similarly priced resales are divided into various other configurations that I think are more practical for many families (e.g., a den, dining room, separate kitchen, etc.).

I am sure plenty of families make that configuration work, but when you are spending $6mm+ on an apartment, I think many families would be looking for something different.

I see. Thank you for clarifying. Most people will use the 4th bedroom as a den / library and in many cases depending on the layout, kitchen or kitchen and dining area can be closed off. But the entrance of the kitchen will be from dining room in most cases. The Apthorp and Belnord on UWS have some resales / new conversion with the type of configuration you are looking for. Also some in 20 East End.

https://streeteasy.com/building/the-apthorp/2h?context%5Bcontroller%5D=%23%3CBuildingController%3A0x000055592f605260%3E&context%5Bcurrent_user%5D=1004028&hide_if_empty=true&section=sales

https://streeteasy.com/building/the-belnord/806

https://streeteasy.com/sale/1309636

Once you start putting up and tearing down walls, it seems to defeat a lot of the supposed benefits of new development + it adds to the cost, and query whether the flow of the apartment is appealing afterwards.

Living and Dining rooms are indeed combined in most new developments. Putting up a wall is fairly low cost (less than 10k with doors and finishes) if the layout and HVAC works. Moving the wall is a lot harder.

Back to the tiny market segment I am following. We are getting a lot of showings, and I continue to see competitive listings going into contract on an every-other-day basis (which surprised me for this time of year), so we are keeping our listing active, but good friends just gave up and took theirs off the market because they are convinced that apt is worth more to them than it appears to be to anyone else at the moment (theirs is a family apartment and has been listed for over a year; they will not go below 2.2).

FWIW there were quite a few years where this time was the busiest. My hypothesis is that it was fueled by people with bonus money burning holes in their pockets and that pool was the largest at the beginning of the year and dissipated as that money got spent.

Good luck MCR! We also had a very hectic and busy last 3 weeks of December which is carrying over to January. We did three deals in the end of December, have two current accepted offers and two offers out as of January 1st. I've also spoken with at least half a dozen new buyers over the last few days with two more call scheduled today.

Another note, I spoke to a friend who's a banker at BofA, their number one mortgage originator for the United States. He's been swamped the last few months, but mostly with refis. He mentioned the last few weeks he's been very busy and it's been all new mortgage business.

Before 30 wants to throw some cold water on this, I acknowledge this is a very limited data set to be taken with a grain of salt. Let's see what the next quarter brings us. But the Burkhardt Group is very busy, for what that's worth. Personally I have yet to experience a very busy January in both bull and Bear markets. January, in my experience has been a time when people recalibrate. But again that could just be my experience, I personally don't have any interest in digging up charts to compare January's over the last few years. Maybe someone else here can do that?

Keith

Thanks Keith - I am focusing on your happy thoughts as we head into the New Year. :-)

Some sellers are adjusting to the market, so transactions are happening. That's a happy thought, right?

George: I think whether that's happy or not and for whom depends on the price. I saw a listing recently go into contract at what looks like a 2010 price. We'll see where it actually lands when the dust settles, but that was a bit of an eye opener.

Thoth, Was it a 421A abatement expiration (you would expect these to underperform the market by at least the amount of abatement plus some interest) or no major change in real estate taxes?

300: not a 421A but a 421G.

Thank you. About 10y of taxes plus carry as expected under performance if the 421G just expired. So roughly numbers $1.25 per sq ft per month tax advantage x12 x 10 *1.25 carry factor = Appx $175 per sq ft.

Perhaps only $150 per sq ft as it is only 8-9 years since the sale. Carry natural depends on how cash strapped the buyer was.

Speaking of "back to" prices:
https://streeteasy.com/sale/71003

Land lease among other things.