Market Firming up threat 2020 version

Yeah for new Dev, that's why we actually put that rule in so listings in contract 1-2 years don't take away from fresh stuff coming in there pipe. Hmm will need to think about this. For 1 Manhattan, hmm, let me check. Ud doing some maintenance now, site will be back up soon

the idea was there are 100s if not 1000s of new dev deals that can be pending and remain pending up to 2 years or more. if we kept them there at all times, all realtime indicators that help us show the market is strengthening or weakening in realtime would be 'less sensitive' - the market pulse would be way different, affected by deals 1-2 years ago and not necessarily how realtime demand is. You know?

This was the logic behind doing this. Same logic for supply when listings are ACTV but agent hasnt updated in 1 month, 3 months, 6 months, or years. There are 1000s of stale listings that are listed as active, but are not really active

300 - re: discrepency in contract listings, thats because the sponsor updated some listings in SE as in contract, but never marked those listings in contract in RLS. Happens sometimes. Ill ask RLS what they can do about it to get a mass update from sponsor

Thank you for looking into it.

Stocks are going on sale, it's been quite a while. After being up just over 30% last year...

We had three clients lock in at close to 2% this week. These are all buyers purchasing large homes for their families. No one's happy their portfolios took a 12% hit over the last 4 days. None were concerned about coronavirus, on their decision to buy a home to live in. One client told me he'd be buying stocks today, runs rather a large hedge fund.

Personally, trying to simply focus on the science regarding the coronavirus, ignore the media. It's certainly a terrible and frightening thing, however the mortality rate remains relatively low. This is not Ebola. Of over a billion people in China, 2700 have died, I think about 77,000 infected?

If these numbers worsen significantly, my alarm level would certainly go up. We have a vacation to Italy planned for the end of June, flying into Milan. Our youngest daughter has type 1 diabetes, so preparing ourselves for disappointment.

Hopefully this virus goes dormant with the rest of the flu viruses as spring approaches!

Keith
TBG

@urbandigs watched your video on credit spreads as a predictor of equity markets direction. Always nice to have another tool in the toolbox.

I continue to recommend your site to all new clients I speak to, and it's wonderful to see how it's grown since I first discovered you. That said most of my clients are already on your site!

If you are a buyer or seller or an agent, ignore the noise and check out Urbandigs.Com

Keith
TBG

Digs, For new development, why pollute total supply and total in contract number by excluding listings in contract for more than 6 months when you have a separate metrics to track number of contracts signed by month?

My feeling is every country save S Korea is lowballing infection rates. USA quarantines sound like an epic fail according to NY Times.

I would definitely expect infections to go up, seems to be a fairly contagious virus. If mortality rates go up significantly, that would be worrisome. For now the vast majority of those infected especially under 60 years old, survive.

Open house report from Halsteads Fritz Frigan:

Here is my recap from the weekend of February 22-23. Sorry for one day delay, I was out of town, just returned last night.

I am not sure what happened, but the attendance went up crazy last weekend, especially in Brooklyn. I heard the rumor that, if you move to Brooklyn, you will be immune from coronavirus , could that be it? :)

The average attendance in NYC jumped to 5.62 per open house. The weekend prior it was 4.19, so this is 34% increase in attendance! (I am seriously worried that you guys are eager to report your numbers when attendance is good, and you are totally shy when you have zero.). Nice increase in surveys received too. We received 277 replies, compared to 239 the weekend earlier. I forgot to check the number of open houses held last weekend, hence no estimate of the number of buyers.

25 open houses reported zero attendance. 9.0%, not bad. When this percentage goes above 15%, it signals slow weekend for all.

The most visited open house mention goes to Sascha Beicken from Halstead Brooklyn. He reported 60 parties at his first open house for his exclusive at 251 Pacific Street in Cobble Hill. Here is in his own words: “The apartment is so attractive because it's on the Cobble /Boerum Hill border and very well priced for a beautifully renovated unit in this location with an amazing shared roof. We received 5 offers, all substantially above ask; if it's priced right, then it's selling now given that interest rates are also still falling. Yes, I was alone and everyone signed in on the iPad. It's not too big a space so it was manageable.” It was an amazing weekend in Brooklyn. If you check the Dataset, the top 8 open houses last weekend were in Brooklyn, the least visited had 23 attendees! Check the Brooklyn numbers in detail below. Last year, on February 24, 2019, the average for all of NYC was 3.78, from 320 responses received. Here is the dataset. Let’s check the action in each borough:

Manhattan – the average jumped to 4.65 per open house, from 3.52 the weekend earlier. Nice 32% increase in traffic for Manhattan. Above average in Soho & Tribeca (6.22), Gramercy Park Area (6.00), UWS (5.51), even UES eked out above the average number with 4.74. Midtown West (1.71) and Chelsea (2.40) on the bottom. See the rest of the numbers below and beware of small sample sizes. We received 221 replies from Manhattan. Last year, on February 24, 2019, Manhattan recorded 3.49.

Brooklyn – totally on fire last weekend. The average jumped to 12.94 per open house, from 8.39 the weekend prior. 6 Brooklyn neighborhoods recorded attendance higher than 10.00 – Cobble Hill (22.20), Park Slope (23.25), Fort Greene (19.33)…. Check details below and beware of small sample sizes. We received 35 replies from Brooklyn. Last year on corresponding weekend Brooklyn recorded 5.95.

The problem with coronavirus is not the fatality rate, it's the combination of the fatality rate and the reproduction rate. 1-2% fatality doesn't sound like a lot, until you realize that you are looking at 0.6-1.2MM additional deaths in the US alone if 20% of the people get infected. The 20% isn't so far fetched because that's the high range of how many people get the flu in a year. And even if people don't get sick, the economic impact is still significant because of all the reduced business activity from the policies governments are putting in place to try to contain the virus.

So Chinese infections 80k. Let us assume they are not telling the truth. It is probably 200k. How do you get to 20 percent of population?

This is 200k when the govt was not taking any measures initially. 200k from 1.4bn people.

This was something that was debated and decided many years ago, around 2010ish. I recall seeing both and we all agreed at that time to do what we did to exclude stale listing. When does it end? What if listings in contract 3-4 years prior and never close. The effectiveness of the measure dropped when tracking real changes. Month to month is highly seasonal, more so than the 6 month pending measure. I'm sure there are good arguments on both sides of this. May review this when we expand our chart system in summer

Keith, damn man, thanks so much for kind words!

Keith, damn man, thanks so much for kind words!

Digs, I understand the removal of listing in contract for more than 6 months for resales as the information is probably not updated but does not make much sense for new developments especially when you have a separate metic for contracts signed in particular month. Too many back end adjustment which are even somewhat debatable make people distrust the metric. New development data already not a reflection of reality as the developers do not list all their inventory. That is why I always talk Resales.

300: I don't understand your question - are you asking how do you get from 80-200k people to 20% of a population? That's simple - how do you think 5-20% of the people get the flu every year? You have people with or without symptoms that spread the virus to other people. It's just math: if you have 1 person that infects multiple people, and that chain continues, you start to grow exponentially pretty quickly. If you have 200k infected, that's a lot of potential people who can infect others.

We'll see if China has truly contained the virus in the next few weeks. Given the fact that coronovirus has been found to have a longer than expected time for when people show symptoms, and there are now people who have shown no symptoms at all that have spread the disease, this is a nasty disease to try to contain. And don't forget China has the ability to enforce quarantines and crack down on people that other governments simply don't have. If they have trouble containing this, it's not a good sign.

That is just paranoia. China would have had many 10s of million cases at 15-20 percent of inflection rate. Some may take Cold sore rate and apply to Corona Virus and come out with 50 percent infection rate.

Separately, I think Powell’s statement today is very meaningful positive for equity market. Let us see Monday.

A big test will be in the second half of March. And no, not because that's when I turn 60, but because the Chinese government has claimed that is when factories will be reopened and while they can fake reported infection rates and even number of deaths, it's a lot harder to fake production especially when you need to export the results.

@30yrs - George asked you a question that you noticeably did not answer.

@George (and @300 Mercer too!): Some posters (e.g. Inonada and 30yrs) will never advocate buying over renting because they do not value the intangibles/consumption aspects of owning real estate in NYC. However, for those with families who DO value those intangibles (@George - remember, happy wife makes happy life! You and my husband can commiserate if you move to our hood), Beekman Place is calling you.

Ha. Nada is in ultra-luxury segment of $4k plus per square ft. So even after 20-30 percent decline from the peak, it doesn’t make sense to buy vs rent after assuming a “ownership freedom premium” of buying of 10-20 percent when you are rich. Another 10 percent down at least in this segment due to excessive supply relative to demand.

@300_mercer: We both know Nada had (much like 30yrs) an NYC real estate Messiah Complex (ironic or, not so much, you tell me)

"Some posters (e.g. Inonada and 30yrs) will never advocate buying over renting because they do not value the intangibles/consumption aspects of owning real estate in NYC. "

That is categorically untrue. And I am willing to bet I have owned more Real Estate than the next 4 top buyers here put together, and owned said Real Estate for more years, too.

Mcr, NADA is very practical and has been very clever to understand ultra-luxury over pricing.

I just got quoted 1.875% for a 10yr jumbo ARM... basically free money if inflation runs 2%. If I can find a realistic seller, maybe Mrs George will be a homeowner.

Nice!! I know Mrs George will win!! A little help from corona virus paranoia is what was needed.

300: it's not paranoia. You are being complacent. Is it a probable scenario? Maybe not. Is it possible? Absolutely. And you don't need the worst case scenario to damage the economy. It's already done that. The only question is how much.

NYC economy has been shifting more and more towards tourism for decades. Not just the overbuilt hotel market (which is still adding tons of supply), but most restaurants, pop-ups and other "experiential" retail, Broadway and other shows, even the surviving retail is geared towards lines for Cronuts and $300 hoodies and less towards the daily needs of residents. A large turn down in travel will wreak havoc on NYC's now highly dependent on tourism dollars economy

So you are forecasting 600k-1.2mm deaths in the US. I say well under 10k in the worst case under 1 percent probability scenario. My expected case 500 mostly older people. Stock market is already reflecting a fair bit of economic damage as it usually moves 3-5x of reality in each direction.

https://www.wsj.com/articles/defaults-are-rising-in-sluggish-new-york-city-hotel-market-11582027204

What do you think about investing in REITs right now?

I've read a number of articles of people that have actually had coronavirus, for the most part it seem like a bad flu or less. Looking at the science, mortality rate seem to be about 1%. But it's the fear that will undo us at least in the short-term. Eventually we will have a vaccine, and let's see how all these cases pan out over the next few months. Non-chinese sources have said cases in China have exponentially decreased over the last few weeks.

I have not seen any research on whether corona virus always existed and a few hundred died every year, no one tested for it, and diagnosis was just bad flu causing complications. We will know more about Chinese case in a week if people cured are far outpacing new infections. The numbers in the rest of the world will continue to increase as more doctors/labs start to test for it.

30, When did you get out of most of your vast real estate holdings?
“That is categorically untrue. And I am willing to bet I have owned more Real Estate than the next 4 top buyers here put together, and owned said Real Estate for more years, too.”

30, Also, I am a small fry in terms of my real estate owned. But genuinely curious when you sold most of your holdings unless you are still sitting in a vast empire of multi-family in Queen and BK.

Putting a foot into commercial real estate through investment in a partnership in a Qualified Opportunity Zone focusing on office buildings and warehouses. Too soon to see results, but the upside was not immediately paying heavy capital gains tax on sale of equities.

Get ready for Fed rate cuts and rent increases buy vs renters!!! Do not think Mortgage rates go much lower even with fed rate cut.

And this coming on top of 33 percent yoy increase in pending sales (Resales) using DIGS data.

Please, I implore the readers of this board (including @300): hear from brokers all the time "well if the Fed cuts rates..." before talking about where mortgage rates are going. It's not exactly the wrong, way to think about it, but consider upgrading your reference point to the 10 year US Treasury yield. It's a lot more reliable and it's priced more frequently. This graph demonstrates the relative relationships on a weekly basis over time:

https://fred.stlouisfed.org/graph/?g=qgeI

Ha. Dean, I know a few things about fed and relationship to 10y rates as below.
“Do not think Mortgage rates go much lower even with fed rate cut.”

300: No, I'm not forecasting 600k-1.2MM deaths in the US. Re-read my posts. I said that's now a possibility, which is one of the reasons why markets started crashing. Before, markets were way too complacent about the virus and thought this would just be a minor hiccup. I anticipate (and hope) the actual number will only be a fraction of that, but there's now a nonzero probability this will be much worse.

Keith: I'm cautiously optimistic about the China data, but I take it with a grain of salt because it's China.

sorry for delay 300..dealing with health issue here that just plain sucks.

So, if I look at our current method of calc new dev pending sales with 6 month exclusion filter, we are at 338. If I took that filter out, pending new dev would be at 874...with inventory just over 1k, that would mean a market pulse of 0.8x or so, when counting the 500+ units that are still marked in rls as in contract from up to 5 years ago. The market pulse as a measure of realtime demand/market strenght would be inefficient and weakened, as deals coming in the front end would be masked by deals signed 1-2+ years ago. We decided waaay back when we built this, that its more important to prioritize the front end of the data stream vs the back end of the data stream. Again, I know there will be those that think differently, but thats the way we decided to go. By doing this, it correctly shows how weak the new dev sector became during this latest down cycle, vs, not showing it correctly if we counted all those "very old deals" that were signed in a diff market

Hope you are feeling. Thank you for explaining the rationale. I assume the listings in contract for more than six months have been removed from supply as well pending sales. To me Market pulse and the two metrics it is based on for new developments should be discontinued as you have no way to know what true shadow supply is - or least, when you time, there should be big bold caveat about issues with the supply number due to shadow inventory and that listings in contract for more than 6 months have been removed. Monthly contract signed is indeed a very meaningful number.

Hope you are feeling better I mean.

Thanks! Supply is 1 year, and we exclude listings not updated in 30 days. Not many of those as rebny mandates updates every 14 days.

Agree with new Dev supply issue. We discussed that and actually didn't have pulse for new Dev in the beginning due to this.. but agents kept asking and we ultimately added it in. That is a valid concern tho 300

For the record, on multiple occasions I have lobbied rebny and rls to require sponsors to create a record of every unit in the offering included in schedule A. Sponsor can of course take listings off market if they choose too, at least we can measure it. Years and years I've tried.. so far nothing

100% agree with that: the minute an Offering Plan is accepted every unit in the building is on the market. Developers "releasing" units is a marketing gimmick to make it seem as if supply is limited and there is some urgency for buyer's. Now I see some developers are listing zero units on their websites and just telling buyers to make inquiries. I assume they are selecting some brokers to whisper what units and prices are, but if that's happening I don't see how that is consistent with just about everyone's claims that consumer transparency is a priority these days.

See new thread.
https://streeteasy.com/talk/discussion/45598-market-watch-2020