Manhatran listing inventory breaks 9,000

Onward and upward!

As always, the vast majority of those 9K are inexpensive. Bluntly, I do not believe the widespread narrative that the implosion is clustered at the high end.

Claims I do believe:
* low end transactions are still happening at a fair (though not good) clip, unlike the high end which screeched to a halt
* historically cheaper homes in Brooklyn & Harlem, particularly those with backyards, have seen strong sales and perhaps even some appreciation
* average "discount from last ask" is still less than 10% in prime neighborhoods
* low end units almost never see sudden 75% swings, like that $50M place that sold for $12M, unless the entire building goes BK

However, these facts do not support a claim of low-end market health. It's the age old fallacy of looking at what's easy to measure instead of what's important to measure. Unless you stand to profit from transactions themselves, what you care about is *equilibrium price level*.

Aggregate closing stats like median price or PPSF are worse than useless. All they tell you is *where* transactions were clustered, i.e. whether the things that traded in July were more or less likely to be in traditionally-expensive buildings. They tell you nothing about valuations / price level.

What about "average discount"? I'll admit it hints at per-unit valuation...but when there's only 1 contract for every 14 listings, stats about the 1 will not tell you an accurate picture of the price level of the other 13. If anything, the opposite is true: it tells you that the 1 is an outlier on the left tail!

To assess the market-clearing price level, I think you have to look at same-unit resales. The following involves a little cherry picking (two price segments of one neighborhood) but not a whole lot (I sorted by date, not by discount %). The picture that emerges is one where we're 35%+ off the peak, or equivalently where 15yr of appreciation might soon be erased. Quite different from the picture you'd get by looking at the listing prices of everything that's NOT selling and blindly subtracting the 8% "average discount" from them.

Under $1M

https://www.urbandigs.com/building/55-wall-street/614/ - closed for $868K in 2006, $540K in 2020

https://www.urbandigs.com/building/56-pine-street/15d/ - closed for $600K in 2005, $535K in 2020

(continued in separate post to avoid spam filter)

$1-2M sector

https://www.urbandigs.com/building/15-william-street/25a/ - 2008 contract signed at $1.92M, broke & eventually closed for $1.5M in 2009, only to close at $1.45M this August

https://streeteasy.com/building/47-walker-street-new_york/4b - listed for $3M in 2016, entered contract at $1.9M, just broke and relisted at $1.8M

Remember, every trade in this market is an outlier that happened to poke through the fog. The only way the silent majority hits their bids simultaneously is if they cut even deeper. (Or wait years for the fog to clear.)

Re: median price of deals.

Let's say there was someone looking to buy at $2 million starting January 2018. They decided the market was overpriced so stopped looking after 2 months. They went back to looking in January 2019 with the same result. Again in 2020 but this time COVID-19 cut their search short. But last month they found something they thought the price was appropriate and signed a contract. What price do you think it was? I say odds are probably at the same $2 million as they had been looking at before.

So whether prices are down 5% or 25% their purchase can in at the same amount, they just bought more apartment. In the short term median price of transactions tells you a lot more about the financial health of the buyer pool than how much same unit sales prices have moved.

For people who are buyers of Coop/Condo units in Manhattan, I don't see evidence that their financial positions have changed much. If anything there is still upward pressure due to low interest rates. But unless someone has come up with a great refute to Keynesian microeconomics, the huge gap between current supply and demand really points in one direction for prices.

RichardBerg,
I don't know if you've seen the threads where I predicted the market was going to fall 35% to 50% and what the reactions were.

I have argued in other threads and will argue here that FiDi sort of doesn't count. To take buildings that were converted with 421-a (or 421-g) abatements and to compare their price performance over time is to ignore the effect of those tax time bombs , which is fairly significant.

One has to adjust 421-a for tax savings as a minimum assuming some rate of return. And then there is a new development adjustment - in my view (debatable naturally), people pay too much premium for a new development over a substantially similar 5-10y old condo.

Ali
Can't you make the same argument for much of Midtown West, Dumbo, Downtown Brooklyn, LIC.....

It's really an argument that these tax abatements are somewhat of a scam only benefitting the developers and not bringing long term gains to the City as claimed. I understood the need for them when NYC was offering City owned lots for $1 and still couldn't get anyone to build. But now all it does is give speculators an extra percentage on selling buildable SF to developers.

@30yrs the story of the hypothetical $2M buyer is a great illustration.

Mainly ranting against Noah & his podcast guests. I'm glad that he publishes the data for us to pore over, but the commentary that comes with it is often bogus IMO.

Noah and John have different interpretations on some stuff than I do, but I wouldn't be moderator of the forum over at Urban Digs if they weren't open for discussion.

I appreciate Richard's point that current market data show only a small fraction of the market - the fraction that involves a completed transaction. In a normal market where most inventory sells in 30-90 days, the data are quite reliable. Now they are not, but I don't think most people appreciate that. Richard's was a good explanation.

I've said before that it's a lot easier to buy in a rising market than a falling market. In the rising market, all properties eventually transact because the overpriced properties find buyers once the better-priced properties sell, so you learn the market price of every property as the market rises.

As a corollary:
Back in the early 1990s, almost every 1 BR sale at 250 Mercer St was $125,000 to $150,000 (most towards the lower end of that). But for every sale, there were another 5 to 10 listings which would have taken the price the last one traded for. And you couldn't pick which one was going to sell next because they may have been different, but you couldn't necessarily say the one which sold was "better" (whatever that means). So just because there were units trading at that number, it didn't mean for sellers that there was a ready market at that price. As a result we passed on several deals there which on their face looked like attractive spreads.

Streeteasy pegged inventory at 10,639 this week.
https://streeteasy.com/blog/august-2020-market-reports/

The inventory keeps building. There is over 10,900 listing for all Manhattan on StreetEasy and Urbandigs should be above 9,500 on the Friday weekly update.

At this point, only two weeks into the fourth quarter, if your property is on the market in Manhattan at the current 150 contracts per week run rate, you have less than a 20% chance of entering contract by end of 2020.

What was the UrbanDigs all-time high inventory number during the global financial crisis? We must be very close.

That run rate projection assumes no further restrictions or lockdowns during second wave.
Look at what’s happening in London & Paris (who arguably handled better than US/NYC originally)..

I could easily see in-person showings pausing again plus more people leaving city.. slowing sales rate and increasing supply.

Last high in supply was in the 9600s.. in March 2009. We are close

Please note that our supply excludes stale active listings, those where the agent didn't update the listing in mid than 30 days.

Sorry for not participating as much as I would like here. Health, dev updates coming and other stuff.. but hope to come chime in more once we get past this next rollout. 30yrs knows.

Cheers to all in these crazy times.

Noah, I hope your health recovers!

Noah, I hadn't realized you were facing health issues - wishing you a speedy recovery and thank you for providing some much needed transparency in NY RE.

As a simple thought exercise, if you go by SE numbers, then Manhattan inventory is back in the 2010-2011 range (one caveat - SE's sales inventory data doesn't go any further back than 2010). Their price index is only back to the 2014-2015 range, so perhaps that's indicative of how much room there is to fall. That would imply another ~15-20% drop left to go.

The current SE Index level already suggests anyone who bought over the last 5 years has lost all their gains, even ignoring transaction costs. If the pricing eventually matches the inventory or even gets halfway there, things start looking ugly.

Thoth, you can set the date range for the price index to go back further.

Here’s an official vacancy rate, no speculation needed — Symphony House in Midtown West-ish is at 35%. Wouldn’t stun me if buildings in more residential areas of Manhattan had vacancy rates of half that. Either way, 15-20% vacancy is fairly catastrophic for a lot of these levered buildings, should this weak demand persist.

https://therealdeal.com/2020/10/16/richard-ruben-accuses-jonathan-resnick-of-usurping-control-of-midtown-building/

Best wishes, Noah!

@Inon Yes, but I can't set the inventory past 2010. Can't do simple price to inventory level matching without that data.