Urbandigs: Market continues to improve - Feb 21

Even $4mm+ deals very active. I guess that part of market wasn't as active in Dec/Jan and is just waking up. So far, I am thinking that it is just making up for for very few deals during the summer.

https://olshan.com/marketreport.php

Welcome, FP! I think we all agree on a tiny movement one way or the other, which makes this the perfect wager: the stakes are meaningless.

300, yep I saw they use ARIMA. They used to follow Case-Shiller and do 3-month averaging, described decently well in a whitepaper. No clue what they do now.

They claim it is substantially similar to Case Shiller but threw in ARIMA. I would think it is still pretty close to 3m averaging.

Manhattan apartment discounts may be ending soon as sales soar 73% in February

https://www.cnbc.com/2021/03/04/manhattan-apartment-discounts-may-be-ending-soon-as-sales-soar-73percent.html

Manhattan apartment discounts may be ending soon as sales soar 73% in February - CNBC

https://www.cnbc.com/2021/03/04/manhattan-apartment-discounts-may-be-ending-soon-as-sales-soar-73percent.html

That inbound migration seems to be real for now !! We will know the truth by the year-end in prices.

Let's go to the video tape!
Market pulse: 54
Weekly contracts signed: 322
Some excellent perspective from Noah and John along with some new very interesting charts.

https://youtu.be/QSbXapmIYqs

I remain cautious as the current action may be make up for some of dead time last year but I can’t get any good deals on diamonds in the rough (real rough). So I have to defer to the numbers.

It's great that the market is clearing. Buyers and sellers agreeing on prices does NOT mean that the market has to go up, down, or sideways. The tailwind of low interest rates may already be coming to an end. The animal spirits will be dampened with the 10 year at 1.6, the ARK Innovation ETF down 25% this year, and the 30 fixed back above 3% and zooming higher.

The speculative short position on US treasury securities was the highest than any week in history. I would expect a large rebound soon. Interest rate will remain low for long time

I think it all depends on the extent of the nova variants taking hold.

Interestingly, there is still zero inventory upstate. Near where we are, there is only one property that has come on since October that would have piqued our interest. It was listed end of January and was “pending” within 3 days.

Yourname, Are you still looking in Manhattan? If so, appreciate your thoughts as a potential buyer on what you are seeing.

NYYH/UWSer,
1. What do you see as the upper bound for 10y yield before Fed steps in with twist or outright buying? My thoughts are that they are ok at 1.6 percent.
2. Is there not that much mortgage hedging as Fed holds a large chunk of mortgage backed securities and they don’t hedge?

30 yr FRM and 30 yr FHA both up over 50 BP in little over a month but people should feel free to keep saying what is actually happening can't happen.

It’s hard to say exactly where the Fed’s pain threshold on rates will be breached because it likely depends on what rates level starts to cause real dysfunction in equity markets. Right now we’re not there, and I don’t think rates under 1.7% or so will trigger the Fed to act. Once you start to get into the 1.75-2% range in the 10y yield is where you’ll see so much pain for equities that the Fed may step in. If they don’t extend SLR relief at the March 17th Fed meeting, I think you’d see 10y yields in that range pretty quickly. I would expect some sort of SLR relief to be announced, though. Real yields (TIPS) will also play a role here as the Fed will not be able to handle real 10y yields even approaching positive territory for a while, but that market is starting to get more illiquid as the Fed owns >25% of outstanding TIPS so it becomes less reliable as an indicator. The Fed doesn’t want to do yield curve control but since the other endgame option is the US defaulting, I don’t really see anything else as the ultimate likely outcome. BofA put out a note agreeing with this yesterday afternoon.

I’m not an expert on the mortgage market but the general consensus seems to be that the US economy is so dependent on home prices rising that the Fed can never allow a significant and sustain rise in mortgage rates. They also post-covid can’t allow a sustained rise in bond yields, so this all just fits the same playbook.

The Fed will step in, 30yrs. Never mind the ongoing buying at the rate of $4T/yr, including the $1T/yr in mortgages. They’ll really step in now.

I'm starting to get a ton of calls and emails from various mortgage brokers etc trying to get me to refi my mortgage in Nowhere, which is barely 6 months old and was issued at about as good a rate as has ever been offered. 6 months ago, nobody would touch refi because there was so much $$ to be made in purchase origination. Something has changed.

I tend to think of NYC's "normal" non-luxury apartments as being fairly closely tied to property taxes, the SALT deduction, income taxes, and mortgage rates. These four factors all matter for enabling a run-of-the-mill $250-500K income family to afford a $2-4 million apartment here. Right now three of the four factors are going in the wrong direction. (The SALT deduction is automatically restored in 2025.) Something has to give, and that something is prices.

Uws, Thank you. Continuation of SLR relief will indeed be interesting to watch. I would think they extend it as it lets banks buy short term US debt without punitive liquidity charge and effectively do some QE for the Fed.

Nada, What is another trillion $ when you are monetizing debt and Congress wants to spend?

300 - no, since we bought upstate we’ve completely abandoned our search in nyc, though I’ll check in here on the forums from time to time to keep current.

I’m in the office in the city (midtown) about 30% of the time, working remotely for the balance. Our firm has already reduced its office footprint. I don’t mind the office now, frankly, given how quiet it is. I am not looking forward one iota to returning to a busy midtown, crowded streets and subways, etc. Weirdly, that frenetic vibe holds no appeal for me anymore. I do miss live music though.

If we do end up buying in nyc, it’ll be a smaller place for sure. And there’s zero rush to do so.

Youname, Congratulations!! I am glad you are liking it. Upstate is indeed very nice and quiet. Rhine beck, Poughkeepsie etc.

It looks like there is some federal money coming to NYC and NYS in the new stimulus bill. Probably enough to cure most of the budget deficit for NYC. Likely takes significant increase in property taxes off the table. So that leaves rise in rates as the biggest risk factor.

A sustained rise in rates is not a real risk factor. The Fed will simply not allow it as if it happened we’d have much bigger problems than the housing market.

What areas do you think will appraise more?

While in areas like the uws, ues or midtown you can find similar prices than 2011-2014, on Harlem or north Manhattan you see 50-100% appraisals... Should we expect these areas to fall in price?

If inflation is higher for longer, the Fed's options are much more limited. There is a cozy consensus that rates won't or can't rise. I was no Chicken Little on inflation 10 years ago, but I'm a lot more worried today. The economy was already roaring before adding a $1.9 trillion blowout of deficit spending.

As for NYC's bailout, never underestimate the ability of progressive politicians to waste money and raise taxes. I hate Cuomo, bit of he resigns, the replacement could be far worse. And the people running to replace Blas seem like progressive idiots across the board. Hard to avoid feeling like the state is doomed.

Altogether, I continue to see prices moving sideways for the typical $3m Manhattan apartment.

1.9 trillion in targeted fiscal stim to those who will likely spend it fastest is unprecedented. While I appreciate Powell's logic on inflation averaging out, Fed has already underestimated how fast macro indicators are accelerating. What else will he be wrong on ? Sure Fed can force rates down but that can only make the problem worse if inflation actually starts heating up. Wont be comfortable for Powell/mkts if we see 10 go near 2% in the next few months.

RE: "These four factors all matter for enabling a run-of-the-mill $250-500K income family to afford a $2-4 million apartment here."

Hello everyone, I'm curious if anyone has data on what the median income is for home purchases in this (2M-4M) price range. I struggle to think how anything other than the 500k income / 2M apartment situation works. Unless we are talking about childless families, I don't see how anyone south of 50 with that income would have the liquidity and monthly cash flow to afford such an apartment. Life is expensive... private school, taxes with no SALT deduction, carrying costs, 500K really isn't very much. Not that anyone should be complaining at this level, I'm just wondering if a 2M+ apartment is feasible on that income. Thoughts?

“One of our main investing points in the world today is looking for assets with limited supply. And my favorite one is New York real estate. The pandemic brought a lot of questions, the mix of people in the city will probably shift – with billionaires moving to Florida – but I’m confident demand will still be there, with the safeguard of not having sudden supply increases. Covid also created an entry point, after years of rising prices; I won’t risk saying when prices will go back to climbing the way they were before the pandemic, but if you’re a good negotiator and patient, it’s a good moment. In a time when rates worldwide will remain close to zero, it’s the kind of investment that gives you 6-8% return above inflation that you can also boost through leverage."

"it’s the kind of investment that gives you 6-8% return above inflation that you can also boost through leverage."

An interesting statement considering at today's prices most condos in NYC are trading at a 2% or less cap rate.

Wow, I stand corrected. And here I thought comments like that were a thing of the past decade...

NYYH, What is the source of the comment? Or is this what you are thinking?

source:
https://www.bloomberg.com/features/how-to-invest-a-million-dollars/?utm_campaign=instagram-bio-link&utm_medium=social&utm_source=instagram&utm_content=business&sref=1nh6v8wc

In Manhattan, it will be hard to get inflation plus 6% without leverage.

Digs data continues to be bullish. Is it just catch up of lost sales or sustainable? I think we will know by the end of April. It seems like anyone wants a vaccine will get one by the end of June. Mass vaccination sites I was dreaming about, finally started with the increased supply of vaccines.

https://www.youtube.com/watch?v=zi9zfyJ5G28

The statement that Off Market is down is misleading. Yes the weekly number of Off Market is down, but so is the number of new Contracts Signed. If you are going to use cumulative metrics like Pending Sales or Market Pulse then the apples-to-apples comparison is Off Market and that number is up Month-Over-Month, Year-Over-Year, and I think might be at an all-time high or close to it. When have we seen the ratio of Off Market to Pending Sales at 1.36 before?

And yes I'm not counting the number of Off Market during last year's market shutdown. If you want to include that period we can come up with all sorts of annual numbers which make the market look terrible.

What would be market pulse change yoy if you included off market in denominator?

For resales market pulse after some sake I get, YOY increase of 24% (0.26 to 0.32). So improvement in this metric even if you include off-market. As I mentioned above, there is some catch up effect of lost sales but we will know in a month as off-market will have had a chance to come back to the market with a lot more people getting vaccines.

Listings 6115
off Market 4422
Pending 3361
Market Pulse 0.55
Market Pulse Off 0.32
YOY Listings 11.10%
off Market 26.10%
Pending 45.10%
Previous Year Listings 5504.050405
off Market 3506.740682
Pending 2316.333563
Market Pulse 0.42
Market Pulse Off 0.26

Year To Date Contracts Signed vs Year To Date Off Market (As of March 13)

2014: 2520 / 752
2021: 2646 / 2132

So the odds of a unit leaving the market because it was pulled due to not selling in 2021 is 270% higher than in 2014.

So panic finished and people decided no need to sell? Total off-market in Resales is more or less unchanged in the last few months.

I think it's too early to decide if off-markets are going or staying. Five-sixths of New York is not vaxxed, buildings still are generally not allowing open houses, etc. These numbers will have a lot more meaning for me two months from now than they have now.

ali r.

Agree. We need to see the cross-currents stabilize. By the way, the number of New Yorkers vaxed with a one dose or more is much higher at 22% and this growing fast with JNJ mass vaccination sites. Click on the NYC adult population tab in the link below.

https://www1.nyc.gov/site/doh/covid/covid-19-data-vaccines.page

about that rising property market, um, yeah...

https://nypost.com/2021/03/14/ny-legislature-proposes-nearly-7b-in-new-taxes-on-wealthy/

George, your posts seem to be the epitome of talking your own book. Just because you’ve moved to “Nowhere” doesn’t mean that an increased tax on dual income >$2mm is going to overcome all the bullish pressures coming from ultra loose monetary policy, NYC quickly reopening, nationwide housing bull market, and dwindling supply. That *proposed* tax would have virtually no effect on the vast majority of sales.

Congratulations on having recently passed the class where you're taught that everyone talks their own book. Now comes reading comprehension. The tax hikes are far beyond income of the mass affluent Albany also wants to hike taxes on capital gains, implement the pied-a-terre tax (which the industry says would be awful, just awful), tax mezz debt (wft!?), raise the estate tax, and raise the corporate franchise tax.

Now, as you'll surely recall, the hikes of the mansion tax and elimination for 10 years of the SALT deduction had no impact - nil, zero, nada - on NYC real estate prices. Prices simply kept chugging up as they always have. Right? Right?

Your condescending tone notwithstanding, maybe you should be the one working on reading comprehension re: “mass affluent”? Going purely off the article you linked, here’s what it is said about your points.

The proposed tax hike on capital gains would be 1% “on those earning more than $1 million” - putting its effect into the luxury sector. This would not have a material effect on most of the market.

The pied-a-terre tax would certainly have a negative effect on any home that would have been a prime pied-a-terre target - no arguing with you there - but again that’s just a small subset of the Manhattan and Brooklyn markets. Most co-ops don’t allow these in the first place and would be unaffected.

The mezz debt/pref shares tax proposal sounds rough and is not well explained in the post piece, so like you my reaction is wtf? but doesn’t seem like something that is worth freaking out over at present.

Estate and “corporate franchise” tax increase proposals both don’t appear material to the majority of the real estate market. NY’s estate tax exemption is approaching $6mm and likely isn’t a consideration for most home buyers anyways aside from older retirees. The corporate franchise surcharge again is hard to understand from the post blurb.

I’m with you that the tax and spend focus out of albany is a long term negative for the nyc resi RE market, but these proposals don’t ring any alarm bells for me. Even if Cuomo is removed, the moderate (and even slightly conservative) bonafides of the lieutenant governor are well established. I wouldn’t expect these proposals to waltz through into law, and the macro forces for all real estate are bullish.

It's hard to tell on the internet if someone is using "dwindling supply" to describe the Manhattan market with a straight face.

It's interesting that after seeing first articles threatening that the rich would move to Florida, then saying they were moving to Florida, then saying they had moved to Florida... This week's flavor seems to be mix of they didn't really move, they don't like Florida, they planning on moving back, they are moving back....

https://abc7ny.com/10407696/
"The old New York is gone: Here's what NYC will look like next

Economists predict a younger, poorer and more eclectic crowd. There will be changes in everything from restaurant dining, to entertainment, to residential and commercial real estate."

https://commercialobserver.com/2021/03/citadel-securities-four-seasons-palm-hotel-palm-beach-florida/

30, You talking bullish!! Welcome.

The pied-a-terre tax would catch properties with an assessed value of $300,000 or more, so that's properties with roughly a market value of $5 million. I'd argue that's not going after the mass affluent, but rather the tier above them.

ali r.
{upstairs realty}

I hope the pied-a-terre tax is enacted, and I hope the auditors tasked with enforcing it are as vicious as the group in Rochester that wanted to know my daily whereabouts for a 3-year span to determine if I properly attributed my income between NY and CT.

flarf,
Won't it be more simple: if you're not paying NYC income tax as a resident, then it's a pied-a-terre. I suspect an added benefit of the pied-a-terre tax is that they are going to catch people claiming their NYC residence as "only a pied-a-terre" to avoid paying NYC income tax.

It should be that simple, but how often is taxation straightforward?

The first situation that comes to mind is a NYC resident who owns >1 property in NYC...

Then they had better be declaring rental income. Again another way to catch tax cheaters.

30yrs for Prez

Eric Trump looking to open a casino in Miami Beach. It’s far from a done deal, but the Governor is his pal.
Wouldn’t want to be down there.

https://www.washingtonpost.com/politics/trump-florida-casino/2021/03/17/7679cb28-8699-11eb-82bc-e58213caa38e_story.html

For George:
https://www.nbcnewyork.com/news/business/money-report/nyc-mayoral-candidate-andrew-yang-wants-msg-tax-exempt-landlords-to-pay-for-his-universal-basic-income-plan/2945382/

Andrew Yang stands in the schoolhouse door..

Just not the New Paltz schools...

Huh. So Andrew Yang has been in NYC long enough to know MSG? Glad he's learning his way around the city's major landmarks.

This single-issue dud of a candidate does have one thing going: he has correctly identified that corporate welfare via tax breaks for for-profit enterprises owned by billionaires is out of control. But progressives are just as eager as Republicans to do the bidding of billionaires, so I don't see it stopping any time soon.

I wouldn't count Yang out. Remember the 2003 California gubernatorial recall race? There were 135 candidates, so who won - the guy with name recognition. I think there are 40 candidates who have submitted paperwork to run for the Democratic primary. Unless a lot of them drop out soon Yang could be the nominee. And I've seen him listed as number 1 in a couple of polls as well.

And I think Stringer might be underestimating the damage going all-in supporting the Transportation Alternatives anti-car agenda might do to his chances. Those nuts keep screaming about how "only" 44% of NYC households own cars, but that probably makes them the single largest special interest group in NYC.

I think we should see a very strong number from Urbandigs tomorrow. Anyone looking to buy, especially in the under $2 million Market along with brokers, I'm sure your experiencing the same thing, a very active market for many properties.

For our newest listing in Brooklyn we've had over 100 saves in just a few days, with about 40 showings taking place between now and Sunday. Our other Brooklyn listing had multiple bids after a few days, and that's an almost 3M property.

Of six properties we recently bid on, all six went to best and highest, we squeaked by with an all cash offer on one in Dumbo, no go on the others.

I much preferred the market about three or four months ago, as someone who represents buyers about 80% of the time, we were doing much better. I'm not exactly 100% sure on the timeline, but somewhere between October and December we put about 20 deals in contract. Currently not so easy to get there.

If you're a buyer or following specific properties it would be interesting to hear from you. This just happens to be our experience. the strength of certain segments of the market has really caught a lot of people off guard, at best I was expecting stability not what we're currently experiencing.

This was a particularly popular listing in Brooklyn, but I feel like these days 50% of the properties we're requesting appointments for have either accepted offers or are calling for highest and best.

We're certainly not seeing strength across the board, however if you have an attractive apartment in a desirable neighborhood, priced correctly, you should be seeing a lot of activity.

"Norman

We did 48 showings Saturday and Sunday and went to highest and best 8pm last night. Multiple offers significantly over ask.

xxxx
The Corcoran Group"

Glad to see New York City on the rebound!

Keith Burkhardt
TBG

So what's a very strong number? 375? 400?

I would think 300 is very strong number considering that we rarely had a March with more than a 1000 contracts.

Current numbers are strong, I was thinking very strong would be about 340 to 350. I'm not one to make predictions, especially accepting the fact that my singular point of view does not provide enough information to speculate about the general market. However we are seeing very positive signs and I'm hearing good things from bankers that we work with along with attorneys.

Would be curious to hear from other buyers that are out in the market? Is there anyone that's actually participating in the discussion here that's actively looking to buy a property? I know there are many lurkers who don't participate, curious if any of the active participants are out there looking?

Wow. I am not sure that we get more than 300 for Manhattan but I am not in the field. Too bad that there is not enough focus on BK in these convos as the market is going gang busters there in sub $2mm resale market.

Your right 300, I might be being biased by our robust business in Brooklyn right now. But we've also definitely seen an uptick in our Manhattan business.

We have already seen 322 contracts signed in a week so one would think very strong would need to be some quantum level above that. It would be nice to get actual numbers so we can understand what people are actually trying to say to avoid ex post facto adjustments. So you're saying very strong would be anything

Over a 5% improvement.

Manhattan and Brooklyn very bifurcated. At this point there appear to be Manhattan bargains, but those bargains are in buildings where the co-op boards are not in sync with buyers, so you have renovator specials at discounts in niches where the buyers are couples with two intense jobs.

Similarly, if something in Manhattan is in move-in-ish condition at an appealing price, it's probably in a building where the board is looking for post-closing assets beyond the reach of most buyers who would otherwise target that listing. Yup, Greenwich Village, I'm looking at you.

Reasonably priced Manhattan listings, meanwhile, are getting lots of viewings and then sliding into contract... I wouldn't say the pace is "sedate," but I wouldn't call it "frenzied" either.

Meanwhile on Tuesday I called about a cutie in Brooklyn -- outdoor space, details, the sort of thing that lots of people like -- and I asked the listing agent if it's still available.

Yes, she said.

Oh, great, I said, when are you showing this weekend?

Well, she said, we have a contract out, so if they want it, you better get them in ASAP. And the offer we have is at list and all cash, so they have to be prepared to pay for it.

And I thought, "well, this is some new definition of the word 'available' that I'm unaware of."

ali r.
{upstairs realty}

BK resales are indeed hotter than Manhattan. May be digs will go a market pulse for BK as well with history etc

I don't think strong to very strong requires a quantum leap. Js.

https://www.wsj.com/articles/people-moving-to-florida-during-covid-11615463911

"mid the pandemic, Florida politicians and real-estate developers have promoted the narrative that hedge-fund execs and tech workers, in search of warm weather and low taxes, are abandoning New York and California en masse and putting down roots in Florida. Far less discussed is the fact that each year nearly as many people move out of Florida as move in. They are fleeing hurricanes, heat and escalating home prices. ⁠⠀
⁠⠀
While Covid-19 has prompted some out-of-staters to buy homes in Florida, the state’s population growth has slowed in the pandemic to its lowest rate since 2014, according to the state’s November 2020 Demographic Estimating Conference. ⁠⠀
⁠⠀
There were fewer moves into Florida from other states in 2020 than any time in the last nine years, according to an annual study of migration patterns from the national moving company Atlas Van Lines. The study also found that roughly 50% of the Florida moves in 2020 were inbound versus outbound, down from 60% in 2015. By contrast, in 2020, North Carolina had approximately 65% inbound moves.⁠⠀
⁠⠀
Florida’s overall population has grown steadily for decades, but over the past 20 years, the state has also seen large numbers of people depart each year, with many returning to their home states, said Hamilton Lombard, a demographer at the University of Virginia. “A lot of people go down there and realize that they don’t like hurricanes,” Lombard said.⁠⠀"

NYYH, I think the migration dynamics for Manhattan are too complex but makes an interesting story. That is why I just rely on hard data such as market pulse. We have not seen foreign travel open up, many families are still camping out temporarily in their suburban rentals, offices really have not opened up fully, and Digs Market Pulse is staying above 50. So seems to be a balanced market between buyers and sellers for now. New Developments are still challenged due to over building and high $ price per sq ft.

"I don't think strong to very strong requires a quantum leap. Js."

Ok Humpty Dumpty.

For real time feedback, a family member and I are both in contract for a coop and a condo in Manhattan.

Congrats. Let us see what Digs number come out. I am guessing one can make an educated guess by using Digs dashboard data and then try to bet on the actual number.

So what is the reason that Brooklyn market is so much hotter than Manhattan? Is it because price per square foot is much lower? Or do buyers actually just prefer living in Brooklyn for some other reason?

https://youtu.be/EOCr5b_1a-8

328 new contracts last week

Seems pretty good to me. Let us see if 275+ contracts per week can be sustained for another couple of months.

57 on resales. Can it stay above 50 as we get more listings and see impact of higher rates? I remember this thread started with market pulse in the 20s a few months back. So wouldn’t be surprised to see some pull back.

Here's the link for those that would like to follow along in real time on Urbandigs

https://www.urbandigs.com/dashboard/

@noah I just noticed contracts signed at 344. In the vlog you noted contracts were at 328, what's the cutoff time for recording before the weekend? Just curious how that works.

Listening to the Urban Digs podcast and reading this thread I am confused about market size.

Based on the sentiment in this thread, 300 is a good number of contracts signed per week for Manhattan. But that would put annual sales at only 15k apartments.

1.6M people live on the island of Manhattan, and average household is 2 people (wikipedia). 32% own their apartments (streeteasy). That means there should be ~256k owned apartments in Manhattan. If households move every 8 years (national average), there should be at least 32k transactions per year, before considering transactions related to pied-a-terres or "investments".

What am I missing?

Very nice to see New York City recovering, let's all hope that it spreads through all sectors of the city. #pma

https://olshan.com/

30+ per week will certainly help the $4mm plus sector get moving and people aren't travelling yet. New development price drops have certainly helped.

Starting a new thread as the previous one is getting too long. https://streeteasy.com/talk/discussion/46567-urbandigs-market-continues-to-improve-mar-23