UD - Market Down 20-25%, Pickup in Activity

I disagree with Noah about this and I'm going to use his own data against him. If you look at his "Contracts Signed" chart you will notice that the trend has been 5-15 since Sept. The latest data hasn't changed. Of course I think his data is averaged over a week so there might be a lag. In comparison, IIRC last year peak buying season the contracts signed were between 20-40.

Which chart are you talking about?

hsw, they do seem to be picking up a bit, from 30-day perspective. I also doubt that brokers are delaying adding contract signed data to the system, as it is only in their best interests to show an uptick in activity. No room for complacency any longer (although Darren Sukenik will probably continue to update his whenever the hell he wants).

http://www.urbandigs.com/charts3.html

lol It is likely fair to assume that some people may be out looking, not necessarily buying, but looking. Who knows, I am sure deals are being done, the question is how much, how many, where, what, by whom, blah blah. More do the story here -then, there is the the question of the quantitative data to demonstrate a given correlation, either way, it is good to acknowledge any change, even if it is slices of things as they occur in segmentations. It is good to have information.

It would take a pretty drastic increase in activity to slow inventory growth given the volume of new listings.

Exactly... inventory continues to increase faster which is the important thing. Besides, markets don't fall all at once. The buyers now are those who 1) have stable jobs, cash and good credit and either believe this is the bottom or aren't trying to time the exact bottom. Eventually, this buyer pool will buy places, and it will be down to the next team of buyers. And so on and so on ...

One interesting data point I have found is the number of people who want to sell now. A ton of friends and co-workers of mine have decided to sell or are thinking of selling their apartments. All of these sellers have jobs and many of them bought between 2005-2007. They aren't even the distressed sellers - these are people who think it's going to be bloody and would rather take a hit now then wait for all of the distressed sellers to hit the market in 6 months or a year when they absolutely have to sell because they can't find a new job / pay their mortgage. A good friend of mine is a real estate broker and says she is getting a TON of calls from sellers.

whoah.... even with an "uptick", its going further in the toilet...

whoah.... even with an "uptick", its going further in the toilet...

(looking at the 6 month chart)

yes nyc10022 that's what I'm talking about. But I've been following it for the past year and I think the #'s were in the 20-40 range. But there is no 1 year function.

kspeak, I hope you are write about all your friends who want to sell fast, and are willing to take a small hit now before it gets worse. Because I'm seeing the opposite with most sellers, whose apts I'm bidding on. Many are still tied to approx $1000/sf for co-ops studios that they bought in the last five years. They all seem to think they are entitled to 50-100 percent profit.

Yeah, sounds like those folks are the exception to me. We have sooooo many people tied to a certain place, and with LOTS of denial attached.

I can't imagine that all these people turned the corner in 6 months, going from expecting prices to double again, to running for the hills.

Fact is, even if sales bumped, they're still mightly low compared to stuff being put on the market.

please keep in mind that contracts signed tool is highly lagging. SE crawls brokerage websites and tries to pick up the CS tag, but data is only as fresh as the agent that edits/updates it.

Many brokers continue to leave a webad UP, as active, even after a contract is signed in the hopes of getting some more calls and potential buyer clients to work with. The deal is to have 2-3 similar properties nearby ready, in case the call comes. The spiel is something like "oh, Im sorry, that JUST went into contract late yesterday, but I have a few others just like it that are wonderful and a great value. Would you like me to send you the info...?"

So, keep in mind that the CS metric is not the most reliable and IS NOT directly from the source, the internal MLS system. Reports like this come from activity I see out there right now. I think its a countertrend surge considering where we just came from, a drop of 20-25% in 6 months, embedded in a longer term correction. Which is fine. Nothing goes straight down. Well, oil almost did!

Most of these people I am talking about haven't listed yet ... they are thinking about listing.

A lot of the inventory out there right now seem to be people who listed in early to mid 2008 - when the market was starting to turn but pre-lehman collapse. I know this because I am seeing A LOT of the same inventory I saw 8 months ago when I look for fun. It's almost all still there A lot of these people were probably unrealistic even by spring/summer 2008 - I suspect many of them got offers in say June, July 2008 that were 5% below peak and wouldn't take them ... of course they aren't budging now that the market is 20% down or more. I think the people who are just starting to list are likely to be a lot more realistic.

Contracts signed may be lagging... but inventory is still rising.

Assume a bump in activity (that will be reflected in sales and contracts signed in the future). Inventory will still rise given the volume of new listings. The flood of new listings is overwhelming right now.

"please keep in mind that contracts signed tool is highly lagging"
"So, keep in mind that the CS metric is not the most reliable and IS NOT directly from the source"

nyc10022, are you reading this?

Yes - and the peak selling season isn't until late spring.

And new construction will keep dribbling onto the market - with most units still just "shadow inventory" until they are actually released onto the market.

A slow-motion train wreck in progress.

> nyc10022, are you reading this?

of course...

The understanding (as previously argued by Noah) for the UD metrics is that even if they are flaws, so long they are consistent, they are useful for trends. So if brokers are doing the same as they did 6 months ago, the Contract Signed chart is useful to document a 50% decrease in activity. If they have altered their behavior, then the model breaks down.

And, you have to figure... with all the free time from not selling apartments, they have extra time to book contracts in streeteasy!

;-)

bjw2103, not sure what your point is. Are you arguing that there are MORE contracts being signed than those captured by UD's methods? Seems unlikely since brokers have every incentive to make the market appear busy through immediate reports of contracts being signed.

In fact, it's much more likely that they'd inflate the contract numbers than hold back ...

And hsw9001's point is good -- as long as broker reporting behavior remains the same, it's apples-to-apples to compare current UD stats to UD stats from, say, 6 months ago. NO ONE has an accurate snapshot of real-time deals (either volume or price). All we can do is track trends. The trend now is clearly rising inventory.

JKB, my point is that contracts are an interesting measure to look at, but they're not all that reliable if you're trying to really gauge the market. As for numbers of actual contracts out there, I have no idea what's being captured and what isn't.

urbandig is in panic. He's telling us there are buyers, even though you can't see, hear, or smell them.

Noah was reporting on two distinct trends - a statistical slight uptick in signed contracts, and an anecdotal uptick in buyer interest. Zizizi - you may not be able to see, hear, or smell them, but that's why Noah's update is helpful. They are there. And yes, all of us brokers are relieved to have the market hit a level where there is a sufficient reduction in listing prices to interest the buyers who were on the fence all last year.

And that is significant, even if the market continues its move toward the bottom. It may not be enough to lure everyone back into the market, nor should it be. But it's interesting, at any rate.

Tina,

If true, it is great that there is an uptick in buyer interest at lower prices. But, who cares? In the last 30 days, there were almost 2000 new listings (vs 352 contracts signed). There is no way that there is demand to offset this inventory increase at current price levels. The market is heading, if not accelerating, down.

It is way too early to talk about a bottom... or even stabilization.

well I see and hear them. I dont smell them. But by no means does this change the macro picture or how I view the next 12-24 months for this marketplace. We hit a comfort zone, and some deals are happening. Thats it. Its likely a countertrend surge in activity as we reach a level of comfort, when it passes, the bigger trend should continue. Thats how it will be for next year or so until we just stabilize and hang around for years as the shock of this downcycle for everyone gets absorbed.

"my point is that contracts are an interesting measure to look at, but they're not all that reliable if you're trying to really gauge the market."

I'll venture to say there is nothing more reliable than this data for current marketing conditions.

They represent agreed upon prices on specific properties, and the majority close. If you want until closes, they you are looking at, almost definitionally, outdated data. In a fast-moving market like this one (fastest decline in the country per some measures), that data is nearly meaningless in assessing the currnet market.

nyc10022 - I agree with you that market conditions are moving too quickly for closed sales to represent much more than a fossilized account of the the market 90 days prior. But the problems with using "contract signed" as a market indicator are (at least) two-fold: a) we don't know what the agreed-upon price was, and b) not all properties in contract are indicated as such. So it's useful as an indicator of what types of properties are appealing to buyers right now, but as "data" it's not comprehensive.

bjw2103 and tina24hour, if either of you have a better objective real-time metric, please do share.

In a blind man's world the one-eyed man is king.

hsw9001 - as I said above, I think "contract signed" is a great indicator of what types of properties are moving, but it's difficult to extrapolate the price at which that property is going to close. So if you're looking at that data to determine general trends (as Noah suggests), it's useful. But if you want an accurate measure of, say, percentage down from peak comps, or rent-vs-buy ratios, you'll have to wait for the actual numbers to come in.

As for a better real-time metric, I think you really need to be comprehensive in your approach. No single indicator is going to tell us what's going on in the market. I work in Brooklyn, which is slightly out of step with Manhattan, but I find the opinions expressed on Streeteasy to be a helpful predictor of what my clients will be thinking a month from now. I look at signed contracts, sure, and at price reductions. I follow the open house schedules and note when the open houses stop for a particular property (usually an indicator that there is an accepted offer).

And yes, I speak with my fellow agents, and pay attention to what brokers say here and in the press. While industry flacks may be falsely hopeful, the actual brokers have been pretty accurate in their depictions of the market. When activity came to a virtual standstill in the late fall/early winter, brokers at every level said as much, publicly. And now that activity is picking up, we're noting that as well.

I have disagreed with Noah on several occasions, but I would never accuse him of banging a drum for the industry. If I have any beef with his forecasting, it's because I find it a little too wonky and data-oriented. So anecdotal evidence from him is always useful, taken with the rest of the statistical evidence he always provides.

tina24hour, I think you nailed it. Contract data just doesn't tell you much as some people would have you believe here. hsw9001, I don't think there's one great metric out there that is objective and real-time, simply because real estate transactions can take a while to complete. In this specific market, if you're informed, you know that closed sales prices are not a great indicator for how to place your bids, but they are the most reliable record of pricing. The market movement threads on Streeteasy are great for this.

"nyc10022 - I agree with you that market conditions are moving too quickly for closed sales to represent much more than a fossilized account of the the market 90 days prior. But the problems with using "contract signed" as a market indicator are (at least) two-fold: a) we don't know what the agreed-upon price was, and b) not all properties in contract are indicated as such."

We're not talking about pulling the data off streeteasy, we're talking about the apprasial firms who do have access to that data.

So, if those are your only concerns...

"Contract data just doesn't tell you much as some people would have you believe here. "

Only if you're not reading the contract. Contracts have price information in them.

I know some folks don't want anyone to know the market is down 20-25%, but that doesn't make it so.

wait, sorry... I have to stop and laugh.

Did someone just argue that the problem with contract data is that there is no PRICE data with it?

sorry, too funny.

Now THAT is what I call grasping at straws...

"I know some folks don't want anyone to know the market is down 20-25%, but that doesn't make it so."

Now when did either of us say that? Stop being a jack@ss.

nyc10022, here's a nice piece by Jonathan Miller - the guy whose data you've been trumpeting. Even HE calls it suspect. (http://matrix.millersamuel.com/?p=3043) This should help clear up what you've willfully chosen not to understand:

"Our appraisal firm began to see a pattern in late September 2008 where current contracts of properties we were appraising, were clearly lower than contracts signed in the summer of 2008. The range was roughly 15% to 20%. My 20% number has been widely referenced by the Fed, Goldman Sachs and others, and in fact, page one of AM New York published the number “20%” in red on the entire cover. But our conclusions were based on more of a case by case analysis, similar to a repeat sales analysis.

I don’t currently issue contract reports but I certainly aspire to, but only when I have credible results. Periodically I’ll see one of my appraisal competitors distribute a press release with their own contracts tabulated. I’ll see real estate brokers and marketing agents issue contract reports.

Readers oooh and ahhhh over the relevancy of contracts because the data is perceived to be fresh and current. In principle it is current, but in practice it is much more subject to skew than other data.

I also wonder why methodologies are never fully provided, especially those prepared by marketing groups or departments.

Here are the issues that make much market analysis of contract reports suspect, despite perhaps the best intentions of the authors.

Quantity of data — the key issue that makes much analysis unreliable - absent from the public domain.
Location of the data — contract data tends to be sourced from a few institutions or entities so its availability and the potential for skew is very serious.
Unit mix of the data — This is subject to skew depending on the source of the data - what type of business they have - who their customers are (low end, high end, studios, 3-bedrooms, etc.)
Source of the data — The four largest real estate brokerage firms probably account for 80% of all sales in Manhattan. I know each of the senior management teams so I am fairly confident they will not release contract data in bulk to anyone outside their company, especially to a competitor.
I have never met a broker that will share contract data in bulk because it can jeopardize their company’s sales and commissions. We are able to get contract data periodically, but not in bulk. If producers of contract reports can win me over on these key issues, I am ready to jump in with two feet. NAR publishes a pending contract index and frankly, not many people I know believe the results.

In other words, contract data is the Holy Grail, but I am not convinced it’s yet achievable as a reporting tool."