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Analysis & Research

Pending Home Sales Down 10.2% YOY And That’s Not A Bad Thing

March 27, 2014 | 11:55 am | Charts |

NARphsi3-27-14
[click to expand]

NAR released their pending home sale index today and the news was not unexpected. US home sales volume has slowed since last spring’s taper miscue by the fed which caused mortgage rates to jump. If you look at the May surge in pending sales, sales volume, seasonally speaking (comparing year over year) has fallen 10.2% (unadjusted).

The introduction of QM earlier in the year probably doesn’t help volume levels, but I’m not really convinced that the housing recovery is actually stalling. It seems more like sales levels are settling to more sustainable levels. And as sales go, so goes the insane price gains seen in the national reports.

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Manhattan’s Decade of Incredible Shrinking Apartment Sizes

March 19, 2014 | 12:30 pm | Charts |

I took a look at the last decade of Manhattan sales activity and broke out a bunch of neighborhoods and property types to compare their changes in average square footage from 2004 to 2013. I looked at the annual sales activity for both years and presented the percent change in the table below.

Takeaway

Rising costs over the decade have prompted small apartment sales at higher prices. New development activity that dominated the market in the middle of the last decade influenced sizes to shrink. This is distinctly different than the discussion about the shift in the mix towards larger apartments – ie more bedrooms.

matrix14manhattansqft
[click to expand]

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Bonus for NYC Housing: Wall Street Comp Up 15.1%, Most Cash Paid Out Since ’08 Crash

March 17, 2014 | 7:00 am | Charts |

The annual release by the New York State Office of Comptroller brought upbeat news to the real estate economy in NYC. Wall Street compensation has long accounted for roughly a quarter of personal income but only 5% of employment so the industry remains very important to NYC’s tax revenues. Here are some of the key points:

  • The overall bonus pool and bonus per person increased 15.1%.
  • The total bonus pool was
  • Bonus pool is up 44% in past 2 years.
  • Securities employment is down 12.6% from before the 2008 market crash.
  • Wall Street accounts for 8.5% of NYC tax revenue and 16% of NYS tax revenue
  • Part of the rise was due to payouts of deferred compensation from prior years.

Here are a few charts that layout the bonus trends in NYC. Wall Street is a key economic driver of NYC and therefore important to the health of the NYC housing market.

Wall Street compensation is 5x that of mere mortals (other private employment compensation) and that ratio has stabilized after a modest correction following the 2008 stock market crash.
2013nycsecuritiesbonus
[click to expand]

Wall Street bonuses rose steadily as a portion of total compensation but after the 2008 stock market correction and financial reform, the market share fell – but not as much as perceived.
2013nycsecuritiescompasperc
[click to expand]

Wall Street employment has fallen since 2008, but not nearly as much as expected. The market share of Wall Street NYC employment has slipped as a result.
2013nycwallstreetemployment
[click to expand]

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[Manhattan Absorption] February 2014 – “Tight Supply” as a Market Rant

March 4, 2014 | 10:41 am | Charts |

2-2014Manhattan [click to expand]

Thoughts
For the overall inventory in the Manhattan market, the operative phrase remains “tight supply” with no real relief in sight. While we are seeing a nominal improvement year to date in 2014, the operative word remains “nominal.” $10M+ has long had bloated supply with lots of “I’ll sell if you pay that” listings. $5M and up continues to see the most supply relative to demand. Supply is chronically low below the $3M threshold and most acute between $1M and $2M.

Side by side Manhattan regional comparison:

February 2014 v 2013
2-201402-2013
[click images to expand]

I started this analysis in August 2009 so I am able to show side-by side year-over-year comparisons. The blue line showing the 10-year quarterly average travels up and down because of the change in scale caused by some of the significant volatility seen at the upper end of the market. The pink line represents the overall average rate of the most recently completed month for that market area.

Definition
Absorption defined for the purposes of this chart is: Number of months to sell all listing inventory at the annual pace of sales activity. (The definition of absorption in our market report series reflects the quarterly pace – nearly the same)


Manhattan Market Absorption Charts 2014 [Miller Samuel]
Manhattan Market Absorption Charts 2013 [Miller Samuel]
Manhattan Market Absorption Charts 2012 [Miller Samuel]

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Price per Square Inch for Pizza, Slices for Real Estate Market

March 3, 2014 | 5:58 pm |

sausagepizzabox

Now that the Oscars are behind us and the “next big snowstorm” just missed NYC, I thought I would finally talk about pizza. But because of why you are here – I’ll make price per inch and price per square foot interchangeable.

One of my favorite podcasts, NPR Planet Money had a great segment called “74,476 Reasons You Should Always Get The Bigger Pizza

The math of why bigger pizzas are such a good deal is simple: A pizza is a circle, and the area of a circle increases with the square of the radius. So, for example, a 16-inch pizza is actually four times as big as an 8-inch pizza. And when you look at thousands of pizza prices from around the U.S., you see that you almost always get a much, much better deal when you buy a bigger pizza.

Explanation of above math: 200.1 inches of pizza surface versus 50.2 inches of pizza surface (pi*r squared=surface area of a circle) And here’s an easy way to calculate the volume of a pizza if you can’t help get enough pizza geometry.

priceperinchpizzachart

Here’s the (pizza) logic
The premise of the piece is that it is much cheaper to buy a large pie than a small pie on a price per inch basis. Pricing for a large pie doesn’t expand as much as the surface area does so the price per inch drops precipitously. In the example above, the 16″ pizza wouldn’t be priced 4x as much as the 8″ pizza – probably more like 2x. Apparently pizza makers don’t take geometry seriously.

Buy the large and throw the unused portion in the fridge. Perhaps that is why people buy homes somewhat larger than what they actually need – they will grow into it.

Suburbs
In suburban real estate, after a certain point, larger the home is, generally the lower the price per square foot. There is a point of diminishing return on excess square footage. The total dollar price is higher, obviously, but the cost of additional space is usually less on a per square foot basis. Hence the pizza analogy applies.

Queen of Versailles, Florida
A well known example of diminishing return is the home featured in the documentary, Queen of Versailles. The 90,000 square foot home is so oversized for the Windmere, South Florida housing market that the vast majority of the living area likely has no value as a single family – other than to the current owners, of course.

Manhattan
In a market with one of the highest per capita population density for a US city, there is a premium for larger contiguous space so perhaps that is why we have so many pizza joints. Here is an price per square foot table by apartment size – you can see how ppsf expands with apartment size consistently over the decade (actually it has shown this pattern for the past 25 years). It’s expensive to get more living area in Manhattan.

manhattanppsftable

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[Manhattan Absorption] January 2014 – “Bottom 99%” of Market Is Tight

February 5, 2014 | 7:00 am | Charts |

1-2014Manhattan [click to expand]

Thoughts
For the overall Manhattan Market, in fact for the “Bottom 99%” (I love saying that) of the market, the absorption rate is well below the year ago period. Record high sales and record low inventory has pressed the absorption rate to the floor. For the $10M+ market (top 1%) the absorption rate has slow sharply from a year ago. While this segment has always been a LOT slower than the market overall (see archives below), it has slowed considerably. The next highest segment $5M-$10M has essentially remained the same with the remainder of the submarkets seeing much more rapid absorption rates over the same period. All regions saw similar changes from the year ago period.

Side by side Manhattan regional comparison:

January 2014 v. January 2013
1-201401-2013
[click images to expand]

I started this analysis in August 2009 so I am able to show side-by side year-over-year comparisons. The blue line showing the 10-year quarterly average travels up and down because of the change in scale caused by some of the significant volatility seen at the upper end of the market. The pink line represents the overall average rate of the most recently completed month for that market area.

Definition
Absorption defined for the purposes of this chart is: Number of months to sell all listing inventory at the annual pace of sales activity. (The definition of absorption in our market report series reflects the quarterly pace – nearly the same)


Manhattan Market Absorption Charts 2013 [Miller Samuel]
Manhattan Market Absorption Charts 2012 [Miller Samuel]

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[Manhattan Absorption] August 2013 – Don’t Blink or It’s Gone (Except Trophies)

September 9, 2013 | 3:42 pm | Charts |

[click to expand]

Absorption defined for the purposes of this chart is: Number of months to sell all listing inventory at the annual pace of sales activity. (The definition of absorption in my market report series reflects the quarterly pace – nearly the same)

I started this analysis in August 2009 so I am able to show side-by side year-over-year comparisons. The blue line showing the 10-year quarterly average travels up and down because of the change in scale caused by some of the significant volatility seen at the upper end of the market. The pink line represents the overall average rate of the most recently completed month for that market area.

Side by side Manhattan regional comparison:

August 2013 v. August 2012

[click images to expand]

Compared to last year, everything below $5M (all but a few % of the market) is flying off the shelves as evidenced by very fast absorption rates. The $1M to $1.49M Manhattan co-op market is seeing absorption rates as low as 2.4 months, an incredibly fast pace. The weakest segment appears to be $5M and $10M+ condos, which are seeing absorption rates of about 12 months and 28 months respectively. High end co-ops, especially those above $10M (<1% of the market) are also absorbing slowing, averaging about 16 months. The balance of the co-op market (nearly all of it) is being absorbed faster than the 10 year average absorption rate.


Manhattan Market Absorption Charts 2013 [Miller Samuel]
Manhattan Market Absorption Charts 2012 [Miller Samuel]

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[Manhattan Absorption] July 2013 – Most of Market At Breakneck Pace, But North of $5M Slows

August 22, 2013 | 10:54 am | Charts |

[click to expand]

Absorption defined for the purposes of this chart is: Number of months to sell all listing inventory at the annual pace of sales activity. (The definition of absorption in my market report series reflects the quarterly pace – nearly the same)

I started this analysis in August 2009 so I am able to show side-by side year-over-year comparisons. The blue line showing the 10-year quarterly average travels up and down because of the change in scale caused by some of the significant volatility seen at the upper end of the market. The pink line represents the overall average rate of the most recently completed month.

Side by side Manhattan regional comparison:

July 2013 v. July 2012

[click images to expand]

This month I began to make the Y-Axis fixed in height so better side-by-side comparisons can be made in the future. The disparity in pace of the market between the $5M+ (slowing) and the remainder of the market (brisk) widens. An exception to this seems to be the co-op market from $5M to $10M which is absorbing at an average pace while the condo market in the same price range is moving much more slowly. This is likely because re-sale units are competing with the surge in new condo units entering the market (most won’t start closing until next year) and are often over listed, influenced by the new dev pricing even though buyers view new development with a premium value.


Manhattan Market Absorption Charts 2013 [Miller Samuel]
Manhattan Market Absorption Charts 2012 [Miller Samuel]

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Zillow Acquires StreetEasy, Goes Vertical, Literally

August 19, 2013 | 10:41 am | bloomberglogo |

I was reading my twitter feed and it just jumped out at me: Zillow announced their acquisition of StreetEasy for $50M in cash. I also heard it simultaneously on the show Bloomberg Surveillance. Their CEO Spencer Rascoff will be on the show tomorrow morning to talk about the acquisition.

While there will be lots of prognosticating about Zillow‘s entrance into the NYC housing market through a heavily used resource like StreetEasy (Zillow was here already, just not taken very seriously).

I think there’s a bigger story for Zillow. If Zillow leverages the StreetEasy data presentation model, Zillow will be shaking up the housing market real estate information space across the US.

Think highrise urban housing markets – I call them “vertical” markets (not to be confused with “vertical” in marketing parlance).

• All national data aggregators and brokerage companies haven’t yet figured out vertical housing markets yet in terms of their presentation of information.
• MLS systems remain firmly single family orientated and have yet to present data in highrise markets in a visually logical way – ie co-ops and condos. Symbolic of the general primitiveness of MLS systems in handling multi-unit housing, one MLS system in the NYC metro area still tags “co-ops” as “condos.”

Kudos to Streeteasy for shaking up the market from day one. When they launched, StreetEasy became the housing data resource of choice for most in NYC. I met most of the team a while back and I was impressed with how a small group of people could really shake things up in a huge market. While presenting clean data in a very dirty data environment continues to be a challenge, I think their greatest contribution to the housing market has been how they displayed their information – in a way that consumers screamed for.

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[Manhattan Absorption] May 2013 – Fast Pace Below $2M Remains, Slowing On Top

June 6, 2013 | 7:00 am | Charts |


[click to expand]

Absorption defined for the purposes of this chart is: Number of months to sell all listing inventory at the annual pace of sales activity. (The definition of absorption in my market report series reflects the quarterly pace – nearly the same)

I started this analysis in August 2009 so I am able to show side-by side year-over-year comparisons. The blue line showing the 10-year quarterly average travels up and down because of the change in scale caused by some of the significant volatility seen at the upper end of the market. The pink line represents the overall average rate of the most recently completed month.

Side by side Manhattan regional comparison:

May 2013 v. May 2012

[click images to expand]

Significant acceleration in the pace of the market below $2M, not much change from $3M to $10M and continued slow down north of $10M


Manhattan Market Absorption Charts 2013 [Miller Samuel]
Manhattan Market Absorption Charts 2012 [Miller Samuel]

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