I’ve been asked to participate in Thursday’s New York Times Event New York Real Estate: How Low Will Prices Go?”.
Click on the image below to RSVP!
Here’s an updated excerpt from my Housing Note newsletter dated October 28, 2016, digging into the median sales price. You can subscribe to Housing Notes and other housing resources for free.
I wrote about the median sales price a decade ago, and the message still holds. A couple of years ago, I whipped up a table that shows how median sales price can perform in a changing housing market. The median sales price is the default price trend indicator of real estate because it eliminates the extreme highs and lows of a data and merely represents the middle number. However, it is also subject to skew by consumer behavior that can overpower the math. So I always provide two to three price trend indicators depending on the quality of available information (average sales price, median sales price, median sales price) for all of the reports in my Elliman Report Series. The relationship between median and average sales price can also tell a story.
Click on the graphic below to expand.
In our post-Coronavirus world, it is clear that market conditions and our understanding of the future are subject to change every day. In my prior post Establishing the COVID-19 Demarcation Line: From ‘Hanks To Banks’, data that falls after the line represents a different market.
So how do we determine what data falls in after the demarcation line? It’s not as straightforward as it sounds.
Throughout my career, I have seen brokerage firms publish pending/contract reports, touting pending trends as more reliable than reports based on closings. I don’t look at them as better or worse, just a different way to look at the market. The simplistic, uninformed argument for pending sales is that contract dates occur before closing dates, so they are more current. Incidentally, contract prices are not readily shared. I get all of this. Yet I have seen the failure rate of contracts be as high as 40% – in other words, many contracts might not close whereas closing reports are solely based on successful transactions. Still, pending sale trends are useful as long as the reader understands their shortcomings. I plan to develop one someday.
Closing data and contract/pending data lags the “meeting of the minds.“
Meeting of the minds (also referred to as mutual agreement, mutual assent, or consensus ad idem) is a phrase in contract law used to describe the intentions of the parties forming the contract. In particular, it refers to the situation where there is a common understanding in the formation of the contract.
While we know that closing dates lag the “meeting of the minds,” we also need to understand that signed contract dates are lagging indicators, often by 2-4 weeks. During this crisis, I’m speculating the failure rate will be high initially, and the time lag will be on the longer end rather than, the shorter end of this 2-4 week range.
Here’s why contract dates are a lagging indicator and not necessarily more insightful than closing data:
1) The “meeting of the minds” occurs when buyers and sellers negotiate price and terms, usually facilitated by a real estate agent or broker.
2) The price and terms are handed off to transaction attorneys who work together to craft language agreeable to both parties.
3) The contract is signed by both parties and often indicated as such in an MLS-type system.
4) In some markets or marketing periods, especially when a market is cooling, many contracts never close, so their initial inclusion makes pending trends reports suspect.
If there is a four week signed contract lag from the meeting of the minds, and considering the March 15 demarcation line for post-Coronavirus, that means that with us being six weeks into the crisis, we are only able to see two weeks worth of post-Coronavirus data. And even with that reality and current shelter in place rules, many current contracts might have been older deals that were facilitated by the buyer who had already inspected the home in January/February – we are seeing some of that now.
In other words, relevant data on the new market remains extremely limited.
I joined Emily Myers of Brick Underground for my third interview on their podcast series. The discussion topics are covered here: The Brick Underground Podcast: How does NYC real estate move past ‘peak uncertainty’ in 2020.
I had a nice chat with Vonnie Quinn of Bloomberg Television on Monday concerning the state of the Manhattan housing market, following a highly read Bloomberg article on the terminal covering our Elliman Report results for Q3-2019 as well as a followup on Bloomberg Radio here and here.
I was just interviewed by Noah Rosenblatt and John Walkup of Urban Digs for their “Talking Manhattan” Podcast. I’ve known Noah for well over a decade and always enjoy geeking out on the market with him. He’s a data nerd with a real estate agent and day trader background. I’m proclaiming that John Walkup has the best real estate-related last name in the business and is clearly able to “elevate” any real estate conversation.
They weren’t kidding yesterday when they said they were going to get this podcast out right away, placing the interview online this morning. I was speaking to a group of real estate agents on the roof deck of a new building this morning, and four of them told me they had already listened to the podcast and one confirmed that he heard it in the shower and noted that was high praise. Love it.
One of the topics we focused on covered the adjustment for outdoor space in valuation. Throughout my career – when I get a lot of similar inquiries on a particular valuation topic, I turn it into a blog post – here is a collection of value-related posts in one place. One of the most read “value” resources in the collection covers outdoor space in a blog post I wrote in 2010. Admittedly I’m a bit relieved my written methodology still holds up nine years later!
Their interview of me is below. I hope you enjoy it and subscribe to their podcast as I do.
When I came through security, the guard at NYSE asked me “when was the last time you visited the NYSE?” and I said, “about 10-12 years ago.” He looked it up to confirm and deadpanned, “I’ll bet you remember that I was the guy that took your picture in 2007, right?!?! He and his colleague and I all had a good hard chuckle over that. Moments like this are what I love so much about my job.
Back in 2007, I was interviewed by Erin Burnett (now CNN) and Mark Haines (sadly passed away in 2011) at CNBC on the balcony overlooking the exchange floor. It was a tight fit on the balcony so I got to sit near the president of the Russian natural gas conglomerate Gazprom and his dozen very large bodyguards. It was very crowded. While he was being interviewed I thought to myself, there is no amount of money in the world I would take to live with that kind of personal risk every single day.
No such worries today. Kristen and Tim were terrific to speak with and I appreciated the invite.
I was recently interviewed by James Nelson, one of New York commercial real estate’s star brokers at Avison Young whom I’ve known since his Massey Knakal days. I’ve been on his podcast several times over the years and always enjoy the conversation. This time he did the interview at CUNY studios in Manhattan. In addition, he brought in Vince Rocco, a residential real estate agent at Halstead who has a broker-centric podcast known as “Good Morning New York Real Estate with Vince Rocco.” I had never met Vince before so it was nice to get his perspective on the market.
That was the theme but my interview episode was called “the state of the market.“
The indispensable NYC web site Brick Underground has been doubling down on its podcast as of late and I was fortunate enough to be invited to speak about the state of the market.
It was fun and hopefully, I conveyed some helpful insights to their listeners. You can subscribe to the Brick Underground Podcast feed here.
And specifically my interview here.
There is a cool graphic from the New York Times Calculator column by Michael Kolomatsky in this Sunday’s print edition of the Real Estate section that illustrates Manhattan’s dependence on high-end real estate. Using the data from a chart I began right after 9/11 and we continue to update, he illustrates this point:
Almost half the money spent by New York City home buyers in the first quarter of 2019 went toward the most expensive properties. That wasn’t always the case.
Just before I stepped on the set, I got to look at the Bloomberg file photo taken at my office about 15 years ago (I think I’ve aged gracefully) but I was also called out for it.
Was the last time you were on Bloomberg Markets 1995? That headshot…— Hiten Samtani (@hitsamty) January 17, 2019
Here’s the interview along with a cameo by Sam Zell, lol!
After I finished the Yahoo Finance interview last Thursday, I ran over to 30Rock and taped a segment for Nightly Business Report/CNBC on our Elliman Manhattan report release. Robert Frank, the wealth editor for CNBC, interviewed me remotely. These are pretty fun to do, especially because to get there, I have to walk next to Christmas Tree, Rockefeller Ice Rink and finally “The Tonight Show Starring Jimmy Fallon” set.