Manhattan Co-op/Condo Market Charts [Miller Samuel]
Tags: Listing Inventory
Manhattan Co-op/Condo Market Charts [Miller Samuel]
Tags: Listing Inventory
Here’s our first professional infographic of my market research for Douglas Elliman. It covers the just released Elliman Report: Manhattan Sales 1Q 2014. Here was my recent attempt at a hand-made infographic covering another topic using Excel.
The Federal Reserve Bank of New York uses a coincident index to track the New York, New Jersey and New York City economies.
They define a coincident index as:
“A coincident index is a single summary statistic that tracks the current state of the economy. “
The Fed results share no analysis but state:
Our Indexes of Coincident Economic Indicators (CEI) for January show economic activity expanded at a brisk pace in New York State and New York City, but was essentially flat in New Jersey.
The rental price spread between Brooklyn and Manhattan is narrowing. At $210, the month of February saw the lowest differential between the median rental price of Manhattan and Brooklyn’s North and Northwest regions.
While Manhattan rents have leveled off, Brooklyn rents have continued to rise sharply – a combination of rising demand as well as a shift in the mix towards luxury rentals.
A decade ago, who would have thought we’d be talking about Brooklyn this way?
Yesterday I did a quick interview for CNBC at 30 Rock (right next to the new Tonight Show/Jimmy Fallon set which was all abuzz). We were talking about housing starts before they were released. While predicting this stuff is a fool’s errand, I think the bigger question was whether the recent weakening of housing metrics was a new trend or a pause caused by the harsh weather creating havoc across the US.
The NAHB homebuilder sentiment index (1 family) posted its largest one month drop in history – severe weather, cost of labor, materials and land with given as reasons but those really aren’t new issues other than the severe weather.
While weather played a role and probably amounts to more of a short term blip, I think the larger concern is the outlook over the next 6 months with reduced affordability (higher rates but still historically low) and the bottoming of existing home inventory in 2013 providing additional listing competition in some markets.
December housing starts
• 999k annualized and seasonally adjusted rate in December, declining 9.8% but exceeding forecasts. More weakness in multi-family starts than 1-family • +18.3% 2013 over 2012
Why I thought January Housing Starts would fall (luckily I was right with the announcement of a record 16% drop) • Same factors in place as last month: Weather, Labor and Material Costs and Land Costs. • Record m-o-m drop in NAFB confidence – looking out over the coming months – suggests a larger impact by weather. • Mortgage rates slipped from last month but still nearly a point higher than a year ago, expectation of flat or edging higher in 2014. • Implementation of Dodd-Frank Qualified Mortgage (QM) may also drag viewing traffic. • Permits already fell over last 2 months which suggests lower starts (contracts versus closed sales analogy).
Actual January housing starts release after my interview
• 880K annualized rate in January, dropping 16% from December 2013. • January 2014 y-o-y dropped 2%. • Permits fell for 3rd consecutive month, down 5.4% from prior month (seasonally adjusted).
STILL – the question REALLY is whether the recent construction slowdown is the beginning of a trend or a temporary set back that will clear over the next few months as the weather improves and the economy shows some improvement. Right now it feels more like the market is losing momentum and the weather is only making it worse.
Also in studio was James Lockhart, vice chairman of WL Ross & Co., formerly the head of GSE regulator FHFA. We were also joined by Nicolas Retsinas, a senior lecturer in real estate at Harvard Business School who called in – he has been on my old podcast a few times. Both provided great insight to the housing narrative.
Here’s the second clip from the same session. My basic premise is that while new home sales are rising, it will not be enough to address the collapse of listing inventory which will drive housing prices higher in the US. Hint: It’s mostly about tight credit. Housing is local and credit is national.
I really enjoyed this “Charlie Rose”-like interview by late night TV host Conan O’Brien and statistician Nate Silver on his “Serious Jibber-Jabber” series. I recently bought Nate’s book “The Signal and the Noise: Why Most Predictions Fail but Some Don’t” and it’s next on my reading list (actually I bought 2 copies because I forgot I had pre-ordered on Amazon for Kindle and ordered again from Apple iBooks, Doh!).
What I found intriguing about the discussion is how much effort it takes to filter out the noise and get the to meat of the issue as well as getting outside of your self-made insulated bubble to be able to make an informed decision – aka neutrality.
Real estate, like politics, is a spin laden industry whose health is very difficult to gauge if you rely on people and institutions who have a vested interest in the outcome. i.e. Wall Street, rating agencies, government, banks, real estate agents etc.
Some interesting points made:
The current “happy housing news” that is all the rage seems to draw a parallel with the pundits who got the election outcome all wrong yet all were experienced in politics. The housing herd is disconnecting from what the data is showing.
May housing starts, seasonally adjusted, fell sharply with the expiration of the tax credit – signed contract by April 30. No surprises here. I suspect we’ll see similar levels for a few months. The tax credit likely “poached” sales from future months rather than jump start the housing market.
Privately-owned housing starts in May were at a seasonally adjusted annual rate of 593,000. This is 10.0 percent (±10.3%) below the revised April estimate of 659,000, but is 7.8 percent (±9.7%) above the May 2009 rate of 550,000. Single-family housing starts in May were at a rate of 468,000; this is 17.2 percent (±7.9%) below the revised April figure of 565,000. The May rate for units in buildings with five units or more was 112,000.
I’ve long marveled at the stats in this report (sarcasm) – notice the margin of error in the above paragraph. Still, it’s the standard reporting method for new housing starts.
The chart above is intended to provide perspective to any month over month gains. The peak for housing starts was January 2006 at $2.3M annual starts, 3.8 times the seasonally adjusted annualized rate.
In a newly discovered blog, Extraordinary Observations by Rob Pitingolo (ht: WSJ/Real Time Economics), I found a refreshing look at a key economic resource: “people” in his post “Where the Smart People Live”.
One of the trends I had observed during the housing boom was a move toward new urbanism. Re-purposed (my favorite new word) commercial buildings in urban centers to residential units and public spaces. It began to feel like urban areas were getting the better of the suburbs and perhaps, in theory, the more upgraded urban markets attracted talent from markets that didn’t adapt to the trend.
Rob’s analysis looked at city and urban density patterns and even “degree sprawl.” Really clever.
It’s becoming increasingly accepted that there is real economic value to bringing a lot of smart and entrepreneurial people together in the same place. This can be tough to measure, unfortunately. Perhaps best proxy we have available is educational attainment – usually measured as the number of people in a particular place with bachelor’s degrees or higher, as reported by the Census Bureau.
One of the by-products of the credit crunch has been the rise in shadow inventory. Within my own market stats, I consider shadow inventory all units that are complete or under construction but not yet offered for sale as condos (sometimes as cond-ops or co-ops). In many cases the developer was unable to sell the initial block of units offered and is therefore unable to release the units behind them.
The development stalls because the lender behind the developer usually prevents the units to be converted to rentals because the value of the project would fall considerably as a rental on their balance sheet, causing stress to their capitalization ratio.
The lender’s reluctance to make such a decision is referred to as:
First American CoreLogic tracks shadow inventory. They define shadow inventory as real estate owned (REO) by banks and mortgage companies, as a result of foreclosures and other actions, such as deeds in lieu, as well as real estate that is at least 90 days delinquent. They put the amount of shadow inventory at $1.7M in 3Q 09, up 54.5% from $1.1M a year ago.
Visible inventory, like the amount estimated NAR and Census every month, is estimated at $3.8M, down 19.1% from $4.7M last year.
The total unsold inventory (which combines the visible and pending supply) was 5.5 million units in September 2009, down from 5.7 million a year ago. The total months’ supply was 11.1 months, down from 12.7 a year earlier. This indicates that while the visible months’ supply has decreased and is beginning to approach more normal levels, adding in the pending supply reveals there is still quite a bit of inventory that will impact the housing market for the next few years, especially in the context of the current increase in home sales, which is in part due to artificially low interest rates and the homebuyer tax credit.
In other words, even with the surge in activity over the past several months, total inventory hasn’t changed all that much (I agree with Bob).
Here’s a take on the Commerce Department’s New Residential Sales Report released on Friday.
Sales of new one-family houses in August 2009 were at a seasonally adjusted annual rate of 429,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 0.7 percent (Â±16.2%) above the revised July rate of 426,000, but is 3.4 percent (Â±13.3%) below the August 2008 estimate of 444,000.
(gotta love the +/- percentages)
The LA Times provides some additional perspective:
August’s sales pace was 4.3% below the same month a year earlier. Last year ended with 485,000 new homes sold, the worst year for new-home sales since 1982 and the third-worst year since the federal government began tracking the data in 1963. New-home sales peaked in 2005 at 1.23 million units.
Builders also have scaled back construction dramatically, cutting the inventory of new homes to a 7.3-month supply, down 34% from 11.1 months a year earlier. The reduction marks a return to a more normal market: a roughly six-month supply is the historical norm.
As does MarketWatch:
Despite a record drop in prices, sales of new homes flattened out in August after four months of strong increases, the Commerce Department estimated Friday. Sales of new homes rose a statistically insignificant 0.7% in August to a seasonally adjusted annual rate of 429,000 from a downwardly revised 426,000 in July, which was previously reported as 433,000. Sales were down 3.4% from a year earlier, but were up 30% from the low in January. Through the first eight months of 2009, sales were down 28% compared with the same period a year ago.
Bottom line is that new construction is competing with rising foreclosures and faces significant challenges with financing availability. New home sales data doesn’t include contract rescissions either so I have always felt it is very inconsistent (a lot more positive) than national home builders actual numbers.
Here’s the meat from the commerce department’s July new residential sales report released yesterday.
Sales of new one-family houses in July 2009 were at a seasonally adjusted annual rate of 433,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 9.6 percent (Â±13.4%)* above the revised June rate of 395,000, but is 13.4 percent (Â±12.9%) below the July 2008 estimate of 500,000. The median sales price of new houses sold in July 2009 was $210,100; the average sales price was $269,200. The seasonally adjusted estimate of new houses for sale at the end of July was 271,000. This represents a supply of 7.5 months at the current sales rate.
Inventory has fallen to 7.5 months from 12.4 months earlier this year because builders simply aren’t building. The general thinking is that the tax credit and low rates have helped move properties more than they would have otherwise. However, distressed property sales are now competing with new construction and credit remains tight.
The number of new properties available for sale is the lowest it has been since 1993.
Sales picked up in three out of the nation’s four geographic areas, with a sizeable gain of 16.2 percent in the South, the nation’s largest-selling region, which includes the Washington area. Sales fell only in the Midwest, by 7.6 percent.