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The US Department of HUD and the US Census released their monthly new residential sales report for July 2010 (aka New Home Sales Report) and it showed a record low of activity, post tax credit since the metric has been recorded (1963)

Sales of new single-family houses in July 2010 were at a seasonally adjusted annual rate of 276,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 12.4 percent (±10.8%) below the revised June rate of 315,000 and is 32.4 percent (±8.7%) below the July 2009 estimate of 408,000.

Since the seasonally adjusted new home sale figure peaked at $1.4M haggling and commenting over the month over month numbers is clearly a waste of time. It does’t look like the tax credit had all that much effect on

Index background
The index captures the new home construction sales trends but doesn’t handle contract rescissions, something that dominated the sales process as the housing market corrected. Although I am wary of seasonal adjustments, my chart presents them including the annualized version since that is the way the numbers are reported. I also present the monthly version without annualized or seasonal adjustments (see above). Same idea just harder to read a trend from.

This index has some of the wildest margins of error ever presented. In the quote above, look at the ± adjustment that is applied to the m-o-m and y-o-y change. Its insanely high/low.

Trulia.com, the real estate search engine, hosted their monthly call covering the results of their ongoing Trulia-Harris Interactive Survey.

Here’s a bunch of chart candy for McMansion afficianados (hint: your days are numbered):

A few years ago I agreed to provide aggregate luxury housing market data I was compiling to Bloomberg News for an index they were building. Time passed, the person who contacted me left and I forgot about it. There has been significant interest in the coverage of the luxury housing market in Manhattan in the past few weeks and it reminded me to check out that index. Apparently, it’s live, kept current and running on the Bloomberg terminals (that I can’t afford but would love to have).

We’ve got two namesake indexes!

Miller Samuel Manhattan Luxury Housing Price Per Square Foot [MLH SQFT]

Miller Samuel Manhattan Luxury Housing Median Sales Price [MLH MED]

The luxury market has showed renewed vigor since the beginning of 2010 after being largely dormant in 2009. Our 1Q 2010 report series showed a jump in activity in the high end market across the New York City metro area no matter the price point of the local market. A shift in sales mix towards larger sized property sales was a heavy dose of deja vu. It’s quite a curious phenomenon given the problems with jumbo financing, the stronger dollar, pending financial reform and high unemployment. However it is clearly happening – but will it be sustained?

Here’s a sampling of the recent luxury market coverage:

Co-op Sales Spark Market Worry [WSJ] …the deal, a dramatic example of how badly some segments of the luxury co-op market have been hit by the downtown, is raising a tizzy among brokers. It raises doubts about the rosy picture portrayed by brokers who have insisted that sales activity is picking up—so much so that some recent co-op deals have been signed above the asking price… Conclusion: High end co-op market may be faltering.

Some Condos Avoid Shoals [WSJ] In the upper stratosphere of the Manhattan real-estate market there are a few buildings that seem impervious to the downward drag of the economy. Fifteen Central Park West is one of these, if a recent deal involving a three-bedroom apartment there is any guide…. Conclusion: 15 CPW is outperforming the rest of the high end market.

Manhattan’s $10 Million Apartment Market Offers No Bargain Buys [Bloomberg] It took Stephane Melloul three days to learn he’d need about $50 million for the New York home of his dreams: four bedrooms, a terrace and Central Park views… Conclusion: The high end market is stronger than you think.

Large Apartments Are the Rage in New York City [New York Times] …Sales of three- and four-bedroom apartments swelled last year, even as sales of smaller places declined, and the trend has since persisted. The increased sales are another sign that New York City has become a more appealing place for families… Conclusion: Large apartments are doing better in the market than last year.

Sale of two cities [New York Post] …Despite the hefty price tag — which doesn’t include $35,445 a month in maintenance fees — an international set of moguls is flocking to see the new space. “There are a lot of billionaires around,” said Woodbrey, who shows the apartment about five times a week to moneybags from as far away as Texas and India. “For some of them, it’s their 10th home.” Conclusion: Buyers are plentiful for high end property.

Million-Dollar Bargain Homes [Forbes] …In hard-hit luxury markets, huge discounts are making mega-mansions more accessible. Conclusion: The discounts in the hard hit luxury market are attracting buyers now.

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The US Department of HUD and the US Census released their monthly new residential sales report for May 2010 (aka New Home Sales Report) and it was a doozy.

The index reached a record low, but I think the month over month analysis is basically meaningless. By looking at the chart it clearly shows there is tremendous improvement needed before the market can be characterized as “recovered.” The federal tax credit played an important role in new home sales this year but that merely stole sales from future months, incentivizing participants to purchaser earlier than the otherwise would have.

Sales of new single-family houses in May 2010 were at a seasonally adjusted annual rate of 300,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 32.7 percent (±9.9%) below the revised April rate of 446,000 and is 18.3 percent (±13.0%) below the May 2009 estimate of 367,000.

The median sales price of new houses sold in May 2010 was $200,900; the average sales price was $263,400. The seasonally adjusted estimate of new houses for sale at the end of May was 213,000. This represents a supply of 8.5 months at the current sales rate.

This chart presents the United States New Residential Sales [non-seasonal monthly rate - census.gov]

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Index background
The index captures the new home construction sales trends but doesn’t handle contract rescissions, something that dominated the sales process as the housing market corrected. Although I am wary of seasonal adjustments, my chart presents them including the annualized version since that is the way the numbers are reported. I also present the monthly version without annualized or seasonal adjustments (see above). Same idea just harder to read a trend from.

This index has some of the wildest margins of error ever presented. In the quote above, look at the ± adjustment that is applied to the m-o-m and y-o-y change. Its insanely high/low.

I talk “dirt” with Jane Gladstein, President of Gladstein Development Group about the process of development.   Hint: it’s not all about bricks and mortar.

Jane is a 30 year veteran who has developed such notable projects as 255 Hudson, The Sycamore, Soho 25 and the award winning 505 Greenwich.

Check out the podcast.

The Housing Helix Podcast Interview List

You can subscribe on iTunes or simply listen to the podcast on my other blog The Housing Helix.

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I don’t think I am cut out to be a developer.

While I get the hard work and analysis part, I’m missing the blind optimism part.

And no, I’m not blindly pessimistic either – during the boom years blog commenters periodically accused me of being a shill for the real estate industrial complex (I liked the phrase so much I bought the domain).

Blind optimism is what makes developers successful because everyone tells them they can’t do it. But it is also their downfall because builders build until they can’t build anymore.

Today’s New York Times article by Charles Bagli “Building a Tower of Luxury Apartments in Midtown as Brokers Cross Their Fingers” which announces Barnett’s 1,005 foot condo with a hotel at the base. The site is due south of the Essex House between West 57th Street, a retail corridor and West 58th Street, a service road for Central Park South (West 59th). I’ve got a “let’s consider reality” quote and graphic in the piece.

The project is the first major construction start in New York since the fall of Lehman Brothers in September 2008, and it is an ambitious, even risky undertaking. Unemployment still hovers at 10 percent in the city, which has only just begun to gain back some of the 150,000 jobs lost during the recession. Not so long ago, the real estate industry was right behind Wall Street and the nation’s automakers in crying for a federal bailout.

Access to financing determines when and how something gets built – in this case it was Abu Dhabi since US banks are not interested new luxury condo development given the excess inventory that needs to be absorbed first.

Barnett said “We think it’ll be the nicest project ever built in New York.” Given the proximity and the success of nearby 15 Central Park West – my vote for the best Manhattan condo ever built, I’m guessing that’s the comparison being made. Although recent sales there have topped $6,000 per square foot, the building fronts Central Park and straddles Midtown and the Upper West Side, I’m not so sure its a reasonable comparison to make but I do wish them well.

Remember I’m not cut out to be a developer.

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The Wealth Report 2010 was released today by Knight Frank Research. It is a much anticipated annual survey targeted at the high end consumer with great detail on global residential property trends. The report covers 56 high end housing markets across the globe.

Check out The Housing Helix podcast for my interview with Andrew Shirley, Editor and Liam Bailey, Head of Residential Research for the Knight Frank Wealth Report 2010.

I had provided commentary on the NYC housing market for the report.

….While the market has undoubtedly improved compared with last year, we ought not to get too excited. The recovery of late 2009 was a short-term uptick, due in large part to a release in pent-up demand. My view is that the surge in demand is not the start of a rising housing market. While sales are up sharply, prices have moved “sideways.”…

Some interesting data points:

• Overall annual global decline was 5.5%
• Monaco saw prices as high as $5,900 p/SF US.
• 73% of cities saw year over year declines versus 40% last year.
• Middle East down 27.5% – the largest decline – Dubai showed a 45% drop.
• Asia Pacific up 17.1% – the highest increase – Shanghai showed a 52% gain.

In light of this strong growth, the Hong Kong government has threatened measures to restrict the market – notably through mortgage lending restraint, reducing, for example, the mortgage limit for luxury property from 70% to 60%. Despite these potential restrictions the market continues to grow.

This example points to an interesting development. The crippling impact of property bubbles bursting in Europe and the US has created a much more confidently interventionist approach in China, Hong Kong and Singapore (where cooling measures were introduced in September last year) among other markets.

Listen to the interview with Knight Frank [The Housing Helix Podcast]
Download The 2010 Wealth Report [Knight Frank]

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Update: Just came across the Bloomberg video and my interview giving a quick take on the US luxury portion.

The future of condo new development sales activity across the US appears in serious trouble, yet it doesn’t have to be that way – and its all due to a new government agency, Fannie Mae.

Back in September 2008, when the wheels were coming off the economic wagon, the US Treasury bailed out the former GSEs Fannie Mae and Freddie Mac (and AIG). It was the end of an era where both enterprises served two masters: the US taxpayer (exposure to risk) and its shareholders (profits and share price), to simply serving the former.

The mandate of promoting home ownership at all costs (literally) by these institutions had run amok which is one of the reasons why we are in this mess. While the GSEs served a noble purchase of providing standardization and liquidity to the mortgage market to promote home ownership, somewhere along the way, the link between value and risk was lost because systemic risks were not clearly understood. To be fair, they were simply one part of a giant problem, yet a key part because Fannie Mae set the tone for the mortgage industry and that message was grow at all costs and lend by exception.

Now that Fannie Mae is effectively a government agency, it is getting reacquainted with the religion of risk, and it’s become a quick student by adopting policies that are prudent, but very damaging to the collateral they are trying to protect. It is of great concern because the rules are being changed in the middle of the game, making weak markets worse by stranding thousands of would be buyers and owners. Many new development projects are stalled or have had only a handful of sales since the September tipping point.

Effective March 1, Fannie Mae:

The government-backed mortgage-finance company stopped guaranteeing mortgages in condo buildings where fewer than 70% of the units have been sold, up from 51%. In addition, the company won’t back loans for sales in buildings where 15% of current owners are delinquent on association fees or where more than 10% of units are owned by a single-entity.

Prudent, yet devastating to the existing inventory of newly developed condos across the country – a robotic like ruling that may likely stop most sales activity in new developments if buyers can’t qualify for mortgages. This will simply damage the entire collateral classification (new development condo) and push many existing loans underwater.

Of all the new changes (which are not unreasonable if the housing market wasn’t in crisis) the increase from 51% to 70% pre-sale requirement for a mortgage to qualify for purchase by Fannie Mae makes it nearly impossible for buyers to qualify for a mortgage in a new development unless it is nearly sold out. All the projects that came online late in the cycle could be damaged by this hard core – its a catch-22 really. How does a project claw its way from say 20% sold to 70% sold? All cash lenders and those that ignore Fannie Mae are few.

The policy will result in a higher rate of foreclosures for entire developments as well as individual homeowners who no longer qualify.

In other words, if you helped make the mess, you need to help clean it up, not make it worse. And of course, get a bonus.

we just don’t know it yet…

I think my use of the phrase “pet spas and on-site sommeliers” has made the rounds long enough and others like it over the past several years to be put to rest…please.

As housing and consumers benefited from the era of easy credit, the surplus of new development entering the housing market necessitated more creative marketing to differentiate the vast array of product under the now tired “lifestyle” moniker. (cliche alert: Location 3x, Lifestyle)

The Conspicuous consumption goes out of style article in Sunday’s International Herald Tribune (or Friday’s New York Times’ In Hard Times, No More Fancy Pants) confirmed what I had been observing for the past few months as the credit crunch bore down on all of our lives.

The US economy is faltering under a significant global financial crisis. A new presidential administration/party is taking over the reigns.

Individuals seeking the biggest and the best will probably do so with less fanfare. Housing demand will likely be re-defined by the marketing shift to austerity.

Times have changed and we don’t have the luxury of asking “Wassup!” of someone without regretting we asked. Speaking of bailouts (c’mon, you were thinking about it), here’s a prime example of how GM continues to miss the market: “My Hybrid Is Bigger Than Your Hybrid.“

Long Island City has been one of those segments of the New York City real estate market that has quietly experienced fairly broad consumer acceptance in a short period of time. This is evidenced by the large level of purchase activity over the past several years in response to new development efforts. As a result, residential support services are entering the market at an impressive pace.

Located in Queens, Long Island City has signifiant linkage to Manhattan. The new residential condominium developments in Long Island City are generally selling for roughly half the price per square foot of similar product in Manhattan and yet is only a few minutes away from Manhattan via subway. (That’s how I plan to get there tonight.)

At 6:30 this evening, Dottie Herman, CEO of Prudential Douglas Elliman and I will first speak at The Powerhouse Condominium and then at 7:30 we will speak at L Haus Condominium to the brokers attending the event. Her firm’s New Homes Development Group is handling the marketing of both developments plus a nearby property that is already being marketed called The Foundry and they are included in the event as well.

Should be fun.