Posted by Jonathan J. Miller -Sunday, April 15, 2012, 8:09 PM
I enjoyed Vivian Toy’s New York Times real estate cover story this weekend: Buyer Confidence: Portent or Blip? because it was full of optimism about the spring market. Who doesn’t like feel-good news? Admittedly I was a little rusty on what extactly “portent” meant:
something that foreshadows a coming event : omen, sign
I was the foil in the story:
Jonathan J. Miller, the president of the appraisal firm Miller Samuel, warned that buyer exuberance could be short-lived. With Wall Street bonuses much smaller than in years past, the surge in buying is not likely to last long, he said. “Also, once we hit summer, we’re going to see a lot more distressed properties hitting the market,” he said. “Even though Manhattan is not a hotbed of foreclosure, the world around us will be, so there’ll be more negativity in the air.”
And I have a little theory on why there is a bit more buyer exuberance in the air that can be substantiated right at this moment:
1) The consumer was pummeled by a melee of bad economic news last fall causing them to press the pause button.
2) The Manhattan housing market was relatively quiet until mid-February despite the unusually warm winter.
3) The second half of the first quarter saw a release of pent-up demand.
4) Inventory has not seen much of a seasonal uptick this year (see chart at top of post)
We’re probably seeing some sort of temporary compression of market activity that feels like a boom. Demand kicked in late and those buyers are competing with those more in sync with seasonality. Mortgage rates remain crazy low and sellers have not been very confident about placing their homes on the market and getting their price. If we weren’t talking about Manhattan specifically, we’d also be worried about the rise in foreclosure activity now that the robo-signer servicer settlement between the 49 state attorneys general and the major mortgage servicers has been completed.
I am skeptical that current above average buyer confidence can be sustained past the spring market. Not being a wet blanket here, but I think it is way too early to break out the party plates. Everything tastes better in moderation.
- Buyer Confidence: Portent or Blip? [New York Times]
- Manhattan Sales Market Charts [Miller Samuel]
- The Decline In Inventory Right Now is NOT a Good Sign [Matrix]