Posted by Jonathan J. Miller -Tuesday, May 15, 2012, 10:04 AM
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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 “blue” line for average changes very little year to year but the scale of the chart does frequently.
Side by side Manhattan regional comparison:
April 2011 v. April 2012
[click images to expand]
Thoughts on the year-over-year comparisons
- Manhattan All price segments below $2M experienced noticeable increase in pace of absorption.
- East Side Condo market accelerating except for $10M+
- West Side $3M to $10M accelerating
- Downtown Below $2M went from faster than average absorption to a lot faster.
Note: This chart series does not include shadow inventory (properties ready for market but not yet listed for sale) so this analysis somewhat understates the pace of condo absorption. The Uptown (Northern Manhattan) data set is too thin for a reliable presentation.
Posted by Jonathan J. Miller -Thursday, May 10, 2012, 10:50 AM
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A few days ago, a post by Felix Salmon at Reuters caught my eye: Chart of the day: Let’s go buy a house! Yesterday he asked me to send similar data for NYC and would run the same chart. I sent over 20 years worth of median sales price and median rental price (face) data for Manhattan and he punched one out: Rent vs buy, Manhattan edition laying the results on top of the US data.
He’s running a payment equivalent adjusting for inflation and he says:
Obviously the Manhattan data series, with fewer transactions, are much noisier than the national series. But broadly speaking, it costs you the same amount to buy a house today, in terms of your monthly mortgage payment, as it did at the end of 2004, when the median sales price was just over $600,000.
Here’s what I told him when admiring his chart handiwork:
We are def moving into a gray area where we are now seeing more and more Manhattan individual apts as cheaper to buy than rent in our appraisal practice – especially coops since they are cheaper than condos. Obviously the problem remains whether the buyer is credit worthy.
Since this analysis is in aggregate, there is not a “tipping” point where the line is crossed and everyone runs out and just starts buying apts (i.e. Justin Bieber tickets).
Posted by Jonathan J. Miller -Wednesday, May 2, 2012, 1:20 PM
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It’s time to share my Three Cents Worth on Curbed NY, at the intersection of neighborhood and real estate in the capitol of the world. And I’m simply here to take measurements.
Read today’s 3CW post on Curbed New York:
Since we are in some sort of rent versus buy gray zone right now, I thought I’d create a “gray” matrix showing the market share differences in location and apartment size based on the buy and rental market in Manhattan. This is not a rent versus buy analysis but rather a comparison between two distinctly different markets…
[click to expand to humungous version]
Posted by Jonathan J. Miller -Tuesday, April 24, 2012, 11:11 PM
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It’s time to share my Three Cents Worth on Curbed NY, at the intersection of neighborhood and real estate in the capitol of the world. And I’m simply here to take measurements.
Read today’s 3CW post on Curbed New York:
By far the three most popular observations about the Manhattan housing market to date in 2012 are: “mortgage rates are at historic lows” and “listing inventory is tight” and…ok, there are just two that are worthy.
I thought I’d mash them together and see what happened since I’ve never made the direct association. Admittedly I was surprised with the visual that resulted….
[click to expand]
Posted by Jonathan J. Miller -Monday, April 23, 2012, 11:04 PM
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[click to expand]
Recently I was contact by The Real Deal Magazine to take a look at the correlation between the stock market performance and the housing market. I personally don’t believe it and I have written about correlation and how silly it can get.
The thinking goes like this:
The Dow Jones Industrial Average rises, the housing market rises = correlation = a housing market indicator, but…
“Twenty-five percent of New York City wages come from financial services,” Miller said. “It’s part of the fiber of being here and so there’s always been a propensity to correlate the Dow Jones industrial average with housing here. I don’t ascribe to that belief. Housing is not a stock. [Rather,] if you have a robust and actively traded market, in theory, employment is more likely to be stable, which consummates sales transactions.”
Actually, Manhattan’s market share was 37% in 2009 after reaching 44% in 2008.
For years I’ve been posting a DJIA versus Manhattan inflation-adjusted sales price chart and there wasn’t much correlation – I also tried a non-inflation version to no avail. But the reporter’s call inspired me to revisit the topic and compare DJIA against Manhattan sales and the patterns were actually pretty similar (see top chart).
When I think about the housing rebound in the dark days just after the Lehman tipping point and how stock-market orientated we are in Manhattan, the only thing that seemed to push consumers back into the market was the roar of the stock market in the first quarter of 2009. This comparison against sales (transactions) seems show the same trend. While I’m still not on the correlation bandwagon, the 20-year trend is quite compelling.
Posted by Jonathan J. Miller -Monday, April 16, 2012, 6:00 AM
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[click to expand]
One of the big issues in following the rental market over the past couple of years has been the disparity between the rental rate of the lease and the actual rent paid by the tenant. Here’s the difference:
Face Rent the formal or gross rent amount on the lease before any concessions offered by the landlord (i.e. free rent, paid commissions, etc.)
Net Effective Rent the face rent less the concessions offered by the landlord (i.e. free rent, paid commissions, etc.)
In periods with high rates of landlord concessions, the face rent trends much higher than what tenants are actually paying (net effective rent). This was clearly the case in 2009 and 2010.
The disparity really bothered me so I figured out a way to track this information and Douglas Elliman’s rental division helped me capture it on a very large sample size of the market. To date we’re the only source of this metric, but to the consumer’s benefit, it now doesn’t matter a whole lot anymore (sigh).
Back in 2009, 2010, landlords were routinely paying concessions of 2-3 months of free rent in 2/3 of all leases. Now it’s about 1 month of free rent in about 1 out of 10 leases. In other words, it’s a nominal phenomenon (good name for a rock band). The chart above shows that the two trends have come together.
But when the rental market weakens (in a few years when credit eases), the lines will begin to diverge again and we’ll still be tracking it.
Posted by Jonathan J. Miller -Monday, April 16, 2012, 12:01 AM
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[click to expand]
I’ll be speaking with Bloomberg’s Ken Prewitt and Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance.” on Monday morning at 9am. We released our rental market report last week and we’ll be speaking about the relationship between the sales and rental market and the disparity between current peak and the last peak: credit policy between those two periods were polar opposites:
4Q 2006: Manhattan Rental Market sets a 20-year (the length of my data series) record high. Credit standards were essentially non-existent by that time in the housing boom causing prices to rise so rapidly that the lack affordability ultimately pushed buyers into the rental market.
1Q 2012: Current credit standards for mortgage lending are so tight that many potential buyers are forced to rent, competing with the existing rental pool and forcing rents to rise – they are currently just 5% short of the 4Q 2006 record.
- [Tight Credit] 1Q 2012 Manhattan Rental Report [Miller Samuel]
- Manhattan Rental Market Charts [Miller Samuel]
- Ken Prewitt and Tom Keene on Bloomberg Radio’s “Bloomberg Surveillance. [Bloomberg]
Posted by Jonathan J. Miller -Sunday, April 15, 2012, 8:09 PM
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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)
The result?
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.
Conclusion?
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.
