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 -Friday, May 11, 2012, 12:37 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:
With all the hoopla about record low mortgage rates, the resurgence of entry-level buyers despite the headline-creating high end market, entering the “gray” area of rent versus buy, I thought I’d take a look at how falling mortgage rates impact the size of apartments being sold. The logic being that smaller apartments thrive as rates fall. I recognize that there is a lot more nuance in the size of what sells at any given time, but hey, this is Curbed…
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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 -Wednesday, April 25, 2012, 9:28 AM
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Quest Magazine asked me to write an intro piece on the luxury housing phenomenon i.e. “Real Estate Renaissance” followed by a number of housing types from the markets they publish within. Quest is a beautiful magazine with some interesting editorial perspectives and great visuals on high end real estate.
Here’s what I wrote (I’m arguably the driest writer in the magazine, but hey, it’s how I think):
Real Estate Renaissance: Jonathan Miller – April 2012
One of the primary characteristics of the U.S. coastal housing markets, after the dust settled from the collapse of Lehman Brothers, has been a sustained period of high-end market strength. Trophy properties are seeing new demand.
The sudden end to an era of reckless bank underwriting and subsequent entry into a period of fiscal austerity was expected to disproportionately crush the luxury housing market. Easy access to credit allowed for many consumers to live beyond their means.
The onset of the credit crunch led to the overnight evaporation of the secondary market for jumbo mortgages, too large to be purchased by ailing Fannie Mae and Freddie Mac. While the federal government focused on the former GSEs, little attention was given to improving access to mortgage financing for high-end housing. Banks now have to hold jumbo mortgages in their own portfolios rather than offload the risk to investors hungry for bigger returns. The much tougher jumbo mortgage financing requirements were expected to bring a collapse of high-end housing prices and grind sales activity to a halt. But that isn’t how it played out. The price spread between high-end and starter homes has expanded over the past several years despite irrational mortgage underwriting standards for jumbo mortgages. In fact, a remarkable number of home purchases at the high end of the market have been paid with cash rather than obtaining mortgage financing at commercial banks, thereby bypassing the lending industry’s legacy of poor lending decisions in the prior decade. The global accumulation of wealth during the global economic boom enabled many investors after its end to seek out luxury housing in the U.S., helping coastal markets outperform others.
The weakness of the U.S. dollar against other foreign currencies, specifically in Europe, South America, and Asia has brought investors to U.S. soil in droves. Initially, this was viewed as a currency play where wealthy foreign investors were simply taking advantage of the sharp discount for U.S. housing. While the favorable exchange rates may have tipped the balance towards the acquisition of U.S. assets like housing because of the perceived discount, investors were also moving their assets into a relatively more politically and economically stable environment.
Will the use of cash in housing purchases continue? It seems likely, perhaps out of necessity. Rational jumbo mortgage underwriting standards and the creation of stable secondary market for jumbo markets is not expected to return for years. Once those problems are eventually resolved, the widening gap between luxury housing and the balance of the market could very well widen further.
Posted by Jonathan J. Miller -Monday, April 23, 2012, 11:04 PM
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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 -Wednesday, April 18, 2012, 9:24 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’ve been fixated on the higher rental costs facing New Yorkers as of late, I thought I’d look at the the ownership side of the housing market and, specifically, monthly HOA fees.
I wanted to present a visual on how these monthly fees trended over the past 3+ years. I looked at the average monthly cost per square foot based on all the sales I had for each period…
[click to expand]
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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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 -Thursday, April 12, 2012, 11:56 AM
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We published our report on the Manhattan rental market for 1Q 2012 this morning. I’ve been authoring this report series for Douglas Elliman since 1994 and added this regional report three years ago (but have over 20 years of historical behind it).
Rents continue to rise, but rather than being a leading indicator of an improving economy and sales market they are a reflection of an irrationally tight mortgage lending environment. Drivers of tight credit, namely low rates, rising foreclosures, more regulations and sliding housing prices are keeping underwriting standards above historical norms and as a result, driving more volume into the rental market driving rents higher. This is a national phenomenon, not just a Manhattan situation.
Here’s an excerpt from the report:
Year-over-year prices continued to
show strong gains as landlord concessions
declined. Median net effective rent was
$3,064 for the first quarter, 9.1% higher
than $2,808 in the prior year quarter.
Use of concessions fell to 11.1% winthin
all new rentals from 36.8% in the same
period last year. Rental price per square
foot increased to $52.57 in the first quarter,
reaching its highest level since the third
quarter of 2008, just as the credit crunch
began.
I’ve got a tool to build custom data tables on the Manhattan rental market. I will be updating the chart section shortly. In the meantime you can see other market areas and some other generally cool housing market charts (IMHO).
* The Elliman Report: 1Q 2012 Manhattan Rentals [Miller Samuel]
* The Elliman Report: 1Q 2012 Manhattan Rentals [Prudential Douglas Elliman]
Posted by Jonathan J. Miller -Tuesday, April 10, 2012, 2:19 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:
A continuing refrain in 2012 has been (no, not Linsanity) the shortage of Manhattan apartment inventory. Seems like everyone has been complaining about it. I thought I’d look at how 2012 was shaping up by parsing out the markets by bedroom size. I looked at the first 12 weeks of the year and compared it against the average of the three prior years. Although I’d rather average the last decade as a basis of comparison, my per unit historical only goes back to late 2008…
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