Gregory J. Heym
Executive Vice President, Chief Economist
The bottom fell out of the Manhattan real estate market at the start of 2009. In truth, it fell out the day Lehman Brothers declared bankruptcy, but the quarterly market reports put out by the major brokerages lag behind what's happening in the real world, so it was Q1 '09 when we started to see the wreckage. And holy moly, there was wreckage. Nobody bought an apartment who wasn't already roped into a contract for a new luxury condo signed 12-18 months prior, and the reports reflected that: sales levels were low to the point of absurdity, while prices remained wildly overinflated.
It's one year later, and Prudential Douglas Elliman, Corcoran, Halstead and Brown Harris Stevens (and StreetEasy!) have released first-quarter reports for 2010. They show a Manhattan market building momentum and finding its footing, but the year-over-year numbers make the reports look unhinged: sales have nearly doubled, and prices have dropped over 20 percent. The volatility has us dizzy, confused and a little frightened, so to make sense of it all we must go on a journey. We must seek out the oracle!
Paging Jonathan Miller. Jonathan Miller, you have a call at the front desk. >>
Now, the experts tell us never to analyze the real estate market on a quarter-to-quarter basis due to seasonal buying patterns, but since the first quarter of last year was such an anomaly, shouldn't we be looking at Manhattan's recent history to draw some conclusions about the latest numbers? Why, yes we should! Jonathan Miller has given us permission to do just that. The man who gives the Elliman report its juice offered us his three cents on what the hell is going on out there:
The momentum of the market seen in the 2nd half of 2009 continued in the first quarter - prices and sales moved sideways. Anecdotally, although inventory and sales are consistent with averages of the past decade, we have been seeing bidding wars and hearing a lot of complaints about lack of inventory.
Why? Because we estimate about 1/3 of listings in any given quarter are usually overpriced by at least 10%, and this quarter it's more like 2/3 of the product is overpriced. Buyers are bypassing the overpriced listings and fighting for whats left. As a result we saw a sharp decline in listing discount and days on market.
But JMillz, what about prices and sales compared to Q1 '09?
To answer your question, sales doubled but they were at half normal levels last year. Prices are down double digits but most of that decline occurred early in 2009; the last three quarters have been relatively stable price-wise.
The issue this spring is going to be shadow inventory of re-sales. In other words, sellers who pulled their listings in droves last year at this time (inventory in early '09 declined even though sales fell through the floor) are re-listing now to take advantage of a better market. The concern is whether inventory will continue to grow at a brisk pace as it has so far this year.
And just like a Magic 8-Ball, JMillz has left us somewhat satisfied with where we stand, but eager to find out what lies ahead. So what lies ahead? Our impressionable young minds are open to your manipulation! Lay some analysis on us in the comments.
Friday, April 02, 2010