Housing Has A Runway In Front Of It

January 8, 2021

2021 so far…wait for it…and think about taking some Dramamine.

But I digress…

The Manhattan Sales Market Continues To Claw Out Of The Hole COVID Dug

I’ve been writing the expanding Elliman Report series for Douglas Elliman since 1994. One of the first reports we undertook covered the Manhattan sales market. This week we published the Elliman Report: Manhattan Sales Q4-2020 that showed market activity surging after the lockdown ended but still falling short of the prior-year quarter. Sellers are pricing better to drive more deal flow and based on the results of the New Signed Contract Report covered later down the page, there is a possibility that year-ago parity will be reached by the spring.

Coverage of note (in no particular order):

Bloomberg: Manhattan Home-Shoppers Aren’t Finding Huge Covid Discounts Yet
New York Times: New York real estate begins to recover after a grim year.
The Real Deal New York: Manhattan’s condos get year-end sales boost as inventory balloons
Crain’s New York Business: Manhattan ends 2020 with stronger residential sales

Here’s the same Bloomberg chart two different ways.

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MANHATTAN SALES MARKET HIGHLIGHTS

Co-ops & Condos
After lagging the region’s sales trends during the COVID era, Manhattan sales levels surged from the prior quarter but remained short of the level reached in the same period a year ago.

Elliman Report: Manhattan Sales Q4-2020

– The number of sales surged from the prior quarter but fell short of year-ago levels
– The market share of cash buyers fell to a new record low as mortgage rates plummeted
– The price trend indicators showed mixed results from prior-year levels as sales activity improved at the upper end
– Median resales price slipped for the fifth time in six quarters
– The number of co-op sales jumped from the prior quarter but fell short of year-ago levels
– There was a significant year over year uptick in condo sales above the $5 million threshold, particularly new development
– Luxury median sales price rose annually for the second straight quarter skewed by the rise in sales size
– The market share of new development closings exceeded the quarterly average for the decade

A screenshot from my internal spreadsheet shows the jump in high end sales as seller’s dropped prices to the new market level:

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NORTHERN MANHATTAN SALES MARKET HIGHLIGHTS

Elliman Report: Northern Manhattan Sales Q4-2020

“Apartment sales surged from the prior quarter while townhouses shifted to larger sized sales.”

Co-ops & Condos
– The number of sales surged from the prior quarter but remained short of year-ago levels.
– Listing inventory fell from the prior quarter record but remained sharply higher than the same period last year.

Townhouses
– Overall price trend indicators rose above year-ago levels, skewed by the shift to larger sized sales.
– Listing inventory continued to fall sharply along with the number of sales.

New Signed Contracts Are Up Everywhere

The New “New Signed Contracts Report” series we launched for Douglas Elliman in the early days of the lockdown has been showing growth across the four regions we cover:

Elliman Report: New Signed Contracts New York December 2020
Elliman Report: New Signed Contracts Florida December 2020
Elliman Report: New Signed Contracts California December 2020
Elliman Report: New Signed Contracts Colorado December 2020

Most notably, Manhattan exceeded year-ago levels for the first time since the COVID lockdown.

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New York New Signed Contracts Report

Elliman Report: New Signed Contracts New York December 2020

Manhattan
New signed contracts for co-ops and condos rose annually for the first time since the lockdown ended while townhouses have continued to exceed year ago levels since September. Co-op and condo new listing inventory have fallen year over year for the third straight month.

Brooklyn
New signed contracts for all three property types were more than triple the levels seen in the year-ago period, continuing the streak since July. New listing inventory saw significant gains but was overshadowed by new signed contract growth by a multiple of three to four times.

Long Island (excluding H/NF)
New signed contract activity for each property type rose year over year for the sixth straight month. Modest new inventory gains were significantly overpowered by robust new signed contract growth.

Hamptons
New signed contract activity for each property type rose year over year for the seventh straight month. The significant gain in new inventory continued to exceed new signed contract growth in recent months.

North Fork
New signed contract activity for each property type rose year over year for the seventh straight month. Overall new inventory declined year over year for the first time since May.

Westchester
New signed contract activity for each property type rose sharply year over year for the sixth straight month. Modest new inventory gains were significantly overpowered by robust new signed contract growth.

Fairfield
Single family new signed contract activity rose year over year for the sixth straight month while new inventory fell year over year for the third straight month, keeping the market pace brisk.

Greenwich
Single family and condo new signed contracts continued to show gains of roughly triple the levels of the same month last year. While new listings for both property types were up over the same period but growth remain significantly below the rate of new signed contracts.

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Florida New Signed Contracts Report

Elliman Report: New Signed Contracts Florida December 2020

Palm Beach County
New signed contracts for single families and condos nearly doubled from year ago levels with greater growth seen at the upper price tranches. New inventory for both property types continued to slide, keep the market pace brisk.

Broward County
Condo new signed contract annual growth continued to outpace single family growth. larger year over year gains were observed in the higher price tranches. Overall new inventory for both property types showed modest change.

Miami-Dade County
New signed contracts for condos rose at nearly three times the rate of single family new signed contracts with generally more gains at higher price tranches. New listings for condos fell sharply.

Pinellas County
Single family new signed contracts edged up year over year with more significant gains seen in the higher price tranches. Condo new signed contracts fell year over year but growth in most of the upper price tranches remained strong.

Hillsborough County
New signed contracts for single families showed stability while condos showed modest annual gains. The upper price tranches for both property types showed significant year over year gains.

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California New Signed Contracts Report

Elliman Report: New Signed Contracts California December 2020

Los Angeles County
Year over year gains for condo new signed contracts continued to outperform single family new signed contract growth. New inventory for both property types fell sharply, helping maintain the robust market pace.

Orange County
New signed contracts for single families and condos continued to decline year over year. New inventory for both property types fell sharply, helping maintain the robust market pace.

San Diego County
New signed contracts for single families and condos continued to decline year over year. New inventory for both property types fell sharply, helping maintain the robust market pace.

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Colorado New Signed Contracts Report

Elliman Report: New Signed Contracts Colorado December 2020

Aspen
New signed contracts for single families showed large annual gains while condo new signed contracts doubled over the same period. Single family new inventory fell sharply for the second straight month, overpowered by new signed contract gains.

Snowmass Village
New signed contracts for single families pressed higher year over year but at the lowest rate since tracking began in July. Single family new inventory fell sharply year over year for the third time in four months.

With a 51% Price Drop, One57 Has New Definition of “Value”

About a month ago, I worked up this chart but never used it – the units are sorted by apartment number with the resale following the original sponsor sale. The blue rows denote resale closings in 2020 At some point, the developer of One57 claimed that the May closing of unit 88 was not an “arm’s length” transaction and its 40.9% discount, therefore, wasn’t real.

However since that May closing, there were four additional closings by August 2020, and three of the four showed discounts in excess of 40% with the outlier only dropping 18.9% in value.

Today Bloomberg reported an additional resale that closed for a 51% discount in December.

The developer who indicated that the 41% discounted resale in May wasn’t “arm’s length” was the same developer who said this in today’s Bloomberg article.

“Clearly, over six years ago the buyer understood the value of this unit,” Gary Barnett, chairman and founder of Extell, said in a statement. “Unfortunately, this was an estate sale and they decided to just dump it.”

Here’s my translation of what was said:

“When prices go down, developers rationalize it by thinking people stop recognizing the value.”

Yet what Extell is really saying is:

“The seller’s definition of value is “what I want it to be or need it to be.”

The reality here is that market value is a moving target and condo development is one of the riskiest property types to speculate. I take my hats off to developer’s in this regard because I don’t have the stomach for it. Just look at what prominent developer HFZ is going through now. This is because a boom like we just went through has a short shelf-life yet the development window is often much longer, taking 2-4 years or perhaps even a decade, like Hudson Yards. Timing and luck are considerable components of development.

It is important to understand that value is not the highest number that can be achieved. That’s really something else. Value is always defined by a moment in time.

The Pied-a-Terre Tax 2 is Blinded By Politics And Devoid Of Critical Thinking

Habit Magazine’s Proposed Pied-a-Terre Tax: Windfall or Boondoggle? provided a good overview

Intentions were good, but the overzealous Housing Stability and Tenant Protection act of 2019 removed any upside for landlords or investors which will lead to a 1960s and 1970s gradual decay in the rental housing stock. It’s already begun. Maintenance has dropped and construction staff had been let go well before the pandemic.

Now the threat of the return of “PAT2” in a multi-edited version of the proposed Pied-a-Terre Tax is more or less personal – based purely on principle without consideration of sustainability. If a tax is proposed that brings in little to no net revenue, then what is it? It’s just a personal attack on the real estate economy that drives more than 50% of New York City’s tax revenue. Cut revenue drastically, on top of the aftermath of the pandemic impact and you cut even more revenue to the city and then see a cut in services. Once you remove yourself from the fog of politics, why would anyone want that?

Getting Graphic

Our favorite charts of the week of our own making

Appraiserville

(For earlier appraisal industry commentary, visit my old clunky REIC site.)

This week’s Appraisal Institute Board meeting was bitterly disappointing because the BOD showed cowardice in hiding how they voted. That cowardice was driven by the FOJs whose corruption is wiping out this institution’s legacy. I’ve got a slew of commentary queued up but will publish it next week because of my heavy market report release schedule and appraisal volume.

OFT (One Final Thought)

I won’t be placing my phone on the table ever again.

Brilliant Idea #1

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– They’ll be more likely to claw out of a hole;
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– And I’ll be overwhelmed with work.

Brilliant Idea #2

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See you next week.

Jonathan J. Miller, CRP, CRE, Member of RAC
President/CEO
Miller Samuel Inc.
Real Estate Appraisers & Consultants
Matrix Blog
@jonathanmiller

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