2nd quarter statistics defy easy explanation

Since the second quarter price and sales statistics were released on Friday, I’ve been mulling their meaning.

The consensus analysis was that the numbers reflected stability in the market, and I echoed that sentiment in my post’s headline last week.  Actually, I had been saying when asked, frequently, that the market appeared to me to be stable.

But I wonder whether “thank goodness” wouldn’t be more to the point and whether individuals quoted on the state of the Manhattan housing market weren’t just expressing relief that we avoided disaster in April, May and June. How well founded is that relief?

As everyone knows, statistics are easily manipulated — they come from self-interest parties, real estate brokerages. Moreover, they never agree with each other. The value on any one of them perhaps lies in their findings relative to each report’s previous numbers.

Another issue isthat the information feeding into the reports does not include sales that have closed without yet having been recorded in the city register. The data never are up to date.

I’d go buggy trying to sort them all out, so I’m going to concentrate on the report that appraisal executive Jonathan Miller prepares. Still, his document (though certainly not his alone) contains a series of numbers that I find hard to reconcile.

I’m generally narrowing my own analysis to comparisons between last year’s and this year’s second quarter in my belief that results from one quarter to the next have little meaning; after all, buyers don’t tend to trek to open houses during January’s wintry blasts.

A closing just in time to receive the federal tax credit.

Like all the other reports, unfortunately, Miller’s is complicated by last year’s federal tax credit, which distorted second-quarter data, especially for one-bedroom and two-bedroom co-ops and condos. But that is the hand we are dealt.

Taken together, co-op and condo sales volume declined by 3.8 percent, to 2,650. But that pesky tax credit caused a boost in sales last year, making the decrease of negligible interest. In fact, the number of sales was 4.2 percent above the five-year and 4.8 percent above the 20-year average for the quarter. (Recall, though, that the bust occurred during those periods, pulling down the longer-term averages and polluting the comparisons.)

At the same time, the median price in Q2 was 5.5 percent lower than one year earlier, dropping to $850,000 and indicating a paradox: Even though prices went down, sales activity went down as well.

With prices falling, one would expect strong sales. It didn’t happen, and it doesn’t suggest stability to me, only that we are traveling what Miller has described as a “bumpy bottom.”

That’s not the only sign of potholes: Properties lingered on the market this year 136 days on average versus 105 in the tax-credit quarter.

Yet sellers marked down their apartments from their last offering price — not even the original one — by only 3.5 percent before finding a buyer in 2011 in contrast to 9.1 percent in 2010. Does that mean that owners were more desperate last year than this, or that they had higher expectations when they put their homes on the market? I don’t know.

Miller’s index of condos and co-ops under contract but not yet having changed hands — a pending price index — climbed substantially; it was 14.3 percent greater this year than in 2011.  While the price index went up, presumably based on averages, the pending sales index fell precipitously, by 30.7 percent.  Miller attributes the drop in sales volume to the distortion caused by the tax credit in 2010.

What the indices imply is the surge in luxury sales that was all the news this year. Those sales skew both the pending price index and the average price of all sold properties, which rose 9.3 percent and which I do not, therefore, consider a particularly useful metric.

(The multi-million-dollar luxury market had an 11.2 percent rise in the median price and 4 percent reduction in number of sales as Wall Street rebounded. But there were 28 sales at or above $10 million, the highest number since the second quarter of 2008.

(According to Halstead’s figures, the average price of co-ops with at least three bedrooms swelled 28 percent to $3.675 million, while studios and one-bedrooms edged down by approximately 1 percent.)

An unexpected phenomenon occurred with co-ops alone. They registered the highest number of sales, 1,366, in nearly four years.

Co-ops even outpaced condo sales for the third consecutive quarter since the market peaked. They accounted for 51.5 percent of apartment sales in the last quarter as opposed to the two thirds of the market share that those units enjoyed two decades ago, before new developments burgeoned.

The most expensive co-ops had the biggest gains. The top 20 percent in sales volume had a 9.5 percent increase in median price, to $2.3 million. The next most expensive fifth went up 2.5 percent, to $999,000. Below that quintile, prices were flat or as much as 5.8 percent lower than one year earlier.

Two-, three- and four-bedroom units made up 43.7 percent of the co-ops sold in the second quarter.

Rendering of Setai Fifth Avenue condominium.

It appears to me that co-op share rose because the supply of such apartments also rose, 9.7 percent, while condo inventory decreased by 11.2 percent as developers kept available units off the market in their hope for better times.

Unsurprisingly, condo sales were off 17.3 percent and prices slipped 2.7 percent to a median of $1.07 million. Their price changes were the reverse of co-ops, with the upper three fifths of the market dipping by 2.1 percent to, at the top, 4.1 percent, where the median was $3.45 million.

Yet price per square foot of sold condos sold actually grew 4.2 percent, to $1,182, as the result of the increased popularity of apartments with three and four bedrooms, which made up nearly 16 percent of sales in contrast to nearly 10 percent for co-ops.

My impression of the market from these figures is that we are at best merely treading water.

We cannot know whether most of the wealthy have found the big trophy apartments that have invigorated the statistics, what will happen with the oversupply of the more modest units and how soon developers may be releasing their shadow inventory.

What we know for certain is that predicting the future is a hazardous undertaking.

I’m holding my breath for the impact that the national and global economies will have on the Manhattan housing market in particular (never mind the U.S. market in general), what role politics may have on the ethos, what influence tenuous consumer confidence will play and what will be the course of unemployment.

I fear not only a bumpy road, but a rocky one strewn with obstacles that is fit more for all-terrain vehicles than for four-door sedans. We won’t be cruising toward a strong housing recovery for many months to come.

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Malcolm Carter
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022

M: 347-886-0248
F: 347-438-3201

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