Wall Street sneezed. Now what?

(Flickr photo by Mash Potato)

Few of you would disagree with the thought that the gyrations on Wall Street cannot be a good thing for the housing market in Manhattan.

After all, it is axiomatic that our market catches a cold when Wall Street sneezes.  And Wall Street suffered much worse than a fit of sneezing.  It briefly went into intensive care and, unfortunately, could be rushed there again.

I didn’t need the latest consumer confidence level, the latest statistics in the listing database or the following e-mail on Saturday from buyers with whom I have been working to know that the impact on Manhattan’s housing market has to be severe:

[We] have been discussing our outlook for NYC and we have come to the conclusion that we do not think that we want to spend approximately $500,000 for a 1/2 bath or 2nd bath.  We think that for a savings of $500,000, we can manage with 1 bathroom. . .  

This economy has made us more conservative. I thank you in advance for your understanding.

Indeed, how could I not understand, as I wrote in my response?

(Flicker photo by Diego da Silva)

I don’t see how the housing market can fail to freeze.

Consumer confidence plunged in early August, as the Wall Street Journal noted.  The Thomson Reuters/University of Michigan index for early August recorded a startling drop to 54.9 from 63.7 at the end of July and 63.8 in early July.

That is not a good, though unsurprising, sign of things to come.

The preliminary August current conditions index fell to 69.3 from 75.8 in late July, the Journal reported. The expectations index plummeted to 45.7 from 56.0.

Because it is August and little is happening anyway, I view with a grain of salt the numbers in the OLR (OnLine Residential) database.  But they may be worth a gander.

Compared with the month ended July 17, the time since then has registered what I take to be an insignificant 1.74 percent decline in the median listed price, to $811,400.  At the same time, the (lagging) number of signed contracts fell 6.14 percent, to 76.

To me, the most revealing statistic for this admittedly crude analysis is the number of listings with price cuts.  They actually plummeted by 220 to 969, an 18.5 percent change over the month.

Not so alarming, you might conclude.  But. . . but. . . fully 170 of the 220 — that is, 77 percent — of the reductions over that period occurred in the last seven days!

If you have the stomach for more numbers, consider, too, August’s angst compared with the especially accurate statistics that Noah Rosenblatt of UrbanDigs compiled for July.  He notes that only 1,168 new listings came on the market in July, the 10th consecutive monthly decline in new supply from the previous year.

Moreover, he finds a mere 713 contracts signed that month, down from 988 in June and also down from 760 one year earlier.

At the same time, pending sales — those at some stage after having gone to contract and before closing — have continued a steep downward trend that began in June.  They are down 8.7 percent as of now, though seasonal decreases are normal.

Seasonal or not, I’m wondering whether this won’t be the fall and winter of our discontent.

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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

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Weekly Roundup: Housing market news is mixed

Here’s your chance to catch up with news included to inform, enlighten and perhaps even entertain you. To read about The Big Apple, check out another of today’s three posts.

SUTTON PLACE DUPLEX IN WHICH LATE MAGAZINE MAGNATE LIVED FINALLY SELLS FOR $7 MILLION

HER SEX IN THE CITY WILL CENTER ON CENTRAL PARK WEST WHEN HER HUSBAND TAKES TIME OFF

ACTOR’S NEWLY LISTED PENTHOUSE IS PRESUMED EXPENSIVE

LATE SIDEKICK’S HOUSE IS IN FORECLOSURE, SPORTS FIGURE PLANS TO PRACTICE OUTSIDE NEW HOME, MOVIE MOGUL BUYS IN L.A.

PRICES OF U.S. OF SINGLE-FAMILY HOMES

Why isn’t a bevy of buyers biting the bullet?

 

The yellow line represents the 30-year fixed-rate mortgage from October 1970 until now. (Reproduced with the permission of Mortgage-X.com)

As almost everyone knows, there was a time that mortgage rates soared into the high teens.  I remember it well.

With interest rates as low as they are, I’ve been wondering why buyers in Manhattan aren’t eager to snap up properties with funds borrowed at record lows.  Taking into account government subsidies in the form of tax deductions, how could this fourth quarter’s activity be so relatively sluggish?  (It is, though the Q3 reports may lead you to believe otherwise.)

A poll in yesterday’s New York Times and an account of Ben Bernanke’s big speech last Friday provided me with some insight.

Plans to buy, renovate home bounce back in year

In May of 2009, only 3.0 percent of the 717 New York State residents polled by the Siena (College) Research Institute of Loudonville said they planned to buy a home.  Last month, that number rose to 4.7 percent.

Those results compare with 3.7 percent in May 2008 and 5.3 percent in May 2007, close to the height of the housing boom.  (Lehman Brothers imploded on Sept. 15, 2008.)

With respect to undertaking a major renovation, the numbers starting in 2007 were 20.6 percent, 16.9 percent, 13.8 percent and, this year, 17.8 percent.

The numbers do not completely correlate with the study’s index of consumer confidence,

Wall Street bonus impact leaves many guessing

Photo by epicharmus.

It is hardly surprising that there has been a flurry of stories in the last few days about the impact that heady bonuses will have on Wall Street.  Will they goose real estate sales, especially at the higher end?

Where’s that bottom everyone is talking about?

Buyers seem not only to be looking again, but they are starting to make offers.  And the offers are less likely to be insulting than they were just a couple of months ago.  Much of the activity appears to be centered on properties listed below $1 million, though buyers at higher levels clearly are less gun-shy than they were in the recent past.

If you doubt the foregoing information, have a look at Sunday’s New York Times, which leads the Real Estate section with a long piece that has the following headline:

Bidding Wars Resume

Regular readers of this blog and my e-newsletter won’t be surprised by the news: I have been warning that such wars would reappear once there occurred a perception that the bottom was here or approaching.  (However, my timing was a bit off; I didn’t expect that change until sometime next year. In any case, I doubt the trend is widespread yet.)

Ask buyers about their renewed interest, and the answers are almost the same:

The sky is falling! The sky is falling!

In today’s New York Times, reporter David Streitfeld discovers that a number of others, including me, have been saying for months: Home prices and sales could continue to decline.  The way the article is written would lead–and doubtless will lead–readers to believe that the sky is falling.

Yes, it’s undeniable that many variables could change the anemically recovering housing market.  Among them are consumer confidence, unemployment rate, inflation, mortgage rates and a rise in the rate of foreclosures.

Case-Shiller indices record slower price decline

The S&P/Case-Shiller Home Price Indices, which omit apartment sales, decreased approximately 18 percent in April from one year earlier.

The declines compared with March’s 18.7 percent. For the past three months, the 10-City and 20-City Composites have recorded an improvement in annual returns. The January data had a 19.4 percent drop for the 10-City Composite and 19.0 percent for the 20-City Composite.

The Case-Shiller 10-City and 20-City Composites declined 18.0% and 18.1%, respectively, in April compared with the same month last year.

“The pace of decline in residential real estate slowed in April,” said David M. Blitzer, chairman of the Stand & Poor’s Index Committee.

Stick out foot, aim gun, now shoot

Home construction leaped up 17.2 percent between April and May, largely because of a burst in the multifamily sector.  (Details in my next biweekly newsletter.)

Don’t start celebrating.

Booming consumer optimism could affect housing

One reason buyers have been on the sidelines so long in the U.S. housing market in general and the New York market in particular has been their lack of confidence.

Nationally, that confidence jumped up again in May, according to the Conference Board’s Consumer Confidence Index, which had improved considerably in April.  The Index now stands at 54.9 (1985=100), up from 40.8 in April.  The Present Situation Index increased to 28.9 from 25.5 last month.  The Expectations Index rose to 72.3 from 51.0 in April.

Says Lynn Franco, Director of The Conference Board Consumer Research Center:

“After two months of significant improvements, the Consumer Confidence Index is now at its highest level in eight months (Sept. 2008, 61.4).  Continued gains in the Present Situation Index indicate that current conditions have moderately improved, and growth in the second quarter is likely to be less negative than in the first.  Looking ahead, consumers are considerably less pessimistic than they were earlier this year, and expectations are that business conditions, the labor market and incomes will improve in the coming months.  While confidence is still weak by historical standards, as far as consumers are concerned, the worst is now behind us.”

If she’s correct, does that mean