This Crazy Housing Market Feels Like A Long Shot

July 8, 2022

Here is an epic long shot I recently discovered as well as the classic Ray Liota Steadicam shot from Goodfellas. I keep thinking of how many of those extras could really screw things up but somehow didn’t. So many analogies here for the current state of the U.S. housing market.

But I digress…

The Q2-2002 Manhattan Sales Report and June 2022 New Signed Contract Report Show The Market Pivot

We’ve been the author of Douglas Elliman‘s expanding market report series since 1994. What makes this relationship work is that I provide market data and insights independently, because they want their clients to be able to make decisions on reliable neutral benchmarks. All the top brokers I know at Elliman and other brokerage firms all do this for their clients, but the firms themselves don’t feel comfortable until well after the market pivots.

What made this report release so interesting was the timing of the pivot. Our Q2-2022 Elliman Report: Manhattan Sales showed market conditions leading up to the change in conditions while the Elliman Report: June 2022 New Signed Contracts showed the conditions after the fed rate hike.

Bloomberg did a good job articulating the pivot in this piece: Manhattan Home Prices Hit a Record While Sales Frenzy Winds Down.

Closed deals still show strength, with buyers paying a median of $1.25 million, but a timelier measure of contracts has been slipping for the past three months.

For some reason, both in the Bloomberg app and the web article, the chart is broken. However someone passed along a copy they saw in Drudge that appended a red arrow.

CNBC and The Real Deal also nailed the story. Lots of media coverage this week because of the market pivot.

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MANHATTAN SALES MARKET HIGHLIGHTS

Elliman Report: Q2-2022 Manhattan Sales

Co-ops & Condos

– Median sales price rose to a record high while average sales price reached its third-highest
– The number of sales increased to the highest total for a second-quarter since 2007
– Cash buyer market share rose to the third-highest tracked, rebounding from the low recorded five quarters ago
– Co-op median sales price rose to the highest on record, the fifth straight year-over-year gain
– Condo median sales price rose to the highest on record, the third straight year-over-year gain
– Largest first to second-quarter rise in condo listing inventory in at least eight years
– Overall luxury price trend indicators continued to rise year over year
– The number of new development sales more than doubled from the same period last year
– New development listing inventory increased sharply year over year for the third consecutive quarter

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NORTHERN MANHATTAN SALES MARKET HIGHLIGHTS

Elliman Report: Q2-2022 Northern Manhattan Sales

Co-ops & Condos
– The average sales price rose year over year for the fifth straight quarter to reach a new high
– Listing inventory increased to a new high after five consecutive annual increases

Townhouses
– All price trend indicators pressed higher year over year, rising collectively in three of the past four quarters
– The number of sales has risen annually for the past six quarters by significant amounts

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New York New Signed Contracts Report

Elliman Report: June 2022 New Signed Contracts

– The New York report attached covers Manhattan, Brooklyn, Long Island, Hamptons, North Fork, Westchester County, Fairfield County, and Greenwich, CT.

Manhattan
Overall new signed contracts have been falling annually since April 2022 compared to the previous year’s unusually elevated activity. However, month over month, newly signed contracts have also fallen for the third month as the recent spike in mortgage rates has slowed demand and expanded new listings. The same pattern emerged for newly signed contracts at or above the $4 million threshold. New signed contracts, and new listings for June were less than the same period pre-pandemic.

Brooklyn
Overall new signed contracts have been falling annually for the past two months compared to the previous year’s unusually elevated activity. However, month over month, newly signed contracts have also fallen for the second straight month as the recent spike in mortgage rates has slowed demand and expanded new listings. New signed contracts, and new listings for June were well above the same period pre-pandemic.

Long Island (excluding H/NF)
Overall new signed contracts have been falling annually since June 2021 compared to the previous year’s unusually elevated activity. However, month over month, newly signed contracts have fallen for three of the past four months as the recent spike in mortgage rates has slowed demand and expanded new listings. As a result, new listings remain well below pre-pandemic levels.

Hamptons
Overall new signed contracts have been falling annually since May 2021 compared to the previous year’s unusually elevated activity. However, month over month, newly signed contracts have fallen for two of the past three months as the recent spike in mortgage rates has slowed demand and expanded new listings. The number of new listings entering the market is well above pre-pandemic levels.

North Fork
Overall new signed contracts have been falling annually since May 2021 (except for April 2022) in comparison to the previous year’s unusually elevated activity. However, month over month, newly signed contracts have only fallen once since February 2022 despite the recent spike in mortgage rates.

Westchester
Overall new signed contracts have been falling annually since June 2021 compared to the previous year’s unusually elevated activity. However, month over month, newly signed contracts have fallen for two of the past three months as the recent spike in mortgage rates has slowed demand and expanded new listings.

Fairfield
Overall new signed contracts have been rising annually since June 2021 in contrast to the region. However, overall, month over month, newly signed contracts have fallen for the first time since December as the recent spike in mortgage rates has slowed demand and expanded new listings.

Greenwich
Overall new signed contracts have been rising annually since January 2022 in contrast to the region. However, month over month, newly signed contracts have fallen for the past three months as the recent spike in mortgage rates has slowed demand and expanded new listings.

The New York Times Addresses The “Crazy” Housing Market

The real estate section’s cover story: What’s Up With the Crazy Housing Market? about the state of the U.S. housing market was a bookmark of the significant change that has occurred over the past three months, pulling in economists, brokers, and non-economists (me).

There have been few moments like this in housing history and although I hate the phrase “this time is different” I do think this time is different given the collpase of listing inventory as a byproduct of keeping rates too low for too long. With 50% of U.S. transactions going to bidding wars, how is that sustainable? We should look at this pivot with relief, not worry.

Excuse the indulgent sharing of my photo here but the NYT got my good side:

MARKETPLACE Is The Rental Market Slowing Down? Maybe.

Housing costs account for about a third of inflation calculations so, in order for the Fed to stop raising the federal funds rate, they need to see housing cool. The “For Sale” market is seeing slowing sales but prices are very sticky on the downside as sellers who don’t get their price often decide not to sell.

Rentals are the key segment to look at since the fed relies on the “rental equivalent” of the “for sale” market to understand housing. Something U.S. rental growth is showing signs of subsiding (not in NYC!) which will help the Fed decide to start backing off with their baseball bat.

Op-ed People To Follow On Housing and Economics

In addition to people I often mention in Housing Notes, I thought I’d add a few more whose work I’ve been reading a lot:

Jonathan Levin – Former Bloomberg Miami Bureau chief covering overing finance, markets and M&A.

Noah Smith – An econo blogger, formerly of Bloomberg, now with a substack account

Sam Ro, CFA – I’ve long followed Sam’s econ related work on Twitter and during his former gigs at Axios, Yahoo and Business Insider.

After Mortgage Rates Spike After A Fed Move, They Slide Back Quite A Bit

U.S. weekly averages as of 07/07/2022

It makes me wonder, no matter whether rental price inflation continues, whether the fed baseball “bat” can continue to bash the economy past the fall without serious damage.

Getting Graphic

My favorite charts of the week of our own making

My favorite charts of the week made by others

Len Kiefer‘s Chart Handiwork

Upcoming Speaking Events

As I was writing these Housing Notes, I took a short break and did a 30 minute interview on Barrons Live who produced an excellent show. I will share the video in next week’s Housing Notes.

Appraiserville

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

After Being Under Attack From All Sides, TAF Goes Dark

We are all scratching our heads, waiting for TAF, the authors of the bat-shit crazy letter and the chickenshit letter (proving they love to express their feelings in public), to address lingering issues that have essentially hung appraisers out to dry, like the ridiculously worded ethics rule, the definition of “misleading” and the absence of any kind of actions regarding the PAVE recommendations. Plus Dave sees PAVE as a “nothing burger” so the lack of transparency from this organization continues.

More details on all of this next week.

AI FOJs Proudly Announce SPP3

In order for Jim Amorin, AI’s wildly overpaid CEO, to save his job, he has created a new flavor of the sham petition process pushed shamelessly over the past two years. He is 1-1 but if he loses this year, he’s out and the gravy train for the FOJs stops. All those teachers stop getting the choice teaching assignments. Now version 3, the long expected sequel is here: Sham Petition Process Part III (SPP3)

More details on this next week and beyond.

And There’s More Coming!

– AI’s China Expansion Was A Scheme To Travel Multiple Times Via First Class With Their Emotional Support Spouses On The Hard-Working Members Dime

– A Dive Into TAF’s Finances Where The Question Comes Up: Why Does A Not For Profit Need A Reserve Fund Of $12 Million?

– An Additional Look Into The Corruption Of The West Virginia RE Appraisal Board

In many ways, the marginalization of our own industry is inevitable, made possible by our own apathy and a handful of leadership that does what it does for themselves and not for the appraisers out there trying to make a living. They have made us vulnerable and we need to do something about it. Please.

OFT (One Final Thought)

In NYC “FAR” is a zoning term for “Floor Area Ratio” but in more practical terms its really “Fry Attachment Rate.”

Brilliant Idea #1

If you need something rock solid in your life (particularly on Friday afternoons) and someone forwarded this to you, or you think you already subscribed, sign up here for these weekly Housing Notes. And be sure to share with a friend or colleague if you enjoy them because:

– They’ll go long;
– You’ll be short;
– And I’ll attch more fries to my order.

Brilliant Idea #2

You’re obviously full of insights and ideas as a reader of Housing Notes. I appreciate every email I receive and it helps me craft the next week’s Housing Note.

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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