The third-quarter Jonathan Miller/Prudential Douglas Elliman and StreetEasy Manhattan sales market reports were released today, and to pretty much nobody’s surprise the numbers in the two influential reports reflect a very hot late winter/spring market in terms of price increases. A plunge in new development sales dampened the party somewhat, though total sales, although lower than last quarter, were significantly better than last year. As CurbedNY summed it up, a common theme of the reports was a return to "normal."
But the reports disagreed to a surprising extent about just how hot the market was. And before we declare victory for the local housing market, we must digest the implications of a significant decline reported by StreetEasy in the number of contracts signed third quarter.
Spring prices up, but how far?
While both reports showed significant price increases, StreetEasy paints a cheerier picture. We won't hazard a guess as to why the numbers diverge so significantly (theories, anyone?), though this is not the first time they have done so, as this Urban Digs chart shows.)
Median Sales Price - According to Prudential Douglas Elliman, median sales prices were up 7.5% from the third quarter of last year and 1.7% from 2nd quarter 2010, while according to StreetEasy, median sales rose 14.4% and 15.3% in those periods.
Average Sales Price – The Prudential Douglas Elliman report says average sales prices went up 12.4% from third quarter last year and up 3.8% from 2nd quarter of this year, while StreetEasy says they're up 13.6% and up 9.9% for the same periods.
Price per square foot – Only Prudential Douglas Elliman gives a figure. At $1,095, it's 10% higher than 3rd quarter 2009 and 4.3% more than 2nd quarter 2010. It still has a ways to go to recapture its $1,251 height at the peak of the market in 2008.
Closings off a little or a lot
StreetEasy reports that the volume of closings dropped by 16.3% from last quarter’s levels and increased by only 1.9% from the closings last year. But Prudential Douglas Elliman reports that sales slipped 3.4% from the prior quarter while rising 19.3% over the prior year.
Given what we have seen of market activity over the past year, the numbers from the Prudential Douglas Elliman report seem more compelling. Apartments go into contract but close approximately three to six months later. In 2009, unlike 2010, the late winter/spring market was grim, with activity picking up later and remaining surprisingly strong throughout the summer. This year, in contrast, the market was very active early on, so it makes sense that there would be a significant increase in sales year-over-year.
High summer's deep freeze: Contract signings down
Compared to sales figures and closing data, which reflect deals struck three to six months ago, current contract signing activity is a much more up-to-the-minute barometer of what is happening right now in terms of sales. So this really caught our attention: According to StreetEasy, the 3rd quarter saw 1,832 listings go into contract, a 37.1% decrease from the prior quarter’s number of new contracts (2,914), and a 30.4% decrease from 3rd quarter of last year.
That suggests that New York City, just like the national market, saw demand pulled forward to the spring, with people who would normally have bought later feeling compelled to enter the market earlier. Perhaps the home-buyer tax credit had more affect than was reported. At any rate, unlike last year, this summer's market was more fizzling than sizzling.
So what's the upshot of all these numbers? As the Prudential Elliman report states: “Overall price indicators showed gains over prior year and prior quarters but were skewed higher by the shift to a more normal sales mix as measured by size of apartment. Record low mortgage rates, improved affordability and favorable exchange rates continue to drive demand while economic challenges of high unemployment and tight credit remain.” Translation: Larger apartments started selling again, the market remains locked in a push me-pull you situation of offsetting factors, some encouraging and some discouraging demand.
Overall, these reports are not that surprising. As Urban Digs' Noah Rosenblatt prognosticated in late spring, the "Q3 report has the better chance of reflecting these yearly price gains based on when the data was captured." In other words, the 3rd quarter market reports simply tell us what we already knew, that the real estate market was quite active earlier in the year and many people decided the time was right to buy, which pushed up prices. The next report will show whether sellers have been able to continue to sell at those prices, given the sharp decline in demand over the summer. If that's the case, you can color us surprised.