Single Family Housing Starts: Dog Days of Summer

As we all sit inside our air conditioned offices wondering what will be the next “big” news regarding real estate, the Commerce Department released its estimate of New Single Family Home Construction today.

Stop! We can be happy with this news or we can take it in stride. Every article that I have read, the author comes from a point of strength in that there is some unique data set that only they have access to. There never appears to be any common sense applied and invariably there are always quotes from interested “economic advisors”. The latest news is a classic example.
581,000 new single family homes were built in 2009, according to public records. Now that is a dismal number compared to the hay day of 2005/2006 when over 2 million homes were being built (See Housing In Crisis Report). But is this really a bad number? Every year in the United States, each market replaces existing inventory with new inventory because older homes need to be rebuilt and because of natural disasters. There also is the market for individual, non development homes that are built to meet unique demands of property owners. So 581,000 is actually good number.

But let’s not forget that over 3.5 million vacant housing units that were newly built remain in the market. Let’s not forget that Supply and Demand need to be in balance for a healthy real estate economy to exist. And let’s not forget that supply is reduced by people buying homes and presently this is occurring through natural population growth. So with the national population growing at about 4 million people annually, we will only see about 1 million of the excess inventory absorbed annually. This means three more years before true market levels begin to appear.

Of course in areas where overdevelopment was held in check, the housing markets are already in full recovery. But for areas in Florida, Nevada and Arizona, recovery may be five years away.
Let us know what you think, what you are experiencing in your communities and what you think about the housing recovery!

Housing Market News: Still Cyclical, Seasonal and Emotional

There are conflicting reports on the housing market today. According to news sources and public reocrds, the median sales price nationwide is down close to 16% from a year ago, to $174,100. Simultaneously, there are reports about existing home sales being up close to 4% from the last quarter. All the while, foreclosures are up 7% from the last quarter. But there is one fact about the housing market that arises out of all of these reports: Real Esate is Cyclical, Seasonal and Emotional.

Cyclical Cycles: Run about 15 years in length with the current cycle beginning in late 2006.
Seasonal Changes: Occur every year and follow a fairly consistent pattern.
Emotional Changes: Fear of the unknown is the worst element of any financial market. That is what we’ve experienced for the past nine months.

For property data, real estate reports and market trends, CLICK HERE.

Manhattan Condo Market Projected to Stabilize in 4th Quarter

The Manhattan Condominium Market is about to “shock the skeptics”. There have been numerous reports published by noted “Manhattan Experts”, but a recent article in Crain’s Business week begs of the question “Who is manipulating What and Why? (See the NYC Square Footage Report) (See our repsonse to the Crain's Business Report)

Has a “Shadow” fallen on the NYC condo market, or is it just another game of smoke and mirrors? We thank the New York City Department of Finance for releasing public records, enabling those who have the desire to do the actual analysis, assuming one has the ability to do so. The Department of Finance has provided a rolling sales history since 2003. This represents all property data and sales in New York City; not listings, not possible listings and not sales that didn’t close or the seller backed out. But Real Sales data!

DoF also provides access to the Assessment Rolls for Class I, II, III and IV Properties. From this Assessment Roll we can find out how many properties exist in each borough and when the property was built. An individual with some basic computer skills can than run a query to append the sales file with the Assessment file.

Once completed, a further level of skill is required; not a lot of skill, but just a little. Invalid sales should be stripped out of the analysis. An invalid sale would be a property that transferred for less than $1,000 dollars. As a seasoned valuation analyst, I would actually go an additional step and remove all sales that sold for under a $125 per square foot in Manhattan. The simple fact is that such sales would not be representative of the market and do not come close to representing the actual cost of construction.

So common sense prevails. In the end, a valid set of sales is available for analysis. The table below indicates that the average and median sales price for condos is declining at a rate of about 8% for the first six months of 2009. This is much lower than some reports have indicated, but HOLD ON.. there's more.

The chart above considers the rolling average of sales from July 2008 to July 2009. We have applied this data to adjust for the over correction in the markets and the seasonal affect of winter sales. Based on the trend line, we are projecting that for the months of July, August and September sales activity will increase and property values will adjust upward. Furthermore, the 4th Quarter – which usually shows weaker activity and valuation – will indicate a level of stability.

In short, when you analyze data with a known common factor such as “Square Footage”, manipulation of the data is difficult. Combine this with an open policy of NYC to provide data free for analysis when it used to cost over $20,000, analyst can now openly check one another.
There is a true check and balance and the latest reports about the Manhattan market are misleading.

NYC doesn't have Shadow Inventory, just Smart Investors

The current building supply in New York City is in balance. (In response to Crain’s NY Business, “Shadow Units Cast Pall”)

According to the public records of the US Census, there were 3.328 million Housing Units for NYC in 2008. Of this, 61,000 rental units were held vacant and 26,500 owner occupied units held vacant. The total number of units held vacant in NYC is 2.6% of the total housing units based ib property data. This is well below the National Average of 13.8%. (See the Housing In Crisis report for more details).

Remember that Real Estate is three things: Cyclical, Seasonal and Emotional. Population growth is over 390,000 people since 2000. This represents over 43,750 individuals per year or 16,203 New Households per year. Growth in Housing Units from 2000 to 2008 consisted of 29,006 new Class I Structures for a total of 53,567 new housing units. Class II and Class IV properties increased by 3,472 for Walk-up and Elevator Apartments accounting for over 97,583 new housing units and there were 26,699 new condominiums built. All told, this property development can accommodate a population of 461,167 individuals with an average Household Size of 2.7.


This does not consider the temporary housing for college students and foreign workers. Nor does it accurately reflect that most condominium units are owned with a population size less than 2. If one considers the unique trends of Manhattan, the current building supply in New York City, as stated above, is in balance.

New York City does not have a Shadow Inventory, just smart investors. Why sell when the housing market is weak? Hold on a year and get at least 10% more for your property. We are confusing a smart investor/developer with a property owner who panics. When you can rent and wait out the market, that is smart. Developers, unlike banks, know that dumping product drops values.

Where did all of the common sense go? Sales activity is down because unless you need to sell, you sit tight. Determining current housing market values based on reduced sales activity is not only misleading, but just flat our irresponsible.

For more information regarding the housing market, property searches and real estate reports, CLICK HERE.

Freddie Mac's Outlook Cautious About Seasonal Home Sales

After releasing a report on positive 2nd Quarter gains - with some gains attributed to the slight uptick in home sales - Freddie Mac remains cautious of the housing market. Remember that real estate is three things: Cyclical, Seasonal and Emotional.

“While we are seeing some early signs pointing to a housing recovery — including a modest uptick in house prices in some markets — our outlook remains cautious due to rising foreclosures, growing unemployment, tight lending standards and buyers’ reluctance to re-enter the market,” Interim CEO John Koskinen said.

What are your predictions for Fall home sales? Will we continue to see improvements in the housing market? Or will there be some declines as the spring/summer season comes to a close?
For more information regarding Real Estate Reports and the Mortgage Assistance Program, visit AccuriZ HERE.