Latest News on Housing Market: Not a Surprise

The latest news on property data and Home Prices should not come as a surprise and we should not begin celebrating an end to the crisis. In our article Cyclical, Seasonal and Emotional, we discussed the three critical phases of real estate selling patterns that have attributed to the housing bust.

The latest news and public records indicate that these critical phases are performing to historical levels. That is, the summer seasonal market is showing a correction to the cyclical change that began in 2007. Now the million dollar question is, will the fall seasonal market (which affects Florida, Arizona and Nevada) continue to show recovery or will the markets pause until the next “Selling Season in 2010?”

Our report: Housing in Crisis (published in March 2009) addressed the broader issue of excess housing. Again, there is good news on this front. The excess housing is being absorbed at an annualized rate of about 1 million units. Having a glut of 5 million units at the end of 2008, this means we have another three to four years before the overall markets start to recover.
Housing Recovery is the focal point here. We predict that the Northeast will continue to show stability, with modest corrections in local markets from 3% to 5% through the end of 2010. The Midwest remains strong and will experience similar stability. In the five biggest areas where excess housing still dictates selling patterns, we are predicting that Arizona will recover sooner than sections of Florida and Vegas.

The latest news on the housing market is not a surpirse. Recovery and Stability are the focal points and we should start to see signs of this in the upcoming months.
No one should be surprised when the next Housing Index comes out in September which will show a further strengthening of the market and continued adjustment in housing values in an upward trend. Our report Median Sales Price published in March of 2009 indicated that the overall Median Sales Price would move upward to $215,000 to $220,000 by year end. The current median sale price as reported by the Commerce Department is a $210,000, an increase of over 5% from the low of $201,400 early this year.

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.