why do they issue quarterly reports?
I don’t know how many people actually do this, but I have now read the Manhattan real estate quarterly reports from each of the Big Firms. This exercise cause me to wonder why they do it … what benefits do they seek in issuing these reports? Clearly, there is a great deal of effort involved, and a race to get the numbers out as close to the end of the quarter as possible, hence into the initial news reports (all three came out on April 2 this time).
I have no direct or inside information, but I have a theory — based simply on the content of the reports — that it comes down to habit: they do what they do because that is the way they have done what they do. And they have different audiences in mind.
The Terra reports, I suspect, are as light on comprehensive analysis as they are because that’s what they think their customer base wants (or, what their customer base wanted however long ago they started these reports). They look as though they cut-and-paste the new numbers in each quarter, with a template that includes one or two nuggets per neighborhood. It is kind of weird, as Halstead is doing cutting-edge stuff on the web with videos, while their market reports just don’t go very far. It looks to me as though they think that their target consumer is not very interested in detailed data.
My sense is that the old Douglas Elliman teamed up with Miller Samuel way back when, essentially piggy-backing on the work of the appraisal firm and letting The Miller write the reports. Since that is the way they started, the ‘voice’ in the Prudential Douglas Elliman reports is that of The Miller. In contrast, the Other Major Firm has long written its own reports, and collected its own data. Now that it has a relationship with Property Shark, they can do some interesting things (like the map showing all closings in the quarter, by building and price-per-foot), but that template seems to remain The Firm’s, not Property Shark’s.
That Other Major Firm seems to think that its target consumers want a lot of detail (and charts, charts and more charts), but not a lot of analysis. Whatever PruDE thinks their target consumers want, they get The Miller: rigor, detail, and nuance. Why do I say this?
why are sales up?
Compare how these two firms treated the increase in sales activity in the First Quarter. One report hit the top-level numbers in the text and brought out the cheerleaders and pom-poms (details were left to the charts). On page 4 of 16:
Buyers have recognized that now is a great time to purchase property. As of this writing, the number of market-wide closed sales in First Quarter 2010 is 23% higher than First Quarter 2009. Once all First Quarter 2010 sales are tallied (due to the lag time between a closing and its recording not all sales are able to be included in this report), we estimate that the number of sales could be as much as 70% higher than a year ago. Resale activity was strongly improved with increased activity in both co-ops and condominiums and in all neighborhoods compared to a year ago. New development sales volume fell, however.
The other report provided much more rich text with a great deal of context and on-the-one-hand-on-the-other-hand stuff. On page 1 of 4:
There were approximately twice the number of sales in the first quarter of 2010 as the same period a year ago, however, this is the first quarter-over-quarter decline in the past year. The number of sales jumped 99.5% to 2,384 sales in the first quarter from 1,195 sales in the same period a year ago, but declined 3.6% from 2,473 sales in the prior quarter. The number of sales over the last three quarters has been consistent with the 2,301 quarterly average number of sales over the last decade. The first quarter of 2009 saw the lowest level of sales activity over the prior 15 years and was reflective of the nearly “frozen” market conditions after the Lehman Brothers bankruptcy in the autumn of 2008 and the onset of the credit crunch. The rise in the number of sales over the past year reflected a release of “pent-up” demand resulting in a decline in the number of apartments available for sale. Low mortgage rates, a surging stock market, tax credits, and a new affordability from a sharp decline in property values stimulated demand. There were 8,027 listings at the end of the first quarter, 23.1% below the 10,445 listings in the same period last year, but 17.2% higher than the prior quarter total of 6,851. This excludes, however, an estimated 6,500 units of new development “shadow inventory”. Although inventory is at its second highest level of the past decade, total inventory remains slightly above the ten year average of 7,117 listings.
a marketing report or a market report?
One report talked about macro factors and offered a generalization about buyer attitudes. On page 2 of 14:
Favorable market conditions such as price stabilization, low mortgage rates, renewed confidence in the economy and the extension and expansion of the home buyer tax credit made this an ideal time to purchase property. Buyers have begun to realize that, from here on out, prices will more likely go up than down.
The other report mentioned the same macro factors and offered some skepticism about whether the trend would continue. On page 2 of 4:
Is "normalized" sales activity in the second half of 2009 sustainable in 2010? The return to more normal levels of sales activity over the past three quarters was fueled by low mortgage rates, improved confidence as a result of significant gains of the stock market, and the first-time buyer and existing homeowner tax credits. There remains concern in 2010 over the potential for rising mortgage rates, expiration of the tax credit and an economy that has not established significant improvement in unemployment and mortgage financing terms.
One report addressed the trends in varying methods of tracking price changes, with an unmistakable optimism. On page 4 of 14:
Prices appear to have stabilized. The beginning of 2010 has brought renewed confidence in the real estate market, credit markets, and overall economic condition. Versus the First Quarter of 2009, the major price metrics all show declines on a market-wide level. However, compared to Fourth Quarter 2009, all of the metrics registered slight increases in value. [of course, charts follow!]
The other report talked about the same things, but in much more detail, without dictating a conclusion. On page 1 of 4:
Price indicators remained below prior year quarter, showing near-term stability. The median sales price of a Manhattan apartment was $868,000, 11% below the $975,00 median sales price of the prior year quarter, but 7.2% above the $810,000 median sales price of the prior quarter. This price indicator has shown signs of stability since the second quarter of 2009 as rising sales helped stem the decline of property values that had peaked at $1,025,000 in the second quarter of 2008. The average sales price declined 21.8% to $1,426,994 from $1,825,847 in the prior year quarter, but up 10.1% from the prior quarter average sales price of $1,296,156. The increase in both price indicators from the prior quarter was reflective of the sharp jump in market share of 2-bedroom apartments and decline in studio apartments. This shift was seen in the price per square foot metric which does not generally see the same volatility from unit mix swings as compared to the other price indicators. Price per square foot fell 17.6% to $1,038 in the first quarter to $1,259 in the same period last year and slipped 1.2% from $1,051 in the prior quarter.
mash note
Long-time readers know that Manhattan Loft Guy is a big fan of The Miller’s work. I think, in part, that is because (I infer) The Miller sees his target audience as a much broader category than consumers of real estate brokerage services. He has built his brand as a neutral provider of data, analysis and historical context. He would necessarily approach the task of preparing market reports from a different perspective than the head of a brokerage firm, particularly as he builds his web presence and rep as the Go To guy for Manhattan data.
It works for me. YMMV
more to come
I still need to chew on the numbers, but if you haven’t found them already the quarterly reports (in pdf) are here (Miller Samuel), here (Corcoran), and here (Terra; the Halstead version).
© Sandy Mattingly 2010
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