the scandal in the quarterly report data on Manhattan residential real estate sales

hiding in plain sight
Two quick take-aways from the first stories about the major firm quarterly market reports on Manhattan residential real estate sales that are in the papers this morning, this one from the Vivian Toy piece on page A24 in today’s New York Times, After Months of Growth, Signs of Weakness in the Manhattan Real Estate Market: (1) All seem to agree that average prices were down compared to last year’s first quarter (from “slightly” to 9.9%), but (2) the firms count transactions in sufficiently different ways that reported volume changes year-over-year varied from down 23% to up 6%.

I do not understand why no one seems to think that such varied reporting of a “fact” is a problem for the residential real estate industry in Manhattan.

I will have more after chewing on the data, but here is Toy’s money quote, her polite attempt to synthesize contradictory reports (with my bold, for emphasis):

Sales reports to be released on Friday by the city’s largest brokerage firms varied in their conclusions, but each report showed some signs of weakness. Reports from Halstead Property and Brown Harris Stevens were the gloomiest, indicating that after six quarters of consistent growth, the average apartment price fell 5 percent, to $1.36 million, and that the number of sales this quarter, 1,769, was down 23 percent from the same time last year.

Data provided by mirrored those trends, with average prices down slightly from last year and sales volume dropping by 21 percent. The Corcoran Group showed the number of sales up 6 percent from last year, but the average price down by 4 percent, and Prudential Douglas Elliman showed steady sales volume, but the median sales price at $782,071, down by 9.9 percent from 2010.

Note that this is (or should be) a counting exercise, like counting how many people were in Times Square last new year’s eve, or how many iPad2s were sold last month, or how many seats were actually filled in the rain at yesterday’s Yankee opener.

Firms think it important to report the facts in the market, but not important that they don’t use the same facts. I don’t get it.

you want magic sauce with that?
I do get that there is a difficulty in counting sales through March 31 since there is always a lag between closings and deeds being filed. A smaller issue may be that firms rush to prepare end-of-quarter reports before the end of the quarter (for competitive reasons??), so that newspapers can report them on the first day of the quarter. Presumably, each firm has some proprietary magic sauce that they use to estimate the sales that have occurred but that nobody knows about, or that nobody else knows about, or that they are pretty sure (because they are so smart) occurred, even if nobody really knows.

There is not  a lot of emphasis placed on the use of magic sauce, however. The reports read as counting exercises. Professional journalists report them as counting exercises, yet report different counts as though it is a normal thing for professional counters to vary as widely as -23% and +6%.

As usual, chewing on the data will lag for me, as will an analysis of how (whether) the loft niche varied from the overall Manhattan market this past quarter. Did I mention that I don’t understand this??

© Sandy Mattingly 2011

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