why the race to (call) the bottom? third quarter Manhattan real estate market reports hit

a rainy day also rains numbers
I am pretty sure I am in the minority about this, but I believe that major players in the Real Estate Industrial Complex in Manhattan are missing a shift in how consumers want information processed for them. There may be more than enough business to do — for now — The Old Way, but a new way would pay more attention to why so many people are drawn to data sites like StreetEasy, Trulia and Zillow and commentary (gossip?) sites like Curbed and Brownstoner. I launched into this lane of thinking after reading the classically constructed article about the major firm Manhattan market reports for the Third Quarter of 2010 in that bastion of the Real Estate Industrial Complex, the New York Times.

In today’s Manhattan Real Estate Market Seems to Stabilize, With Prices Up and Sales Volume Down, Vivian Toy has the unenviable task of making some sense out of quarterly reports from firms that use different numbers. I will chew on the numbers over the next few days, but for now I want to focus on the Big Picture “analysis” in that article, as presented from the heads of major firms, after noting this consistent finding:

Prices increased for the fifth straight quarter, with the average sales price hovering around $1.43 million and the median price around $910,000, according to data provided by the city’s four largest brokerage firms.

Previous Manhattan Loft Guy posts on the art form of these newspaper articles include this April 2, first impression of First Quarter reports, where I said

I do feel badly for the reporters who have to summarize the major firm quarterly reports of Manhattan real estate activity, such as Christine Haughney in today’s NY Times, Slight Rise in Manhattan Apartment Prices in First Quarter, Data Show. With reports from Terra Holdings (Halstead and Brown Harris Stevens), Corcoran, and Miller Samuel for Prudential Douglas Elliman, there’s usually enough inter-firm variation to make a coherent narrative challenging even leaving aside the often incoherence of same-firm data comparisons. This quarter is no different.

For the post on the NY Times article introducing  last quarter’s reports, I complimented Ms. Toy for achieving “remarkable” coherence in synthesizing such varying numbers:

Toy’s summation about the Second Quarter in her lede today is actually remarkably coherent: "[b]ut … prices have not rebounded".

That was in my July 1, for real: Second Quarter Manhattan real estate market report numbers out.

“predictions are hard — especially about the future”
Physicist Neils Bohr is often cited as the source for that sub-heading above, but there are some who claim it for Mark Twain. Regardless, it is a great quote, and a terrific counter-point to the (natural human?) tendency to want to hear Smart People tell us What Will Happen Next. You know … that question that 97.41% of all buyers and sellers ask: “where is The Market heading?”

I suspect that Manhattan real estate prognosticators would do no better than the Brilliant Economists have done with projecting the federal budget deficit. This is from Ezra Klein’s February 2 Washington Post blog that used the quote above as its heading (my bold):

The New York Times has a cool feature today showing how rarely long-term budget forecasts get the picture right. …. As you can see, what forecasters do is extend the current trends. When something happens to break that trend — a massive financial crisis, say — they’re generally caught unawares.

predictions are seductive, especially if they are positive
I made that one up, as there does seem to be a natural human tendency to want to be told What Happens Next. And here are the leaders of four major Manhattan real estate firms to satisfy that need, all as quoted by Toy in the Times:

“We have hit bottom, and we’re probably improving ahead of schedule,” said Diane M. Ramirez, the president of Halstead Property. “But that just means we’re into a more normal market. We’ve moved out of critical care, and we’re stabilized now.”   

“I think it’s a sign that the wild ride is over and real estate is back to its basics,” said Pamela Liebman, the chief executive of the Corcoran Group.

“The market came back from the bottom up,” [Dottie Herman, the chief executive of Prudential Douglas Elliman] said. “Now the bigger units are selling again, and the market is basically flat, but it’s healthy.”       

“With the steady growth we’ve seen,” [Hall F. Willkie, the president of Brown Harris Stevens] added, “I think we can be optimistic looking ahead.”

These quotes are almost in lock step, not just in sync.

a different point on the food chain
Since no one has asked me to head a major Manhattan real estate firm, I have never been faced with the question of how to spin present quarterly data in ways that are both fair and in the interest of my firm. I just don’t know that the best way to present the Third Quarter Manhattan numbers is to present a Big Picture of stability, given that (a) the last few quarter-to-quarter ‘trends’ have hardly been stable, and (b) I don’t know what is going to happen next.

In all cases, the heads of these firms have more experience (and more staff!) than I do, and their comments deserve respect. But getting back to my original point up top, I truly believe that fewer and fewer consumers prefer this Simple Happy Talk to a more nuanced view, less capable of quick summary.

Something like this kind of nuance (from Miller, The):

“The only reason the average and median prices are up,” he said, “is because the two-bedroom market is returning from being depressed to a more consistent, normal level.”

To be fair, here is a pretty good summary, but I guess too much for a NY Times reporter who needs to include quotes from all firms who report quarterly numbers:

Since the downturn began, there has been an inconsistent pattern of seasonality as the market corrected rapidly. Since reaching a trough in First Quarter 2009, sales have climbed back, begun to stabilize, and returned to typical seasonal ebbs and flows. Last year at this time, pent-up demand from three quarters of low sales and lower pricing created an energetic buyers market. For Third Quarter 2010, we saw a 5 percent decrease in the number of market-wide transactions from a year ago and a 19 percent decrease from Second Quarter 2010.

Market-wide price metrics have stabilized and even improved from last quarter and one year ago. The median price of all Third Quarter 2010 transactions was $900,000, an increase of 9 percent versus a year ago and a 15 percent increase from Second Quarter 2010. Buyers are purchasing larger apartments with more bedrooms.

You’d have to read the Corcoran report to find this, but these are the second and third paragraphs, so not hard to find.

Old Grey Lady: part of problem?
Maybe my narrow focus on the major firms in my original point up top is a mistake. As you’ve seen from the introductory paragraphs of the Corcoran report quoted above and will see in the Miller Samuel report, there is a lot more from the firms than just the-market-is-back-to-normal. But the Times can’t find a way to report much nuance in the space allotted.

Presumably, they (who know much more about their readers than I do) don’t think their readers want more of the on-the-one-hand / on-the-other-hand stuff.  Sometimes (as hinted in The Miller’s Times quote and in the Corcoran report) the mix of apartments that sold is significant; other times, the number of transactions may be more important than an overall median price change; in other quarters, days on market might be a particularly telling data point.

But the Times template for doing these The Numbers Are Out! articles does not permit that kind of depth. A few Big Numbers, a few quotes from the Big People, a few anecdotes … that’s it. Maybe the Times, as well as other parts of the Real Estate Industrial Complex in Manhattan is just … behind the times (ouch).

links! we got links
The Miller Samuel report is here; Corcoran is here; the Halstead version of the Terra report is here.

Some commentary to follow in the coming days, as I digest the reports.

© Sandy Mattingly 2010