simple, right? don’t measure Market Trends by asking prices

but the NY Post doesn’t know that

I did a quick hit on my Manhattan Loft Guy Facebook page after reading this November 28 puff piece from the NY Post, Apartments experiencing the ‘fastest market adjustment ever’, because I’m a skeptical guy (in addition to being a Manhattan loft kind of guy) and because it constantly irritates me how much attention is paid in the real estate press to opinions and anecdotes rather than market facts (actual apartments or lofts actually sold). But this particular piece has irked me enough to re-read it and try to figure out the story behind the single closed sale used (among three other examples of too-high asking prices dropping for still-unsold properties) to ‘prove’ the provocative claim in the headline (fastest market adjustment ever). So now I’m even more irked, irked enough to write more than anyone should on Facebook ….

the premise about the Manhattan real estate market might be true, but the NY Post has no way to know

The provocative quote follows the set-up paragraph:

The overpriced Manhattan real-estate scene has left some homes lingering on the market for more than four years, prompting huge price cuts that make them ripe for the picking, according to experts and stats compiled for The Post.

Before getting to what provoked me most, note how two things are combined: an “overpriced Manhattan real-estate scene” (“scene” must be JournoSpeak for the Manhattan market), causing “huge” price cuts (my, how I hate that word!) for listings now “ripe for the picking” (not sure what that means with over-priced listings, but still). Note that the Post claims two sources for this intelligence: (1) experts and (2) stats compiled for the Post.

While three agents are quoted by name, the only “stats” offered are (with the one exception addressed below) about price drops and days on market. Oddly, while reference is made to other statistics, none of them are provided. There’s this pregnant sentence:

There also have been extreme price drops in the much more affordable range, according to statistics compiled for The Post by real-estate Web site StreetEasy.

This is followed by a single example of a small coop that has been on and off the market for three years, with an asking price that dropped in the last year by 40%. (That’s more an example than a stat, no?)

But here’s what provoked me, and offered the headline for the NY Post, and the social media linkage that inevitably follows this sort of drama:

“Historically, we are now in the midst of the fastest market adjustment ever,” said [the] president of the city real-estate giant Compass.

Fastest. Market. Adjustment. Ever. (Remember that guy.)

If you were an editor of a newspaper, what sort of proof would you like to see to support this provocation? I’d think StreetEasy (or others) could do a chart, showing the velocity of market changes measured by (pick one) median prices for Manhattan coops and condos, or by median prices for just the tippity-top of the Manhattan market, or maybe by changes in days on market overall, or by sales volume compared to inventory (i.e., absorption). We don’t know what the actual “statistics” that were “compiled for The Post by real-estate Web site StreetEasy” are, but we’re told about

1. Robert DeNiro’s old duplex penthouse at 165 Perry Street, which is asking $19.8mm 18 months after asking $38mm
2. that small coop at 575 Park Avenue, on and off since 2013, asking $500,000 last year and $300,000 this month
3. “a buyer [who] got a seemingly incredible deal when a[n unidentified] Village town house sold for $6.8 million [recently, presumably], even though it was listed for $13 million just last year” [remember that townhouse, those numbers], and
4. an apartment at 150 Charles Street, on the market for 233 days, originally asking $8.99mm and now $7.95mm

That’s it for data, let alone stats. Four over-priced listings, overpriced as long ago as three years, 18 months, seven months, and since last year some time.

Remember The Provocation? Fastest. Market. Adjustment. Ever.

Is that what you conclude from these four factoids? Some notes…

• only one of the four has actually found its market clearing value
• we have no idea, from this limited data, whether any of them was actually worth more at some earlier point than it is today

Maybe I am not as smart as the average bear, but I can’t tell anything for these four factoids other than that the sellers and their agents have had difficulty figuring out what The Market for each listing is (has been over its listing history). In other words, without any further support: Dog bites Man. Long-time readers of Manhattan Loft Guy know that I have often noted sales that were a long time coming, and/or that cleared only after significant price drops. Among examples far too numerous to mention:

• my July 5, 2016, how can a full price deal disappoint? when the Chelsea loft sells off nearly $2M from start
• my March 18, 2016, Chelsea penthouse loft at 240 West 23 Street takes million dollar hit (or, was it a 44% hit?)
• my October 26, 2015, The Black Loft finally sells at 213 West 23 Street, 1/3 off 
• my July 17, 2015, even a Chelsea Mercantile loft will struggle if over-priced

(As Casey Stengel might have said, you are likely to find at least one such post in every single month in which there are more than a few Manhattan Loft Guy posts since 2006.)

once provoked, Manhattan Loft Guy may push back

Obviously, one thing that irked me right off is what led me to that quick hit on Facebook: using drops in asking prices to demonstrate what The Market is doing, without also considering changes in clearing values, is (a) the wrong way to measure market adjustment, (b) lazy, (c) (as I said on FB) “just another puff piece, as the Manhattan Media Division of the Real Estate Industrial Complex fluffs the Manhattan Sales Division”, or (d) all of the above.

Once irked enough, I will try to find more backstory, as regular readers of Manhattan Loft Guy know. The one closed sale offered to support The Provocation is curiously unidentified in The Post, but I am pretty sure I found it. And it is very odd, for a couple of reasons related to that puff piece. Again, this what we’re told by the Post:

This month, a buyer got a seemingly incredible deal when a Village town house sold for $6.8 million, even though it was listed for $13 million just last year.

But “the house was totally overpriced starting out,” noted Steinberg, who was the listing broker when it sold.

Wouldn’t you think that the smart guy who sold the townhouse for $6.8mm was not the agent who listed it last year, “totally overpriced”? Joke’s on you, it appears.

You can trust me on this, or you can go to that smart guy’s agent profile page and scroll through both closed sales and pending listings. You will find only one listing that matches “townhouse” and “Village” and was brought to market last year and sold this year, and that conceivably fits a sale at $6.8mm off an original ask of $13mm. It’s listed as In Contract both there and on StreetEasy, but it has to have since closed (no deed yet recorded, not yet updated on the agent profile page). Here’s the full listing history from StreetEasy:

Nov 3, 2015	new to market	$12.3mm
Dec 2		$11,995,000
Jan 21, 2016		$10,995,000
May 11		$9,995,000
July 1	contract
July 29	back on market	$8.95mm
Sept 11	contract
Nov __?	sold?	$6.8mm?

This isn’t a perfect match for the ‘facts’ recited in the Post, but is convincingly close for me. The principal factual discrepancy is the starting price was $12.3mm instead of $13mm, but I’ve seen enough puff pieces like this to know they either are not fact-checked against public records or use generously rounded figures. Plus, there is no other listing in this agent’s lengthy profile that matches “townhouse” and “Village” anywhere near the right dates or prices.

As the guy said, “the house was totally overpriced starting out,” even though the Post implies it was not “totally overpriced” by him.

Back to my (now-irksome?) point: this sale might be an extreme example of the truism that over-priced properties take a long time to sell, always, and in every market, or it may simply be another example. Either way, I don’t see it as supporting the proposition that the current market is the result of the Fastest Market Adjustment Ever. Not without seeing macro data about trend lines now being much steeper than in comparable periods and/or micro data suggesting that this listing was actually worth a great deal more than $6.8mm at some recent date (micro data such as highly relevant comparable sales histories).

what macro data about Manhattan residential real estate market trends can look like

Unless StreetEasy is pissed at the Post for not using the data compiled for the article (missing, apart from the three still-pending sales), it might have volunteered to run some market trend graphs for the Post. StreetEasy actually makes it easy to visualize broad market trends. You could, for example, go the the StreetEasy Third Quarter 2016 Market Report, scroll down to the graph, and click so that the only monthly trend line you see for the StreetEasy Price Index is for “Manhattan (All)”. But you can tell that the Post didn’t do that, because the trend doesn’t support The Provocation. In fact, looking at StreetEasy’s Index (which uses same-unit paired sales, plus secret sauce), you see that this Index has been flat throughout 2016 (varying by no more than 0.1% from January through September).

Fastest?? Market. Adjustment. Ever. ???

(If you look back into 2015, it gets worse, for the Post: slow and steady monthly increases, totaling 4.2% year-over-year, January 2016 to January 2015.)

What if there were a way to look only at high-end properties?

I have to believe that the Post has quoted The Miller about Manhattan real estate market trends about as often as everybody else, which is a gajillion times. So they know how to reach him. Or, they could have saved the time needed to call and consulted his Third Quarter 2016 Market Report to see (on page 4) that the Luxury niche median sales price (the top 10% of all sales) in Manhattan was up 3.1% quarter-over-quarter and 23.9% year-over-year. You could argue about new development sales skewing this data, as their typically extended periods between contracts and closings may not reflect real-time market conditions very well, but if you are going to assert the opposite (say it with me: Fastest. Market. Adjustment. Ever.), it might be sensible to have some hard data, instead of anecdata.

Let’s leave for another day lamenting (or trying to explain) the fact that The Miller’s trend line for the overall Manhattan residential sales market looks a little different from the StreetEasy Price Index trend line, as for present purposes his trend line (on page 1) shows a modest quarter-over-quarter decline in median prices in Manhattan (-3.1%) but a countervailing year-over-year increase (7.6%) in median prices. Stick that in your provocation.

another odd thing about that unidentified townhouse in the Post

We are now officially at the Manhattan Loft Guy stage of quibbling, a stage that long-time readers are familiar with. It’s simply odd that no address was given for the sole featured sale, while for the other three market factoids, addresses were given. More odd still, the address is, in fact, 150 Charles Street (see the StreetEasy link above), which happens to be the same building as another of the examples:

An apartment at the Village’s 150 Charles St., where rocker Jon Bon Jovi and actor Ben Stiller live, has been on the market for 233 days. Its original $8.99 million asking price is now down to $7.95 million.

That one is this unit, one of five units offered for sale but not in contract, asking from $35mm to $6.95mm. So two of the four data points are from the same building, and three out of the four (along with the former DeNiro penthouse at 165 Perry Street) are in the far West Village.

Only the reporter knows why she didn’t list the address for the mystery townhouse (or even if she knew), but it might be expected to limit the power of “market” data if three of four data points are within a few blocks of each other.

a quick stab at what some micro-data might look like

I’m not going to do this for each of the four factoids (that provocative horse is dead, right?), but there are some relevant data points for two that are close at hand. The unidentified Village townhouse is, as you know, Unit #M8 (where “M” is most likely for “maisonette”, aka “townhouse”). The LLC that just sold #M8 for $6.8mm bought it only in October 2015 … for $8,814,552. Looking at the listing history way up top, the LLC was trying to immediately flip for a 50% gain, and we now know that worked up much worse than badly.

For market trend purposes, these new development sales are difficult to factor. Mainly, because of the (long) lag between contract and closing, which in this case was 29 months or more. Secondarily, as I have often suggested in looking at resales by new development buyers, sometimes the new development buyers overpay, at least as measured by the later resale. This maisonette would be one example, as the overall Manhattan trend from October 2015 purchase to resale is up slightly (at least) and from 2013 contract to sale up significantly, while this reseller’s experience is the opposite. Sh*t happens, right?

This might be something of a building issue. The townhouse next door, Unit #M9, was bought from the developer in September 2015 for $9,611,214, but when that buyer tried to flip it immediately at $12.8mm and then increasingly lower prices, the listing sat, until being taken off the market ten months later, still asking $10,595,000.

Infuriating both these original buyers, their neighbor in #M7 sold two months ago in what looks like a private transaction, and an odd one at that: after paying $10,480,165 in August 2015, that guy sold in September 2016 just over $12mm. One really wonders what that September 2016 buyer of #M7 thought to not buy either #M8 or #M9 and saved more than a few million bucks.

But that micro data, as variable and perhaps difficult to interpret as it may be, suggests that the reason #M8 (my poster child for The Provocation) didn’t sell is not because “the market” suffered a broad and fast (fastest evah!) adjustment, but that one specific and highly motivated seller sold into a market that was not very deep with buyers at the 8-figure level, at a time when hyper-local inventory was relatively flush. In contrast to the time the developer was offering these three maisonettes in 2013, when there were three buyers willing to pay $8.8mm, $9.6mm, and $10.5mm, in 2016 there was exactly one buyer, and he preferred #M7 to the other two, for reasons no outsider will ever know. The seller who didn’t have to sell (#M9) retreated, while the one who did, sold #M8 at a significant loss.

That’s my top-level hypothesis, offered with a good bit more hard data support than the Post article that provoked me (to this great length!).

The testing of that hypothesis would be an interesting article to read.

finally (really) … there may be other facts, but the Post doesn’t know them (either)

The agent who sold #M8 at 150 Charles Street and who offered the provocative quote is obviously a terrific agent. More importantly for this piece, he has a team that does way more transactions than I do, including many at this price point, where I have done none in this rarefied atmosphere. He follows this market niche; I don’t. He may actually have market facts that support his view that there has been some general (and fast!) adjustment, but if so, (a) such facts are not apparent from the macro level stuff I see, and (b) were not shared with the Post to support his colorful claim.

It is interesting to see his acknowledgement of #M8 (in hindsight) as being “totally overpriced” at the start of the resale marketing campaign, but he wasn’t the only agent who made that mistake in this building, at about the same time.