Saturday, December 30, 2006
New home sales rise 22.5% in the Northeast
The Commerce Department November New Residential Sales Report (32kb pdf) showed a 22.5% rise in our region, a 3.4% rise nation wide, and put a dent in the inventory of unsold homes to the tune of 6% nationally too. The news helped send the Dow Jones Industrial Average to an all time high above 12,500 on 12/27 with shares of publicly traded home builders rising too.
Is this the end of the slowdown? It depends on where and to whom you speak. Economists seem split on the answer according to the NY Times reporter Jeremy Peters:
"The median price of a home rose 5.8 percent from November 2005 to $251,700. But rather than reversing the recent downward momentum of new home prices, economists said the uptick was likely the result of a rise in sales for the month in the Northeast and the West, where homes are more expensive."
Indeed this seems consistent with Jonathan Miller's recent observation on Matrix which noted that luxury home sales have been gaining market share in New York City consistently since 2002. I posted last week about the local numbers which indicated that NYC was positioned favorably in relation to the rest of the country, according to the Mayor's office. So this Commerce Department report is not as surprising as it may seem, unless your writing one of those bubble blogs. The news was not entirely upbeat as sales volume compared with November 2005 was down 42.4%. However, it may well foreshadow a shift in the market's direction. One month does not a trend make.
Real estate is a very local market. It's not portable and not highly liquid. So while there may be some continued softness in Florida or Las Vegas, as an agent in New York City, those Northeast numbers seem particularly affirming to my impression of recent market activity. On a more granular level; open house traffic has been generally way up in our office and my latest exclusive at 347 East 53rd Street has gone to contract in just 10 days. I even had multiple bid scenarios on a couple of deals in December. I've mentioned in recent posts that my personal sales volume has more than doubled this year, and that I have about $5 million in contract to close in the first quarter of 2007. The anecdotal evidence for me was never in doubt. The city's luxury market, which is very much driven by Wall Street earnings, is poised for growth next year.
However, it's a marketplace that doesn't accommodate wishes. Those with unrealistic expectations, whether they be aggressively priced sellers, or bottom fishing buyers, are both missing out on a great moment to do business. I've often been impressed by the aforementioned Wall Street traders when representing them on real estate deals. They are realistic and seasoned observers of their own changing market landscapes. The best of them have developed great instincts about how to play the market. They are not surprised to see a trend melt away before their eyes, and accept it because the proof is simply that it happened. They're well read on the news and market white papers, but at the end of the day it is their gut that guides them and permits them to see where things are going, shift directions, and how to win. It's more than crunching numbers. My gut says is that we are in for a pretty busy first half of 2007 in the real estate trade.
It's a great time to be a buyer. There is no doubt a tilt in favor of those shopping the market that we've not seen in the past few years. People looking for new homes are finding better selections in every category, especially new developments. The manic pace has subsided, replaced by a climate of more realistic expectations. It seems to me that the adjustments (no bubble seen) have been of expectations. It's not caused by any fundamental economic weakness. Sellers who've followed my advice to set realistic pricing, and buyers who are actually looking for a place to live, are trading properties at a good pace, getting fair value, without finding themselves in bidding wars. It's more balanced and normal. If you need a home and are in the market to buy or sell, you are welcome to contact my office. See you next year!