April, 21 2015 was a big day for big data. Streeteasy hosted an event discussing what all the big data means to the agent community. Led by Streeteasy’s Alan Lightfeldt, the panel of industry leading real estate folk left the audience with some interesting words of wisdom, though it lacked the substance of true “Big Data” takeaways for the agents in attendance. Below is a recap of the morning’s discussion.
Alan led the discussion with a Streeteasy stats power point that gave good market-wide data. He discussed that sales inventory was the lowest in history last quarter and referenced the tracking systems for data Streeteasy has created for agents and consumers. Alan also covered some interesting statistics in the rental market. The most surprising stats were regarding the rising rents and the fact that Dumbo’s are the highest in the 5 boroughs. He also touched on the growing rent affordability problem, nothing that the average household spends 58.9% of its income on rent. His conclusion was the 421A tax abatement program needs to be continued for developers to justify the cost to build affordable housing.
Julia Hoagland of Compass pointed to a simple fact that “data is by nature historical.” What agents need to do beyond collecting and disseminating data is incorporating the art of pricing. This involves understanding the emotional side of the transaction – especially with unique properties. Her conclusion was, even with all the big data and understanding the “art,” when there isn’t much in the market, the comps don’t matter. It’s whether or not you want it. Consumers then have to decide value based on their needs and desires.
Shaun Anders from Elliman gave his outline for analyzing listings when using data to prepare a comparable report. His takeaway was look at the building and neighborhood as two separate categories. Agents should consider the most recent sales for historical values, what has gone into contract to see what the current market can bare, and the active listings to gauge your competition. His insightful overview gave a roadmap of how to view the data in an organized manner.
Greg Heym, Chief Economist of Terra Holdings and creator of The Heym Report, provided a more macro economic overview. He stated that US and international issues impact how we look at data from the price of oil and what is happening with QE in Europe to interest rates and job growth in the US market. He pointed out that these issues can make buyers emotional and not always use rational and long term planning to make smart real estate decisions. One of his strongest points was the NYC market is unique in the volume of data versus other markets. Therefore, we have the ability to analyze the market individually far better than a Case Schiller, which is not a good indicator. He also pointed out that our market consists of two data point segments: resale and new development, positing that they must be studied separately. His takeaway was “know what data can’t tell you. Data is what it is. There is no agree or disagree. They are just facts.”
Nest Seekers’ Ryan Serhant spoke about the uniqueness of the NYC market. He pointed out that we are a global luxury market that will attract many of the worlds HNWI’s over the next decade. In fact, as a luxury market we are 4th on the list of affordability. London, Monaco, and Hong Kong greatly outpace us. That sets up the opportunity for substantial growth in our residential real estate market. The strongest piece of wisdom that he provided was a simple question for owners you are trying to help price their properties, “Would you buy your own home at the price you want to list it for?” It is a simple yet brilliant question especially for those that want to throw data out the window and list for unrealistic numbers.
After an hour and a half of back and forth with the panel the event left me wanting more. There was some good insight but not much in the way of substance. For those data fiends out there, below are some talking points that will up your game when trying to navigate today’s big data world.
-Inventory to date: 5,194 active sales.
The lack of inventory is exacerbated by the “on the market” concept. At any given time owners who do not “need” to sell and over price their properties hold 10-15% of the available inventory. If you do not need to sell and you’re overpriced without pressure to sell, you are not seriously on the market, thereby making the pool of inventory even lower.
-Numbers that really matter.
D.O.M.: 100 days in Q1 the second lowest we’ve seen since the GFC.
List vs. Sale: 98%, which is the second highest.
Absorption Rate: 3.8 of inventory, which is well below equilibrium, generally considered to be 6-9 months of supply.
These facts matter most as they point to the market remaining very active and competitive. The fact that average price and median price were slightly lower in Q12015 have no bearing on the strength of the market. It simply says the available product was at a lower price point than previous quarters.
-Housing ownership breakdown and what it means.
852,275 residential units in Manhattan – 22.8% of residential units are privately held in Manhattan, 67% of which are co-ops and 33% condos, translating to 129,461 co-op and 64,926 condos. This justifies why there is so much upward pressure on pricing as inventory is low, we aren’t producing enough new product, and demand is growing. Brooklyn has approximately 1,000,000 units and almost 30% are privately held, creating the perfect storm there as well.
-Economic indicators of market strength.
We have incredibly diverse industry, every major domestic retailer has a presence in the city, 2/3 of ownership is cooperative which has kept the market stable, debt to income: average LTV is 65%, rental market has below 1% vacancy, and tourism continues to grow at our highest rate of 56M visitors in 2014.
-New development market.
Approximately 6,000 new units will come to market in Manhattan this year and another 6,000 in 2016. However, 52% of that product will be over $5M. Additionally, there is not enough future product being permitted beyond 2017 and the product that will hit the market will have to achieve minimums of $3,000 per-square-foot for developers to underwrite and build.
-Permitted versus constructed housing.
The Building Congress forecasts a total of 23,250 new dwelling units in 2015 and 24,000 units in 2016 across the five boroughs. Still, the current level of production is falling far short of the than 30,000+ units that were constructed annually between 2005 and 2008. The biggest take away is at no given time in NYC building history has more that 2/3 of the permitted units been built. Thus, we are far behind where we need to be in producing new product.
-Look at economic data on jobs and wages.
Employment in New York City was 2.6% higher in February than the year before, with 105,600 jobs added. However, wage growth has been minimal in terms of 1-2% and not adjusted for inflation.