Archive for Finances

Much of the optimism about the pace or economic recovery evaporated last week, as economic news turned mostly sour. Consumer confidence plunged, and both new, and existing, home sales slowed considerably. While mortgage rates moved upward in last week’s Freddie Mac survey, they may begin trending downward if economic news this week continues to point to a stuttering recovery.

This week brings us the usual cascade of first-of-the-month data, with very important insight into manufacturing and employment. While GDP was adjusted upward last week, most of the increase was due to inventory-related adjustments. If the ISM Manufacturing Survey comes in below 55.0, w could see mortgage rates begin the week on a decidedly downward bent as traders begin worry about a manufacturing slowdown. However, if the ISM shows any improvement, rates will flatten, or perhaps even move slightly upward. Friday’s employment report will be hugely influential as usual. If we get an unexpected month of job creation we could see rates moving back upward next week.

Graph Courtesy from NY Times in an article by Bob Tedeschi February 24, 2010.  Data provided by Jeff Carpenter, Director of Finance, GFI Mortgage Bankers, Inc.

This Week’s Top Economic Reports and Events

Report/Event Date Prior Est. Impact
ISM Manufacturing Index 3/1 58.4 57.8 Significant
with manu
facturing leading this recovery, any big signs of slowing could help create some significant downward pressure on mortgage rates.
ISM Services Index
3/3 50.5 51.0 Moderate
If this index jumps unexpectedly higher, rates could f
eel some upward pressure, with services taking over some recovery from manufacturing.
Federal Reserve Beige Book
3/3 Moderate
The Beige Book paints a picture of the overall economy. If its tenor is slanted toward a stuttering reco
very, rates may feel downward pressure.
Unemployment Rate 3/5 9.7% 9.8% Significant
Af
ter last month’s surprise drop, a second surprise decrease might really surprise the market, and would put upward pressure on interest rates.
Non farm Payrolls
3/5 -20K -20k Significant
A return to job creation is the big boost the economy needs, but another month of
job losses will keep some downward pressure on rates.

Last week the Federal Reserve took center stage by raising its discount rate: the rate at which banks can borrow money directly from the Federal Reserve. While this move has very little immediate impact, the increase was widely viewed as a symbolic first step in beginning to remove the emergency measures put into place during this deep recession. The Fed’s meeting minutes also provided some more insight into future Fed moves. In addition to letting certain programs expire as planned, the Fed will create some new tools that will enable it to “mop up” excess cash in the market. These new tools, in conjunction with its primary method of adjusting the Fed Funds rate, will be targeted at keeping inflationary pressure under control.

This week, and coming weeks, could begin to see mortgage rates become more volatile as the market digests everything coming out of the Fed. We’ll also get new and existing home sales data this week. With housing and employment as the weakest link, any positive news could push rates upward.

Graph Courtesy from NY Times in an article by Bob Tedeschi February 17, 2010. Data provided by Jeff Carpenter, Director of Finance, GFI Mortgage Bankers, Inc.

Recently we reported the Manhattan 10-Year Townhouse Market Report for 2000-2009.   The 10-year sales trend analysis summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

  • There were 402 Manhattan townhouses listed for sale at the end of 2009, 24.2% below the 530 listings available in 2008. Listing inventory was similar to the levels seen ten years ago reflecting the fixed nature of turn-of-the-century housing stock.
  • The 2009 median sales price of a Manhattan townhouse—defined as a 1-5 family residence that can be delivered vacant—fell 31.9% from the record set in 2008 to $3,400,000 from $4,995,000.
  • There were 149 townhouse sales in 2009, down 1.3% from 151 sales in the prior year. The average annual number of sales over the past decade was 249 sales, indicating that the number of sales over the past two years have been below trend levels.
  • The listing discount, the amount buyers and sellers have to move to agree on price, expanded to 15.3% in 2009 from 6.9% in the prior year.
  • The days on market for townhouse properties was 142 days in 2009, faster than the 155 days in 2008.
  • The decline in market conditions left more sellers “chasing the market” when setting list prices

According to comments this last weekend by Treasury Secretary Timothy Geithner the risk that the economy will slip back into recession is lower now than at any time in the past year. While the probability of a “double-dip recession” may be unlikely,  Geithner believes the current recovery is likely to be very uneven. Some evidence of this was certainly present in last week’s ISM Indices. The services index managed to stay above 50, indicating a slight amount of growth in service industries. while the manufacturing index bolted to its highest level since 2004. While the Labor Department employment data did show signs of an improving labor market, other measures released last week were not as positive. Overall, we are at a point where mortgage rates might slip slightly, but the risk of a quick upward movement continues to grow.

This week has a bit less economic data than last week, but with Retail Sales data due, we could see rates moving upward, especially if sales come in stronger than most analvsts are predicting.

Graph Courtesy from NY Times in an article by Bob Tedeschi January 28, 2010. Data provided by Jeff Carpenter, Director of Finance, GFI Mortgage Bankers, Inc.

Approximately 92,000 co-op and condo sales transactions from more than 6,500 buildings over the last ten years were analyzed. Each of the 53 different market areas have been presented with data tables and charts as well as a summary matrix that compare 2009 to the prior year (2008) and prior decade (2000).

  • After setting records in 2008, all three price indicators declined in 2009. This is the first time that any of the three price indicators have posted year-over-year declines since 1996.
  • The 2009 median sales price of a Manhattan apartment was $850,000, down 11% from the record set in 2008 at $955,000
  • Manhattan housing prices have doubled over the past decade. Price per square foot increased 105.6% to $1,073 from $522 in 2000.
  • There were 7,430 sales in 2009, 27.9% fewer than were sold in 2008. However, the release of pent-up demand from the first half of 2009 caused the second half to see a surge in sales activity.
  • The annualized pace of sales in the second half of 2009 was 9,400 units, higher than the 9,178 average annual number of sales over the last decade.
  • There were 6,851 listings on the market at the end of 2009, 24.6% less than 9,081 listings in 2008, which was the highest level of inventory in the past decade. The 2009 inventory level was in line with the 6,860 average annual inventory level since 2000.
  • Over the past decade, the Manhattan condo market has surpassed the co-op market in sales, beginning with a 40% market share and ending with a 54% market share. The gain was primarily due to the addition of new development sales to the housing stock.

The 2000-2009 Manhattan Market Report relaeased today and summarized above was prepared by Miller Samuel for Prudential Douglas Elliman.

While last week had some economic data released, non-market events seemed to dominate. Fed Chair Bernanke was reconfirmed by the Senate. but with the smallest number of votes in the Fed’s history. This may foreshadow some interesting battles ahead for monetary management in the US in coming months. The Fed also met, leaving interest rates unchanged again. However, its policy announcement confirmed the end dates for a number of market support programs. including a March 31st termination of the Fed’s program of buying mortgage-backed securities. In addition to all this, GDP came in at a brisk 5.7%, Consumer Confidence and Sentiment increased, and existing home sales cratered. Everything seemed to come out in balance, and mortgage rates barely budged.

This week, we may have a bit more focus on economic data with the ISM reports and employment data. With signs pointing toward economic recovery, even a tepid one, a decrease in unemployment and net gain of jobs in January could push mortgage rates upward into next week.

Graph Courtesy from NY Times in an article by Bob Tedeschi January 28, 2010. Data provided by Jeff Carpenter, Director of Finance, GFI Mortgage Bankers, Inc.

The IRS earlier this month released the new form that eligible homebuyers need to claim the first-time homebuyer credit this tax season and announced processing of those tax returns will begin in mid-February. The IRS also announced new documentation requirements to deter fraud related to the first-time homebuyer credit.

The new form and instructions follow major changes in November to the homebuyer credit by the Worker, Homeownership, and Business Assistance Act of 2009. The new law extended the credit to a broader range of home purchasers and added new documentation requirements to deter fraud and ensure taxpayers properly claim the credit.

With the release of Form 5405, First-Time Homebuyer Credit and Repayment of the Credit, and the related instructions, eligible homebuyers can now start to file their 2009 tax returns. Taxpayers claiming the homebuyer credit must file a paper tax return because of the added documentation requirements.

The IRS expects to start processing 2009 tax returns claiming the homebuyer credit in mid-February after it completes the updating and testing of systems to meet the law’s new requirements. The updates allow the IRS to put in place critical systemic checks to deter fraud related to the homebuyer credit.

Some of these early taxpayers claiming the homebuyer credit may see tax refunds take an additional two to three weeks.

In addition to filling out a Form 5405, all eligible homebuyers must include with their 2009 tax returns one of the following documents in order to receive the credit:

  • A copy of the settlement statement showing all parties’ names and signatures, property address, sales price, and date of purchase. Normally, this is the properly executed Form HUD-1, Settlement Statement.
  • For a newly constructed home where a settlement statement is not available, a copy of the certificate of occupancy showing the owner’s name, property address and date of the certificate.

In addition, the new law allows a long-time resident of the same main home to claim the homebuyer credit if they purchase a new principal residence. To qualify, eligible taxpayers must show that they lived in their old homes for a five-consecutive-year period during the eight-year period ending on the purchase date of the new home. The IRS has stepped up compliance checks involving the homebuyer credit, and it encouraged homebuyers claiming this part of the credit to avoid refund delays by attaching documentation covering the five-consecutive-year period:

  • Form 1098, Mortgage Interest Statement, or substitute mortgage interest statements,
  • Property tax records or
  • Homeowner’s insurance records.

The IRS also reminded homebuyers that the new documentation requirements mean that taxpayers claiming the credit cannot file electronically and must file paper returns. Taxpayers can still use IRS Free File to prepare their returns, but the returns must be printed out and sent to the IRS, along with all required documentation.

Normally, it takes about four to eight weeks to get a refund claimed on a complete and accurate paper return where all required documents are attached. For those homebuyers filing early, the IRS expects the first refunds based on the homebuyer credit will be issued toward the end of March.

The IRS encourages taxpayers to use direct deposit to speed their refund. In addition, taxpayers can use Where’s My Refund? on IRS.gov to track the status of their refund.

More details on claiming the credit can be found in the instructions to Form 5405, as well as on the First-Time Homebuyer Credit page on IRS.gov.

Last week saw mortgage rates sliding downward, as a few big concerns began weighing heavily on the market. Economic news continues to highlight a very muted recovery, but fears of a double-dip recession were fanned by events in Washington. While bank-bashing has become a popular pastime, the Obama administration took it one step further with the proposal of a tax structure that would hit all large banks.  Regardless of one’s opinion of banks or the tax, it is very likely that business and consumers will ultimately bear this new tax. To compound the market’s concerns, uncertainty surrounding the reappointment of Fed Chair Bernanke stoked anxiety.  A failed confirmation could easily lead to months of political bickering, dragging the search for a successor on for many months.

This week is a huge week for markets.  In addition to the political concerns, the Fed meets again with analysts ready to dissect its policy announcement looking for clues of future Fed moves. With GDP data, Consumer Confidence. and slew of housing data on tap. rates could move either way.

Graph Courtesy from NY Times in an article by Bob Tedeschi January 14, 2010.  Data provided by Jeff Carpenter, Director of Finance, GFI Mortgage Bankers, Inc.

Today we are released fourth quarter sales  for the Brooklyn residential market.  Brooklyn Market Overview Q4 2009 reported here and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

“Sales activity was elevated as purchasers sought to take advantage of improved affordability brought on by low mortgage rates, the federal tax credit and lower housing prices.”

  • There were 2,093 sales in the fourth quarter, 13.4% higher than 1,846 units in the same period last year and 13.3% higher than 1,847 units in the prior quarter.
  • As a result of increased sales activity, inventory declined over the same period. There were 5,439 listings available at the end of the fourth quarter, 10% below the 6,042 listings available at the end of the same period a year ago and 2.9% below the 5,600 units available at the end of the prior quarter.
  • The median sales price of a Brooklyn property was $447,174 in the fourth quarter, down 8.7%
  • from $490,000 in the prior year quarter and down 6.1% from $476,000 in the prior quarter.
  • Days on market expanded by a month to 163 days, from 133 days in the same period last year, but was essentially unchanged from 165 days in the prior quarter.
  • Listing discount—the percent spread between the list price at the time of contract and the contract price—was 6%, up from 4% in the prior year quarter and up from 5.6% in the prior quarter.

Today we are released fourth quarter sales  for the Queens residential market.  The Queens Market Overview Q4 2009 reported here and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

“The fourth quarter 2009 Queens market experienced a surge in sales activity, with 55.6% more sales than during the same period a year ago. Consumers took advantage of the federal tax credit, low mortgage rates and more affordable prices. As a result of the increase in sales, listing inventory has fallen 10.6% and is at its lowest level in three years.”

  • There were 4,260 sales in the fourth quarter, 55.6% more than the 2,737 sales of the prior year quarter and 52.7% more than the 2,789 sales in the prior quarter.
  • Listing inventory is at its lowest level in three years. There were 8,778 properties listed for sale at the end of the fourth quarter, 10.6% below the 9,822 units listed for sale in the prior year quarter and 10.4% below the 9,797 units listed in the prior quarter.
  • Prices continue to slip. Median sale price was $350,000, 7.9% below the $380,000 median sales price of the prior year quarter and 3.3% below the $362,000 median sales price of the prior quarter.
  • The average days on market was 104 days, or two weeks longer than the 90 days on market in the prior year quarter.
  • Listing discount, the spread between the last list price and contract price, fell to 6.1% in the fourth quarter, down from 8.7% in the prior year quarter and unchanged from the prior quarter.

Long-term mortgage rates moved down slightly last week as some of the recent optimism regarding the economy waned while industrial output increased a solid 0.6%.  The increase is due to utility output related to the frigid weather gripping much of the nation.  Retail sales dropped by 0.3%. which was quite shy of the 0.5% increase that analysts had forecast.  Fortunately, both the Consumer Price Index’s headline and core numbers increased only a scant 0. l%.
Top Economic Reports 01-18-10
While the market is being reminded that this recovery is at its early stages and is a rather muted recovery the debate over what the Fed will do regarding its purchases of mortgage-backed securities is heating up. Some analysts are predicting n full 1.0% or more increase in rates by March, while others see only about a 0.5% increase in the first half of the year. In any event, rates are very, very likely to increase over the next few months. However, we could see rates slip just a little more next week if economic news continues to point to a slow path for economic recovery.

Graph Courtesy from NY Times in an article by Bob Tedeschi January 14, 2010.  Data provided by Jeff Carpenter, Director of Finance, GFI Mortgage Bankers, Inc.

Recently the industry has reported data on  fourth quarter  rentals for the Manhattan residential market. The Q4 Manhattan Rental Market Overview reported here and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

  • Average rental price declined 4.3% to $3,789 from $3,958 the same period last year but up 0.8% from $3,759 the prior quarter.
  • Rental price per square foot declined 4.6% to $47.02 per square foot from $49.30 per square foot during the same period last year, and down 1.7% from $47.84 per square foot in the prior quarter.
  • Median rental price declined 9.4% to $2,900 from $3,200 in the same period last year and down 1.7% from $2,950 in the prior quarter.
  • Number of rentals surged 47.5% to 2,456 units from 1,665 units in the prior year quarter.
  • Listing inventory fell 21.3% to 5,225 units from 6,640 units in the prior year quarter.
  • Days on market were 76 days, down from 97 days this time last year.
  • Listing discount was 6.5%, down from 6.9% in the same period last year.

The reports do not account for the incentives (concessions) that tenants are frequently offered in the current market, like months of free rent or waived brokers’ fees. It is worth noting that that if those factors had been taken into consideration, rents could appear considerably lower. Perhaps as high as 10% lower.

Experts remain cautiously optimistic about this year as the unemployment rate, which has a huge impact on the rental market, remains high. ”We are looking for more of the same in the first half of 2010–stable activity and pricing,” Mr. Miller said.

Jonathan Miller’s pod cast discussing the Q4 Manhattan Market Overview can be heard here.

In addition, reporting and analysis of  the Q4 Rental Market Survey were consolidated on the Miller Samuel website and shown below.

01/14/2010 PR Newswire Prudential Douglas Elliman 4th Quarter 2009 Manhattan Rental Market Overview

01/14/2010 Earth Times Prudential Douglas Elliman 4th Quarter 2009 Manhattan Rental Market Overview

01/14/2010 Business Week Manhattan Apartment Rents Drop 9.4% as City Job Losses Mount

01/14/2010 Bloomberg.com Manhattan Apartment Rents Drop 9.4% as City Job Losses Mount

01/14/2010 TheStreet.com Prudential Douglas Elliman 4th Quarter 2009 Manhattan Rental Market Overview

01/14/2010 The Real Deal Manhattan rental deals up in 4Q: reports

01/14/2010 Yahoo Finance Prudential Douglas Elliman 4th Quarter 2009 Manhattan Rental Market Overview

01/14/2010 Fox Business Prudential Douglas Elliman 4th Quarter 2009 Manhattan Rental Market Overview

In addition to the Prudential Douglas Elliman report, some of the above articles refer to the Citi Habitats Q4 Market report.

Q4 Market Report Chart and Graph Recently the industry has reported Q4 sales for the Manhattan residential market. The Manhattan Market Overview reported here and summarized below was prepared by Miller Samuel for Prudential Douglas Elliman.

  • Q4 continues the surge of activity seen in Q3 with 2473  sales up 10.9% from 2230 last quarter and up 8.4% from 2282 prior year quarter.
  • By far, the most activity and shortest Days On Market were seen in the under $1 million category
  • Inventroy Down 18.3% from last quarter and down 24.6% from prior year quarter
  • Average sales price per square foot up 5.5% over last quarter ($1051/sf) but down 11.2% over the prior year quarter ($1183/sf)
  • Median sales price $810 down 4.7% over last quarter and down 10% from  $900 in the prior year quarter.
  • Days on Market up 28.3% from last year quarter
  • Inventory down 24.6% form last year quarter

Reporting and analysis of  the Q4Market Survey were consolidated on the Miller Samuel website and shown below.

01/07/2010  -NuWire Investor- Manhattan Property Prices Plummet In Fourth Quarter

01/07/2010  -Before it’s News- Manhattan Residential Market Slowly Clambering Out of Hole

01/07/2010 -Epoch Times- Manhattan Residential Market Slowly Clambering Out of Hole

01/06/2010 -PropertyWire- Reports reveal the devastating effect of the Wall Street decline on apartment prices in Manhattan

01/05/2010 -Earth Times- 4th Quarter 2009 Manhattan Residential Market Report – Prepared by Miller Samuel

01/05/2010 -PR Newswire- 4th Quarter 2009 Manhattan Residential Market Report – Prepared by Miller Samuel

01/05/2010 – Reuters- Plunging home prices pull Manhattan buyers back in

01/05/2010  -ABCNews.com- Manhattan Home Sales Rise in 4Q, but Prices Vary

01/05/2010 -Bloomberg.com- Manhattan Apartment Prices Fall as New York Loses Finance Jobs

01/05/2010 -TheStreet.com- 4th Quarter 2009 Manhattan Residential Market Report – Prepared By Miller Samuel

01/05/2010 -The Real Deal- Manhattan home sales market on the mend, but is a double-dip ahead?

01/05/2010 -Fox Business- 4th Quarter 2009 Manhattan Residential Market Report – Prepared by Miller Samuel

01/05/2010 -Crain’s New York Business- Manhattan residential market ends year on up note 01/05/2010- New York Magazine- Manhattan Real Estate: Sales Recovering and Inventory Shrinking

01/05/2010 –Business Week-  Manhattan Apartment Prices Fall as New York Loses Finance Jobs

01/05/2010 -1010Wins.com-  Manhattan Home Sales Rise in 4Q, but Prices Vary Website

01/05/2010 -CNNMoney.com- Will bonuses save the day for Manhattan real estate?

01/05/2010 -The New York Times-  Manhattan Home Sales Rise in 4Q, but Prices Vary 01/05/2010 -New York Post- Manhattan housing slide slows

01/05/2010 -Air America Beta-  Manhattan home sales rise in 4Q, but prices vary

01/05/2010 -Inman News-  Manhattan closings up, prices down

01/05/2010 Top News Fall in Prices Recorded by Manhattan Residential Real Estate

01/05/2010 -The Money Times- Manhattan records slide in home prices Website

01/05/2010 -WNYC.com- 2009: A Buyer’s Market For Manhattan Real Estate Website

01/05/2010 -Curbed.com-  State o’ the Market Reports: The Manhattan Bleeding Slows!

01/05/2010 -Daily News- Housing on rebound: Manhattan condo, co-op sales climb at end of last year

01/05/2010  -Scottrade- 4th Quarter 2009 Manhattan Residential Market Report – Prepared by Miller Samuel

01/04/2010  -The New York Times Sales Spur Optimism in Manhattan Real Estate

01/04/2010 The Seattle Times Manhattan home sales rise in 4Q, but prices vary

In addition to the Prudential Douglas Elliman report, some of the articles above mention these other 4Q market reports:

Corcoran, Brown Harris Stevens and Halstead Property

New York-Federal Reserve Beige Book 12-2-2009

On Wednesday December 2nd the Federal Reserve released the Beige Book for the Second District–New York. Below are the report’s highlights regarding New York City.

  • The Second District’s economy has shown further signs of improvement since the last report, though the labor market remains soft.
  • Residential real estate markets have been mixed since the last report, but generally weaker, especially at the high end of the market; New York City’s sales and rental markets have been particularly weak.
  • New York City’s housing market has continued to weaken: while sales activity for existing apartments has rebounded from depressed levels, sales of new units remain very sluggish. Selling prices for existing units are reported to be down roughly 25 percent from a year earlier, with even steeper declines at the high end
  • New York City’s rental market also continues to weaken, with contract rents in Manhattan falling roughly 10 percent over the past 12 months; moreover, when concessions are factored in, the decline in effective rents has been a good deal steeper.
  • There are signs of a pickup in tourism activity in New York City.
  • Consumer confidence among New York State residents edged down in both September and October, after reaching its highest level in more than a year in August.
  • Tourism activity in New York City has picked up since the last report
  • Manhattan hotels report that occupancy rates exceeded year-earlier levels in both September and October, for the first time in more than a year
  • Hotel room rates climbed by substantially more than the seasonal norm in September and October, though they are still down 15-20 percent from last year.
  • Broadway theaters report a pronounced pickup in attendance as well as revenue

Mortgage rates include co-ops

There was an article in the  NY Times on Saturday (excerpted below) regarding new legislation to be signed into law which would  help  New Yorkers who were about to default on their mortgages. What is particularly interesting is that for the first time co-ops owners would be  assisted as well.

I was curious to see the extent of pending foreclosures in Manhattan and searched Property Shark for the number of Manhattan apartment lis pendens for October and November 2009. There were 60 and 72 lis pendens respectively for condo apartments in Manhattan and none for co-ops in October and November.

The following was excerpted from the 11/27/2009 New York Times article written by Bob Tedeschi

Last year, a new law was put into place in New York to help protect subprime  mortgage borrowers from foreclosure. Now the state is on the verge of extending similar protections to prime borrowers, too.

A bill passed by the State Legislature this month would require, among other things, that lenders give all borrowers 90 days’ warning before starting foreclosure proceedings and that they take part in settlement conferences with borrowers before proceeding with a foreclosure action. The bill also covers co-op owners.

  • Of the nearly 20 measures in the legislation, mandatory mediation could provide the most relief for struggling borrowers, some of whom have been unable to get their lenders to consider loan modifications. The foreclosure mediation, free for homeowners, would require lenders to provide a representative at a certain date and place. Lenders may be subject to sanctions if they fail to come with financial documents and other information required by mediators.
  • Under the new legislation, when lenders notify the state of an impending foreclosure action, the state must send the borrower’s name to housing counseling agencies, which can then inform the borrower about foreclosure avoidance strategies like the mediation program.
  • The legislation also includes protections for tenants of multifamily housing units that go into foreclosure.