(By Noah Rosenblatt) A: A tale of two markets as equity markets get jittery over the same old concerns while Manhattan continues to enjoy peak levels of new deal volume -- weekly pace of newly signed contracts is hovering between 320-350, as the past two days alone (mon+tue production) saw 130+ new deals across Manhattan get signed! Today we booked another 40+. Its common for the pace of new deal volume to lag equity markets by at least a few months - just think back to 2007-2008, as Manhattan held on until Lehman failed in Sep 2008. But today's Manhattan real estate sector is a very active one and the data suggests a notable shift in leverage to the seller over the last 4-6+ weeks or so. I'm especially curious to see how current conditions may affect future lending rates if bank pipelines get too backed up, or how appraisals come in for deals where bidding wars resulted in offers well over ask. Expect today's market conditions to ultimately be reflected in the Q3-2012 market report released October 1st. For now, lets look at what equity markets are worried about again and how we can tell if/when it starts to impact Manhattan RE.
Major equity indexes traded down over 1% today before rallying back as worries over Greek and the EU
once again 'mean something' - concerns over Spain
are also worth pointing out. Stock markets are psychotic like that as things matter until they don't...until they matter again - its the markets way of self-cleansing itself of bad debts and mis-valuations and it almost always first shows up in bond markets (corporates, government, asset-backed securities, etc.
)! An example of this would be how the Greece 1YR Govt Bond Yield
is at 1,143%!! - a sure sign of the turbulence that likely lies ahead for Greece. At all times, equity markets are trying to discount this future impact on investor confidence and their taste for risk assets. But what I want to point out is just how far we have come since 2009, and how we are at the height of that up move right now -- this leaves contrarians worried over future risk/reward after climbing a big wall of worry and the optimists who want to continue to ride the euphoric wave.
The EU problems are yet to full out crash our markets -- and now it seems like there will be another round of tests of the markets durability to these known sovereign debt concerns. For this to get Manhattan messy, equity markets need to see some kind of substantial selloff strong enough to impact buy side confidence and bids.