Falling number of signed contracts forecasts weak fourth quarter

Number of signed contracts for Manhattan home sales (Source: UrbanDigs.com)

The number of signed sales contracts for Manhattan condominiums and co-ops has declined every month since July, forecasting a drop in closed sales volume for the fourth quarter of 2011 and the first quarter of 2012, according to Jeffrey Jackson, chairman of appraisal firm Mitchell, Maxwell & Jackson.

The most widly publicized figures from recent Manhattan market reports indicate an increase in sales activity in the third quarter compared to the previous quarter. Prudential Douglas Elliman, for example, said that sales transactions rose 17.2 percent over the previous quarter, while the Corcoran Group found a 6 percent quarter-over-quarter increase.

But those figures just represent closed deals, and a falling number of signed contracts forecasts a weak fourth quarter. (Elliman does provide pending sales figures, but they are less closely watched than closed sales numbers in the report.)

According to Jackson’s data the volume of signed contracts was set to decline 9 percent in October compared to September, after dropping 24 percent in September, and 14.5 percent in August. (Jackson did not immediately have numbers through the end of October.)

Data from UrbanDigs.com, a real estate analytical website, echo Jackson’s gloomy numbers.

In June, there were 988 contracts signed; in July, 713, the UrbanDigs.com data show; in August, 734; in September, 571; and in October, contracts picked up somewhat, hitting 681.

“We peaked out in late June and early July, and for the most part we started seeing a lower amount of contracts [in] August, September and October,” said Noah Rosenblatt, the founder of Urban Digs.

This drop in signed contracts will start to show up in fourth-quarter market reports, Jackson said, with a greater decline showing up in the first quarter of 2012, barring an unlikely turnaround in November.

“We don’t have the pipeline [of pending deals] to sustainably power a strong fourth quarter after what was a very solid third quarter,” Rosenblatt said, predicting a decrease in median and average prices.

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“We’re only starting to see signs of a pick up, and it’s probably three weeks in the works, and it’s just too soon to call it a new trend,” he added.

Of course, not everyone has experienced declining sales volume.

“That’s absolutely the reverse of my experience and what I’ve been noticing,” said Fabienne Lecole, a senior vice president at Corcoran who focuses on the Upper East Side and Midtown, adding that she has noticed an increase in the number of signed contracts coming out of her office.

“I can only speak for me, but I’m extremely busy,” she said.

Steven Leon, a senior associate salesperson at Citi Habitats, said he is busier now than three months ago, having recently inked a contract for a studio at 200 West 20th Street, pending approval from the co-op board.

But “unexpected surprises at the 11th hour” have torpedoed other deals, Leon said.

However, Jackson insisted the downward trend was more pronounced than a seasonal summer slowdown, and stands in contrast to what would normally be an increase in signed contracts in October.

“The market’s in a state of flux right now,” Jackson said, noting that the Standard & Poor’s downgrade of the U.S. credit rating, volatility in the stock market, stubborn unemployment numbers and planned layoffs are all factors contributing to a slowdown in deals. Earlier this week, compensation consulting firm Johnson Associates predicted that 2011 Wall Street bonuses could fall by an average of up to 30 percent compared to last year.

The decline in contracts is also the result of a change in the trajectory of the market, Jackson added, where sellers looking at largely positive market reports do not see eye-to-eye with buyers when it comes to setting a price for a property.

“That in and of itself creates fewer transactions,” Jackson said.

He predicts the discrepancy will continue until buyers and seller see two consecutive quarters of decreased sales activity.