[Three Cents Worth NY #176] Manhattan Housing Gets Spiked, Dipped, Bumped, Occupied

Posted by Jonathan J. Miller -Monday, October 31, 2011, 2:32 PM
3 Comments

It’s time to share my Three Cents Worth on Curbed NY, at the intersection of neighborhood and real estate in the capitol of the world.

Now that our quarterly gauntlet of reports is behind me, I thought I’d throw a chart together to gain a little perspective on where we are now with context given to the past decade. I plotted median sales price adjusted for inflation against the monthly absorption rate. Absorption in this case is defined as the number of months to sell all active inventory (excluding shadow) at the current pace of sales activity. In grocery store parlance, it would be the number of months to sell everything on the shelves if no one restocked them. I’d love to go back 25 years which is the extent of the bulk of our sales data but was only able to begin to capture listing data circa the dotcom era needed for the absorption stat…

Three Cents Worth: Manhattan Housing Gets Spiked, Dipped, Bumped, Occupied

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3 Responses to “[Three Cents Worth NY #176] Manhattan Housing Gets Spiked, Dipped, Bumped, Occupied”

1. Frank Fabbro says:

   October 31, 2011 at 4:44 PM

   Mr. Miller,

   I have been creating similar charts for many years for real estate in parts of the San Francisco Bay Area (mainly for San Francisco and Silicon Valley). If I could make a humble suggestion, please note that what you are charting in the “blue” component of your graph is not actually an absorption rate, but rather a supply or inventory ratio. That is, your chart shows the number of months it would take to sell the inventory of active listings at the trailing sales pace of the prior month. (BTW, to be done properly, that ratio really should be seasonally adjusted IMHO. I apply seasonal adjustments when I create these graphs. At least here in the Bay Area, seasonal factors tend to have a significant effect on the number of listings and the number of sales in any particular period. If you have tracked the data over a significant period of time, which it appears that you have, it is quite simple to deduce the seasonal adjustment factors.)

   To me, an absorption rate would be a reflection of sales activity, which is not quite the same thing as what you are tracking. If you were charting absorption, a higher point on the graph should correspond to a higher rate of sales. Your graph, of course, effectively is the inverse. That is why it would more properly be labeled an inventory graph.

   The information is useful either way, of course, regardless of the semantics of the label. Thanks for providing it.
   • Jonathan J. Miller says:

     October 31, 2011 at 5:15 PM

     Thanks for your thoughtful response. I don’t disagree with you about seasonally adjusting. I’ve never bothered because we don’t get extreme changes in inventory and sales through the year in Manhattan than the more suburban markets do such as Long Island or Westchester Countiy New York outside of Manhattan. Still it would probably be more accurate to seasonally adjust but it isn’t materially different. I did inflation adjust the prices and that’s REALLY different. Its fascinating that we see absorption from opposite perspectives. In property valuation, we look at it from the perspective of the inventory that exists and how long it takes to sell off the competition. In sales efforts, such as new development, its clearly the opposite – as in – how long will it take to sell out a building? Listing absorption versus sales absorption. I’ve gone with listing in my orientation and its not a matter of right/wrong – more about labeling. My brain won’t process the other way. Can you send along a link of what you’ve charted in this regard? Thanks again!
2. Frank Fabbro says:

   October 31, 2011 at 10:44 PM

   Thanks for the reply. When I get a chance, I will send some data/graphs by e-mail.