All stories about "Three Cents Worth"

[This week, our graph guru Jonathan Miller has a few things to say about the path of inventory in 2008.]

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Back in March, I tried showing inventory levels by month, presenting inventory by year since 2001. However the results weren't very clear. So I updated the presentation — trimmed the crust, so to speak — hoping to provide a little more clarity.

One of the ways to characterize the level of inventory today is that it is higher now than last year, but below levels of two years ago. The current year is sandwiched between the prior two on the graph. One of the more striking elements of inventory levels over this three-year period is the fact that levels are notably higher than the seven-year monthly average.

[Appraiser extraordinaire and Curbed's graph guru Jonathan Miller returns, this time with a look at the recent history of co-op and condo sales and inventory, and where the trend is headed.]

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Since the pace of sales activity has been the primary focus of real estate market participants this spring, I thought I'd present the relationship between the number of sales and listings on a percent-change basis over the past five years, comparing each quarter to the prior-year quarter and broken out by co-ops and condos.

Co-op and condo patterns were generally consistent, showing the inverse relationship between these two metrics. No surprise there. Higher sales activity yields lower inventory. Given the high number of condos entering the market, while co-ops as a housing stock remain static, I would have thought we would see more condo volatility. However, demand for condos has kept its excess inventory potential in check, and consistent with co-ops.

The trend suggests a lower pace of sales over the next year with a higher level of inventory.
· 1-Year % Change in Manhattan Number of Sales/Inventory [Miller Samuel]

[This week, chart master and holder of many secrets Jonathan Miller explains why people who call the Manhattan market "one-dimensional" are dead wrong.]

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With the 1Q 2008 report coming out next week, and all the attention being paid to the high end of the Manhattan market, I thought I'd present the dollar volume of properties that sell below $1M, over $4M and in between. I began to do this after 9/11 because I noticed how sales activity at the (then) higher end of $4M was very limited, losing market share throughout 2002 and early 2003.

Since that time (and I am not adjusting for CPI), market share for properties above $4M has more than doubled, from 11% to 30%, while sub-million has dropped from 50% to 25%. However, the middle sector of the $1M to $4M market has remained relatively consistent, generally hovering in the high 45% to 50% range.

[This week, our graph guru Jonathan Miller looks at how inventory rises and falls according to the season.]

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This week, I took our monthly inventory data and plotted the past eight years month-by-month to see what the patterns are. The quarters are labeled by the general season they fall within. The patterns are pretty thin, with summer seeing the most consistency.

Winter: A period of mixed trends. Listing activity tends to be erratic with inventory relatively stable minus a few exceptions. Inventory dropped sharply in 2002 as properties were pulled off the market in the aftermath of 9/11. In 2006, there was significant expansion of inventory as the number of sales remained low. This year (2008) we are seeing an increase in inventory, but the actual levels remain between the other seven years presented.

Spring: Inventory generally increases in the early spring and then levels off, or shows a decline as the pace of sales overtakes available inventory. Again, 2006 was an anomaly, showing an increase in inventory.

Summer: I was struck by the consistency of the pattern each summer. From mid-August to mid-September, listing inventory begins to rise for all years except 2003, when the increase began a month later.

Fall: Inventory falls as demand eases. Potential sellers tend to delay placing their listings on the market until after the New Year unless they are under pressure to sell.
· Manhattan Co-op/Condo Inventory By Year [Miller Samuel]

[This week, our graph guru Jonathan Miller examines the relationship between the amount of time listings dangle on the market and the severity of their PriceChopping.]

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I have graphed two marketing time indicators this week: Days on Market and Listing Discount. The two indicators track fairly closely, which is logical since one would expect the negotiability on price to increase as the time on the market increased.

Days on Market is defined as the average number of days that a property sits on the market from the last time the list price was changed (if at all) to contract date.

Listing Discount is defined as the percentage difference between the last list price and the contract price.

After a decline in both indicators over the past year, both have bumped up as of late. However, it's not clear whether this indicates a weaker spring market ahead. Over the past decade, these indicators were evenly split on whether they rose in the first quarter, even during the boom years. Listing discount has trended upward for the past two quarters and days on market in the past quarter. I've always seen this market indicator as a supplement to other indicators like price trends, inventory and sales levels. In light of the upheaval in the credit markets, and the national economy being either on the verge of or in a recession, I suspect we won't see much improvement in either indicator over the next several quarters.
· Listing Discount versus Days on Market [Miller Samuel]

[This week, our graph guru Jonathan Miller takes on the hot topic of shrinkage.]

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The average square-footage of a Manhattan co-op/condo apartment in the fourth quarter of 2007 was 1,220 square feet, down 5.7% from the 1,289 square feet average of a decade ago. However, the spread between co-ops and condos has also declined over the same period.

In 4Q 2007, the average size of a co-op apartment was 1,083 square feet and the average size of a condo apartment was 1,336 square feet. Since new development activity is nearly all condo, the co-op housing stock is essentially static. It's a widespread perception that the average size of a Manhattan apartment is rising (probably because prices continue to rise), but that is not the trend.

Condo sizes have fallen more than co-ops since the market peak in 1999-2000. During the dotcom-infused real estate market surge in 1999-2000 (which saw a larger jump in prices than the housing boom peak of 2004-2005), condo sizes grew rapidly. However, this trend was overplayed, and by 2002, the size of condo units began to fall.
· Manhattan Average Co-op/Condo Square Foot Trend [Miller Samuel]

[Our graph guru Jonathan Miller has returned! While he's been away, JM has been preparing quarterly and year-end reports, getting quoted in every publication on Earth and planting the seeds that will one day sprout as 3CW mindgrapes. First up: why the luxury market is fudging things up.]

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I compared the change in inflation-adjusted median sales price from the prior year quarter to current for both the overall Manhattan co-op/condo market and the luxury market. Because the luxury market in this analysis represents the upper 10% of all sales, its trend line shows more volatility than the overall market partially because of sample size. I don't think luxury prices are a leading or trailing indicator; they simply represent a different market that, up until today, has benefited more from the weak dollar, Wall Street bonus income and corporate profits than the remainder of the market.

Luxury Market — Besides being the most over used word in real estate after "location", the "luxury" market has not always been in sync with the overall market. This has been the case for the past 2 1/2 years. In mid-2005 through the first half of 2007, the change in its median price was less volatile than in the prior few years, staying closer to
0%, but clearly showed more weakness than strength in the pace of growth in median sales price. However, the second half of 2007 saw a sharp increase in median price, far outpacing the overall market and causing many to think the overall market was rising sharply as well. It isn't.

[This week, our graph guru Jonathan Miller takes a look at how summer's transition to fall affects inventory patterns.]

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In this chart, I track total inventory in the orange columns, with the month of September in orange. I was trying to illustrate the change in inventory from August to September, which increased in 5 of the past 6 years and suggests a seasonal change. In addition, co-ops (blue line) and condos (green line) track separately until the summer of 2006, when they aligned. Condos seem to be edging out co-ops now despite the fact that the owner-occupied housing stock is 3:1 (co-op to condo).
· Manhattan Co-op and Condo Listing Inventory [MillerSamuel]

[This week, our graph guy Jonathan Miller examines the inventory-to-sales-price relationship, a long and fraught affair marked by marathon counseling sessions and bad Valentine's Day gifts.]

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This week I plotted the quarterly change in the inflation-adjusted median sales price from the same period in the prior year against the change in inventory. The erosion in inventory levels over the past year has been significant, reversing a severe case of post-housing boom bloat and (perhaps) stabilizing the decline in the rate of price growth over the past two years. The "contrarian" Manhattan market that has been widely touted over the past year is all about declining inventory and record sales levels, not prices. In the recent 3Q 2007 report I just presented, with the exception of the top 6% of the market, price are relatively stable at the moment.

Its NOT about "skyrocketing prices." That's leftover canned commentary from 2004-2005.
· Prior Year Quarter Gain (Loss) in Inventory* vs. Change in Median Sales Price [MillerSamuel]

[This week, our market analyst and chartmaster Jonathan Miller tackles the relationship between entry-level apartments and adjustable rate mortgages.]

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It would seem logical that the sale of entry-level Manhattan apartments, which tend to be studios and 1-bedrooms, would correlate very closely with adjustable rate mortgages. First time buyers leave the rental market for home ownership as affordability grows. From 2001 to 2004, ARM mortgages fell about 3%, considered a huge decline in rates which should have accelerated the pace of sales of these apartments.

[This week, our graph table guy Jonathan Miller drills down into your neighborhood. Click on the image to expand.]

This week I was a tablist (in Curbedspeak) rather than a chartist and presented the percent change in the annual price per square foot by neighborhood between 2005 and 2006 and then sorted them. I omitted much of the overlapping areas we track, (ie uptown, downtown, etc.) and went with more specific areas that we cover in our reports. The top (red/hot) and bottom (blue/cold) 5 for 2006 were color coded presented by percent change.

I then showed where those neighborhoods were in the prior year (2005) in the second column section. The third section was a position change column that show how much a neighborhood/market changed over the year, so for example, Harlem + East Harlem increased from 6th position in 2005 to 1st position in in 2006 or +5 positions relative to the other markets covered. Sorry about being so numbers-heavy this go 'round.

The change from 2004 to 2005 (prior year) was characterized by an overall 25.8% increase in price per square foot for all of Manhattan with all but one of the markets experiencing double digit increases in price per square foot. The overall Manhattan price per square foot change would have been between the 9th and 10th ranked markets in 2005. The overall Manhattan average price per square foot change from 2005 to 2006 was 6.8% and fell between the 15th and 16th ranked positions indicating that the higher ranked locations were generally
smaller in size, carrying less weight.

In either year, none of the neighborhoods/markets saw negative price declines and judging by the early going in 2007, "more of the same" appears to be the trend. Of course, this is in distinct contrast to the national housing picture.
· Manhattan Neighborhood Change in Price Per Square Foot [Miller Samuel]

[This week, our graph guy Jonathan Miller returns from exile—at warp speed. Click on the image to expand.]

The real estate market velocity of Manhattan has spiked while the Long Island/Queens market as dropped. Velocity is measured by multiplying the number of sales by the average sales price. It represents the total dollars that were traded during a period. However, since there is a lag between recording and closing dates, plus some other inefficiencies in data collection times, these velocity figures are not an absolute number like say, the stock market, but can be used to show a trend. The outlying suburbs are showing more weakness than Manhattan, not unlike many metro markets across the country. Manhattan sees one half to one third the transactions of Long Island/Queens, yet because the average sales price was $1,290,391 in Manhattan in the first quarter of 2007 and Long Island/Queens had an average sales price of $496,369, the total sales dollars in Manhattan were greater for the first time in a while.
· Market Velocity [Miller Samuel]

[This week, our graph guy Jonathan Miller gives up his favorite price indicator on his way to an analysis of quarterly trends. Click on the image to expand.]

I thought it would be neat to look at the patterns of each quarter, overlapping them to see how they relate to each other. I selected average price per square foot, which is my favorite price indicator, and adjusted it for inflation. The percent change from the prior quarter was then plotted with each line representing a quarter, from 1989 through 2007.

The 1st (blue) and 2nd (pink) quarters seem to show the most volatility and are generally more positive than the 3rd (orange) and the 4th (green) quarters. The first quarter was most volatile, probably bearing the brunt of the bonus effect and the second quarter is the spring market, the most active market of the year. In fact the 1st and 2nd quarters seem to pair off as do the 3rd and 4th quarters.
· Average Price Per Square Foot by Quarter [Miller Samuel]