Manhattan Inventory Slips: Now What?
A: Chart man Jonathan Miller dishes up some good stuff for the Crains New York Business magazine about Manhattan inventory trends. In the report, which includes exclusive listings for co-op, condos, and townhouses for the entire island of Manhattan, total inventory has been on a steady decline since about September of 2006. Since that time, total exclusive inventory fell just under 40%, explaining the strength of the current marketplace here in Manhattan. So now what?
Here is the chart as posted on Matrix:
First off, here are some reasons why I believe in this data that Jonathan makes out so we can all get a better idea of the fundamentals powering the local housing market:
1. It only includes EXCLUSIVE listings. Including OPEN listings will skew the data for analyzing how much active inventory is out there. For all that don't know, an open listing is not an exclusive listing, but rather is an agreement made by an owner with a broker to market the property in the hopes of procuring a buyer client to purchase the property. If the broker brings the deal, the broker gets a 2-3% commission; or whatever is predetermined. Most full service firms do not allow open listings anymore.
A telltale sign of an open listing is a listing that a broker markets without a FULL ADDRESS attached to the webad (such as "W 70s" or "UES 1BR"). Many brokers market open listings for new development inventory in the hopes of getting a phone call and converting that buyer to a client and ultimately getting the deal and commission.
2. Includes Co-ops, Condos, & Townhouses. Exactly what is needed to be counted to get a good idea of total active inventory in the Manhattan marketplace. The Case/Shiller index excludes co-ops and condos, as well as new dev units in their home price index for New York; which led me to write why that index is not worthy of NYC trends.
3. Includes All of Manhattan. Some datasets exclude neighborhoods like Battery Park City or Inwood because most of the deals in Manhattan occur in between the far ends of the island. It's better to just include the entire island's inventory so we can go back and see where trends are heading.
Conclusions: No surprises from what I have stated here recently. Inventory in Manhattan is very tight, and as a result, prices are holding and buyers scramble to find a product that meets their needs.
However, I have a hunch that July-September sales volume will come in a bit lower than expectations (which will be proven by data released in December or so) resulting in a bottoming out of these declines in inventory. This hasn't happened yet, its just a hunch. I think the headlines of the credit squeeze, along with higher rates and tighter loan standards has had a psychological effect on the buyer pool by pouring some caution into the minds of would be buyers. In addition, I think many buyers are just flat out frustrated by what they can get for their budgets and are choosing to hang tight a bit longer.
Too early to tell, but come early 2008, I would expect these inventory trends to reverse course a bit and start to either bottom out or rise again for the upcoming 2008 wall street bonus season.