Manhattan Inventory Check
A: This is for spunky; some of you should know what I mean by this. Curbed had Jonathan Miller's inventory charts a few weeks ago that I would like to revisit. Looking at my real time Manhattan inventory tool, powered by Streeteasy, I see rising inventory but still not enough to change the supply/demand imbalance right now that favors sellers. Lets break it down a bit more as a mid month review.
UrbanDigs NYC real estate data & charts is in BETA for another few months. For now, charts will only show daily readings going back 2 weeks so please bear with us as we tweak this tool to be of the highest accuracy for your future analysis. Daily readings, whether small or large, should be taken with a grain of salt as we finish our BETA testing. Overall though, the data seems to be accurate enough to discuss in posts like this one.
Here is the trend over the past few weeks:
Now, lets go back to Miller Samuel's chart a few weeks ago that showed total inventory trends up to January 2008; click chart to enlarge:
CONCLUSIONS
JAN 2007 TOTAL INVENTORY - 6,000
JAN 2008 TOTAL INVENTORY - 5,500
YEAR-OVER-YEAR % CHANGE - down 7% or so
6-MONTH % CHANGE - up 22% or so
Ok, I'm not a fan of using year over year changes for analyzing inventory because it doesn't take into account the change of investor sentiment accurately, and is going back too far in time and to me that doesn't make much sense. I'm way more interested in more real time trends, say the last 3-6 months, and what inventory is doing here as an indication of more real-time investor sentiment and marketplace supply.
When I look back a year ago, inventory is LOWER! When I look back 6 months ago, inventory is HIGHER. The current trend seems to be up. Going back in time, the bonus season of 2007 (JAN-APRIL) was very active (yes, I wrote about that numerous times right here on urbandigs), in my opinion more active than today's environment, and as a result sales volume was very strong. When you have strong sales volume, you will see a decline in inventory in the months following as deals close and listings are sold off. Combine this with a seasonal slowdown during summer months, and Jonathan Miller's inventory chart for APRIL-JULY 2007 makes a lot of sense. During this time, we saw inventory decline sharply largely a result for deals closed during the active bonus months prior + lack of new product coming to market entering the summer.
Then came September, some 5-6 weeks AFTER the credit crisis began and surfaced to media headlines and stock markets. If we look at inventory since August 2007, we see a rise of about 22% (4,600 units to about 5,600 units today), but lets be fair and check out what happened during these months in past 3 years.
AUGUST through JANUARY MANHATTAN INVENTORY TRENDS
AUG 2004 - JAN 2005 ---> down 9% or so (5,400 to about 4,900 units)
AUG 2005 - JAN 2006 ---> up 18% or so (5,300 to about 6,300 units)
AUG 2006 - JAN 2007 ---> down 12% or so (7,100 to about 6,200 units)
AUG 2007 - JAN 2008 ---> up 22% or so (4,600 to about 5,600 units)
Certainly we can say it's a trend worth reviewing! What makes this time around different of course is the macro environment, the lending environment, credit markets, and investor confidence. I have stated before that I think 2008 will be the year Manhattan inventory reverses course and rises, breaking the declining trend since the top in mid 2006. The main reason: a drop in buyer confidence leading to slower sales volume.
By no means is current inventory favoring buyers, we are still tight and there still is not enough options out there for buyers; an environment that favors sellers. But we must follow these trends and see how they react to the changing environment if we are to be ahead of the curve should fundamentals change here in our great city!
Posted by Lisa
Fri Feb 15th, 2008 11:37 AM
FINALLY A ARTICLE I CAN UNDERSTAND!
Noah, I am a buyer and I am wondering if we should be able to negotiate more seeing that inventory is moving higher?
Posted by Noah
Fri Feb 15th, 2008 11:43 AM
ha! Yea, Ive been focusing alot on macro and credit markets lately, trying to pass on to readers what I am concerned about.
Anyway, to answer your question, NO I do not think this could be used to negotiate. Certainly, try bt I dont think it will have any effect on sellers willingness to lower price unless there is active competition in their building for same property type.
You have better chance discussing uncertainty with overall markets. If inventory rises to 7,000, sellers will compete with each other much more on price to move property
Posted by Noah
Fri Feb 15th, 2008 11:45 AM
sorry meant to add...
in the end, you need to bid what you feel the place is worth based on comps, condition, light/views, etc..
Posted by mh23
Fri Feb 15th, 2008 04:19 PM
Nice post. Quick question. Today it shows that there were 166 listings, but 196 in contract. Should that not have led to a net reduction of 30, or do you only remove a listing once it has closed? This is a great tool, and I like and appreciate it.
Posted by Noah
Fri Feb 15th, 2008 04:52 PM
mh23 - total inventory is not that cut & dry. For example, there are listings that are taken off market yet never had contract signed..also streeteasy data is constantly being enhanced and updated and sometimes there are bulk updates. Cant look at this data by day, really need to take step back, collect enough data, and use for trends only.
But it seems accurate when compared to JM's info so we are very happy about that.
Posted by David
Fri Feb 15th, 2008 04:56 PM
Lisa said "...I am wondering if we should be able to negotiate..."
If you want to know what will help your negotiations in Manhattan it's pretty simple - patience and a couple years. Today's buyers will be next year's regretful bagholders.
Posted by Brenda
Fri Feb 15th, 2008 09:31 PM
mh23, pull up all the listing for the last two days, and you'll find that Core seems to have decided to dump all their listings into the system on one day, including an incredible number of contracts signed.
Does this mean that they sold all those apartments on the day they listed them? Well, no would be the right answer, which is one of the reasons that the inventory figures are not accurate in the first place, as well as the time on the market numbers. There are plenty of units on the market that don't show up on Streeteasy, or not until the last moment.
Posted by mh23
Sat Feb 16th, 2008 08:12 AM
Thanks, Brenda. I am looking for the number of actual listings available, excluding those already in contract. Needless to say Streeteasy can only provide data that they have.
Posted by Noah
Sat Feb 16th, 2008 07:27 PM
Brenda,
Yes, there are situations as you described affecting SE data. Out of my hands. What I know is that I have met with these guys numerous times, the passion is there, the quality of content as a focus is there, but the job is a very very difficult one. Anyone familiar with cleaning data which comes from so many different sources, and is updated based on the agent at the firm's motivation for transparency, are all variables against us.
In the end, the data is ONLY as good as the agent that maintains the listing. In most cases, contracts signed are not updated on webads until weeks after, thus giving SE's crawler a headache. No matter how much you try, without a regulated standard for listing in this city, the data will always be very tough to keep at extremely high quality. This is the first step of what I hope to be numerous steps in years to come to solve this transparency problem.
Posted by i.l.
Mon Feb 18th, 2008 12:17 PM
The numbers differ on the vertical axes for 2002 and 2008. Is this accurate--has the number of coop sales declined as much as this suggests? If so, might this be because of consolidation of small apts into larger ones or other reasons?
Posted by anonymous
Tue Feb 19th, 2008 09:41 AM
what do you think will happen in Harlem in the near future?
Posted by Fred
Tue Apr 8th, 2008 11:07 PM
Anyone want to throw out a good estimate for what kind of multiple on the national average Manhattan should trade at over time? My gut thinks 2x the national average which would put the NY metro average at $400k; basis would be that if the stock market is essentially flat relative to 2000, isn't it reasonable to assume that real estate gives up at least its gains of the past five years or roughly 50%? there's just no end in sight for the mortgage dilemma. it will take at least five years to recreate the kind of financing that CDOs provided to the residential industry and as such, the entire basis for what homes sold for at the peak does not hold water. I guess we could just be sitting on a gigantic mexican stand-off between sellers and buyers but my hunch is inventory will have to reach something like 12 months supply to make folks really nervous. liquidity for the $1,000+ psf resi market is gone and OPEX is screaming to go higher. i feel sorry for the europeans (wait, no I don't) who bought little ant condos for $1,500 / sf thinking they'll just rent them out and sit on the appreciation.