Inventory Rises Above 7,000; New Charts Coming Soon
A: As most of you probably know by monitoring the Streeteasy.com powered Manhattan inventory widget on UrbanDigs.com, total inventory in Manhattan seemed to rise above 7,000. The trend is clearly rising, and the reason is clearly sluggish demand. As buyer confidence started to decline late in 2007 as a result of the credit crisis and lagging effect on the equity markets, we started to see a consistent rise in inventory trends. The thing to note is that while this bonus season certainly will go down as a slow one, inventory is by no means at levels that would exemplify fierce seller competition.
First off, here is a preview of the new enhanced charting system that I am custom designing for readers of UrbanDigs.com! The chart below is 1 of 3 charts that will be at your disposal, and compares NEW LISTINGS & CONTRACTS SIGNED data.
The chart you are previewing is about 65% complete. You may notice that the line graph is very choppy/spikey. The reason is because Streeteasy updates their data systems during the wee hours of the morning, when web traffic is lightest. UrbanDigs sends a request to Streeteasy at around 8AM everyday to collect the updated information from the day before. So, there is a 24 hour lag, sometimes a bit longer, between when a listing is first displayed publicly and when it is captured by the Streeteasy systems. In an in-perfect world and a real estate market without a standard MLS listing system, this is the best data at my disposal. So far, it has proven to be fairly accurate.
Moving on, very little updating/editing/adding of new listings is done over the weekends. Since there is a 24 hour lag in data collection, the light data of SAT + SUN is collected by UrbanDigs's widget on SUN + MON! That is why you may notice very low data for contracts signed, price reductions, and new listings on Sunday's and Monday's. This is what is causing the spikes on the above graph. Needless to say, we will probably average the data from the week or come up with a different formula to 'smooth out' the line graph so that you can better interpret the trend without sacrificing data accuracy.
Feel free to offer your suggestion on fixing this in the comment section! The entire purpose of these charts is to get a sense of the general trend! Data will never be perfect or 100% real-time w/out a standardized MLS system, so please understand that these tools are for your general knowledge of trends! In this capacity, it really doesnt matter if a contract signed takes an extra few days to get noticed, or a new listing takes 2 days to get captured; as long as it is captured we can get a more real-time sense of what's going on in Manhattan real estate without waiting for lagging quarterly reports!
Back to the current Manhattan inventory data, it seems to me that listing inventory has:
a) risen about 54% since low in mid-December of 4,600 total listings
b) risen about 10% in the past 4-6 weeks or so; when we were hovering around 6,500 total listings
c) risen about 30% since May 2007; when we were at 5,500 total listings
To me, there is nothing wrong with publicly discussing our housing market; even if that means discussing rising inventory due to slower buy side demand. The trend that I consider worth noting is that at this time last year, we were coming off a very active wall street bonus season where total inventory was DECLINING going into the generally slow summer months. Right now, the trend is clearly RISING inventory coming off a slow wall street bonus season heading into the generally slower summer months.
Here is Jonathan Miller's Manhattan Co-op/Condo Listing Inventory Chart that I am basing these observations on:
NOTE: JM's chart was up until March, 2008. So, I added in green bars to plug in April and today's total inventory number; with this data provided by Streeteasy. It will help you visualize where we are at right now, and the trend.
Click on the chart for the larger version. Note how in the past 6 years, total inventory hit a high just below 8,000 in mid-2006. It seems we are on a path to these levels. Now, when I think back to the summer of 2006, I recall it being slow and hard to get top dollar for my sellers; but in no way were prices falling significantly! It was strange, as traffic was slow and listings took longer to sell (days on market definitely rose during summer of 2006), in the end the price paid was pretty strong and didn't dip as low as one might think given the sluggish activity. The reason I mention this is because it seems we will be close to that inventory high in a few more months, if sales volume continues to be light.
In order for asking prices to show a significant move down (as has occurred in many local markets across the nation), you need to see fierce seller competition at a time when buyer demand is very light. That just has not happened yet. I am still seeing buyer demand here in Manhattan, albeit lighter, and inventory is not at levels where sellers are competing with each other via sharp price cuts to move property. Of course you may find pockets of seller competition in buildings that have 15+ listings for sale (the Trump buildings on Riverside Blvd come to mind), in general the competition has not gotten nasty as of yet.
The new charting system should be ready in a week or so, barring any unforeseen programming issues, and should allow all of us to get a much better glimpse into this very mysterious but fast paced Manhattan housing market! I hope you guys like it!
Comments (8)
Wanted to add one thing regarding my statement:
"The trend that I consider worth noting is that at this time last year, we were coming off a very active wall street bonus season where total inventory was DECLINING going into the generally slow summer months. Right now, the trend is clearly RISING inventory coming off a slow wall street bonus season heading into the generally slower summer months."
This is the formula many have been waiting for to pull the trigger. We all heard of buyers waiting for a bit more control during negotiating, and or a chance to get a price that is a bit below what the building/product has been trading for recently. The question I wonder about is whether buyers will stick to their guns and pull the trigger when a deal presents itself OR submit to the herd like mentality of backing off if prices seem to be cooling.
Or a mix of both these dynamics.
Posted by Noah | May 3, 2008 10:25 AM
this is great info. do you think that things like wall street layoffs would be a catalyst to so-called fierce seller competition? i'm thinking that a seller who didn't get a record bonus is in a different position from a seller that is out of a job. i'm not sure if the pink slips have been handed out yet, and i am sort of wary of buying in a market just before the real seller desperation hits.
Posted by newbie | May 3, 2008 12:32 PM
I think that the key word in your analysis above is "yet." There are many lags in the system. Foremost among them is that sellers won't lower price unless forced to do so by the reality of significant inventory on the market. For now, the bid/ask spread remains large... causing sales to remain anemic and inventory to rise.
Posted by anon | May 3, 2008 1:19 PM
It won't be long before we're looking at inventory at 8,000, with apartments on the market for hundreds of days.
The stock market is up because:
1) Agriculture sectors and exporting manufacturers are benefiting from commodity prices and the weak dollar.
2) All the banks that are receiving cheap liquidity from the Fed are holding onto that cash and not lending it out to the system, so a lot of that money has been put into the stock market.
3) The risk of financial armageddon is off the table for now.
None of these reasons directly impacts the NYC real estate market in a significant way. I read someone argue that a rising stock market creates a wealth-effect that should help the NYC RE market, but if you were about to buy an apartment and needed to make a sizable downpayment in the near future, you wouldn't have your money in the stock market anyway.
Posted by Moe Rohn | May 3, 2008 5:50 PM
Noah:
I can't tell you how much I enjoy your site and the great (and improving!!) statistical analysis tools you have up and running. Its about time that we NYers had a more transparent view into Manhattan apt inventory levels and sales vols. I bought my first NY apt in April 2004 and sold it two weeks before subprime mess hit the papers last July '07 (lucky timing on my part). Given current softness in market and now significantly rising inv levels, definitely want to wait and see if inventory hits and pushes through the 8,250 level (I think that was the level you mentioned as a key turning point in favor of buyers in an earlier post). I am in the fncl services business and have been given advance warning that '08 bonuses are going to be no more than 50% of 2007 bonus levels with most of that in stock (and I am with a bank that has weathered the storm fairly well!!).... which doesn't bode well for the Manhattan market strengthening anytime soon. Any thoughts or views? Have you heard anything different regarding '08 bonuses?
Voyager
Posted by voyager | May 3, 2008 6:07 PM
might try a trailing average to smooth the spikes in the data collection. since the spikes seem to kick in over weekends, start with a 7 day.
Posted by mschlee | May 5, 2008 9:21 AM
Noah,
Thanks again for a great analysis.
Even though inventories are going up, it does not mean prices will go down any time soon. We bought our co-op apartment in the summer of 2006, where your plot shows the highest inventory in recent years. My experience is that prices still did not go down. They simply did not rise as much (before increasing again at a faster rate since then).
As for bonuses in financial services firms, your mileage may vary a lot: where do people work, which bank, how are bonuses accrued throughout the year, etc. Even in some heavily battered banks, some people got great bonuses last year.... I expect the same this year, particularly considering that we are not even at the half-way point.
Also a lot of these recession talks are overblown. There are just too many people (read "presidential candidates") who have an interest in making the country's situation sound as dire as possible. For now. Wait until they get elected. Things will suddenly look so rosy again ...
Posted by Marmotton | May 5, 2008 1:26 PM
Seems like suppy is not being snapped up as quickly as it had been for the past couple years, Here in Tucson AZ we saw the same cooling effects however our real estate market is in no way as diversified as yours and we then saw a significant downturn due to speculators leaving the market in droves. I think NYC should hold up much better but a "cooling" is for sure on the way.
Posted by Michael Oliver | May 6, 2008 12:55 AM