Manhattan Inventory Dropping For Summer

A: BRETT FAV-RA! As a long time J-E-T-S fan, today is a great day! For god's sake, we have ourselves a damn quarterback. Excuse me while I shed a tear of joy. Ok, I feel better now. Back to business, I am getting a number of emails and questions regarding the state of Manhattan real estate right now. All I can say is this, the generally slow summer months here in Manhattan are a bit mixed. What I mean is, while inventory is dropping from a combination of a pickup in activity in JUNE & JULY and stale listings being removed from the marketplace, buyers are still bidding cautiously and only those sellers willing to entertain a price lower than they would like are getting deals done. Lets discuss.

As I said many times, out of all the charts I offer here on UrbanDigs, total inventory & new listings to me is the most accurate thus far. When I look at price reductions & contracts signed, I just don't see a good correlation to what I see out in the field.

Right now, inventory is tighter today than it was just a few months ago. But Noah, the NY Times had a whole report on the glut of 1BR apartments? True, they did. But I think something interesting is going on there, reflecting the macro environment. Lets think about it for a moment. One-bedroom buyers are mostly first time buyers and new couples, and the like, who may be more exposed to difficulties in financing and affected psychologically by the media reports of the credit crisis. Its easier for a first time buyer to hold off buying, than it is say for a growing family that needs more space to accommodate two kids. There is certainly a larger stock of one-bedroom apartments in Manhattan, compared to two or three bedroom properties, and I wonder how many alcove studios were converted to JR1's and marketed as one-bedrooms that are skewing the numbers a bit.

Taking a step back and looking at the real time inventory data, I see a 7-8% drop in actively marketed listings over the past few months. Here is the 3-MONTH chart of Manhattan inventory so that you can see this trend:

This is real-time data folks and the only purpose for me working to get these charts for you was to solve the lagging nature of Manhattan real estate statistics. I did not want to look at quarterly reports, and instead, I want to see what is going on NOW.

In normal markets, Manhattan is generally very active during JAN-APRIL and slows down as we enter the summer months and active buyers seem to be cut in half. Today, this market is anything but normal considering the macro environment. In my opinion, the months of JAN-APRIL or the so called wall street bonus season, was very sluggish which led to a steep rise of inventory as sales volume dropped significantly. Data shows inventory rising about 42% from mid-DEC to mid-MAY; from 4,500 listings to a top of about 7,800 listings. Thats quite a rise for the most active months of the calendar year!

For me, I saw a big pickup in activity in JUNE & JULY (two months that usually are slow for me after an active wall street bonus season; this year was reversed) and reported that to you in my July 16th post, "Manhattan Inventory Holding Steady":

"However, I must say that JUNE & JULY have been active months for me and when I talk to colleagues, these two months have been more active for them as well. So, I would expect this activity to contribute to slightly declining inventory for the next few months."

Doug Heddings over at TrueGotham.com also reported on a pickup in activity in mid July:

"It's summer and although vacation took me away for a week, I have actually been quite busy selling real estate (4 closings this week and 5 contracts signed in past few weeks)."

Those are two front line reports of the pickup in activity that we wrote about in mid-July, but is more reflective of the increased activity in late MAY & JUNE! First we see it, then we report it. When you go back and look at the total inventory reports, you can see the end result of the action that we reported to you last month in declining inventory. If anything, it validates the real-time reports Doug & I are providing to you, as we see it.

Moving forward, I think inventory will continue to stagnate if not, decline a bit more for the next few months. Right now, I have completed deals for most of my buyers who are now awaiting their closing dates. For anyone seeking to take advantage of headline shock, your biggest advantage is the generally slow traffic levels for this time of year; at the expense of fewer options! You really need a rising inventory environment and more seller competition that comes with more supply, to really get that ultra low-ball bid accepted. In my opinion, inventory will start to rise again next January and enter a weak 2009 wall street bonus season. Anyone seeking a deal right now will have to do so at the expense of fewer options. Certainly there will be pockets of distress where you can get a great deal from a seller that just needs to unload their property, but they will be fewer than what it was in May. If things change, I'll report it to you here on UrbanDigs.

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