Manhattan Total Sales Volume & Absorption Rate
A: Some more charts for you on the Manhattan housing market.
MANHATTAN TOTAL SALES VOLUME (in millions of dollars)
I love this chart. Since dollar volume of sales is tied to actual sales, this chart is also set to a 90-day lag. Once we are confident that a month has most of its recorded sales filed with the city, we will publish the production on UD.com. Any chart tied to Manhattan sales (dollar volume, absorption rate, listing discount, etc.) should be at a lag or risk painting an incomplete picture until enough time has passed for all sales to be filed and measured.
The chart shows dollar volume trends, by month, and really shows you the destruction of our market post-Lehman and the reflation we saw to present day. As the March 2011 bar gets published, the trend is down 12% from the same period in 2010 but up 10% from the month of February.
MANHATTAN ABSORPTION RATE (in # of months)
Absorption rate is the pace at which current supply can be absorbed given the most recent measure of sales volume. What some need to understand is that 'supply' can be measured in a few ways:
1) 'Units' of Supply --> includes any unit of inventory that was on the market and has not yet sold (including pending sales)
2) 'Active' supply --> includes units of inventory currently ACTIVE on the marketplace (not including pending sales)
We chose to utilize method #1 and followed this formula; which includes pending units in the supply figure because they were not absorbed (sold) yet.
Most brokers define a level of Absorption Rate that when broken, signifies either a "buyers" or "sellers" market - lets call it 6 months. So anything over 6 months indicates a "buyers market" and anything below indicates a "sellers market". Typically those measures utilize method #2 - so expect our dividing line to be higher (maybe 10 or 11) as 'supply' includes pending sales that are awaiting closing.
Our development team has plans to extend Absorption Rate, and build Days on Market stats, for neighborhoods and submarkets as well in the near future. Right now, this subscriber feature only measures the entire Manhattan marketplace.
Posted by Confidence Stimpson
Sat Jul 2nd, 2011 03:34 PM
Re method 1 vs method 2 for determining absorbtion rate: Seems to me that 80-90% (maybe more) of the signed contracts are going to close. So why not add, say, 15% of the number of signed contracts to the number of active listings and then use method 2? Also, I think the Vanderbilt report, which considers all signed contracts still available, calls fewer than six months of inventory a sellers' market, six to nine months a balanced market, and more than nine months a buyers' market.
Posted by urbandigs
Sat Jul 2nd, 2011 04:28 PM
Hey Confidence - great seeing your comments here and hope to see more in the future!
I think we are going to end up publishing both methods. Method 1 will be exposed to the swings in pending sales, and therefore we will see lower absorption rates when pending rises even if pace of sales has not yet - in fact, this perfectly describes the past quarter (higher pending sales trends, lower sales pace)
Interesting that Vanderbilt uses the same method we do for absorption, but I would think the boundary line should be higher than 6 months no? Look at past history on the bar chart above, somewhere between 9-11 would seem the line that defines buyer or seller markets..thoughts?
Also, do u have latest link to Vanderbilt reports? Thx again and have great holiday!
Posted by Confidence S.
Sat Jul 2nd, 2011 04:33 PM
I just checked and the 2nd quarter/1st six months isn't out yet. Most recent was April 2011. You have a great holiday too!