clock menu more-arrow no yes

Filed under:

Three Cents Worth: Inflated Prices

[Double-dip this week for our somebody-explain-this-crazy-market-to-me guy Jonathan Miller. Both graphs below show the average quarterly sales price (in 2005 dollars) of Manhattan condos (blue line) and co-ops (red line) from the first quarter of '89 to the third quarter of '05. The y-axis runs from 0 to $1.7 million on the top graph and to $1.8 million on the bottom graph. ]

Since the Fed has been telegraphing its concerns over inflation, and now we may see it actually appear as a result of rising fuel costs, you might find it interesting to look at the effect inflation has on average sales price of Manhattan co-ops and condos. You'll find this analysis makes the price increases over the past 16 years easier to digest.

The first chart shows sales price statistics the way we typically look at them. The numbers are in nominal terms, that is they have not been adjusted for inflation and the rising cost of living. (Remember when that $1 candy bar cost 10 cents....I mean....50 cents?) In the second chart, I've converted the statistics to incorporate the effects of inflation (CPI). Notice how the 1989 average sales price on the nominal chart (top) is in the low $400k's while the CPI-adjusted chart shows the 1989 figures just below $800k.

Nominally, the average price for condos increased 235 percent in the last 16 years, yet the actual inflation-adjusted gain is 91 percent. That certainly makes for less sensational real estate headlines.
· Manhattan Average Sales Price [Miller Samuel]
· Manhattan Inflation-Adjusted Sales Price [Miller Samuel]