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Three Cents Worth: Appreciating The Inventory We Have

[This week, chartist Jonathan Miller digs into the relationship between inventory and prices in the Manhattan market. The red bars show the year-over-year change in price per square foot. The blue lines show the year-over-year change in inventory. The graph runs from the second quarter of '02 to the third quarter of '05. Click on the graph for a life-size version.]

I created this week's chart to illustrate how apartment inventory interacts with price levels in Manhattan. It is logical to expect prices to rise when buyers have less inventory to choose from and therefore are competing for fewer apartments. This chart shows is how pronounced the drop in inventory was at the end of 2004 which lead to the sharp spike in prices in the first two quarters of 2005 (plus I have always wanted to use the infamous Curbed "Arrows.")

As you can see, inventory has risen steadily over the last three quarters, partly from climbing out of the hole in the inventory well that was made at the end of last year. At the same time, the rate of price increases has eased as compared to last year as the price bars do not show a decline in housing prices. We are now seeing inventory levels ease slightly as sellers generally hold off listing their apartments during this holiday period.
· Price Per Square Foot and Inventory Change [Miller Samuel]