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Three Cents Worth: Too Much (Information About) Inventory

[Given yesterday's warm-up chart, you should have no trouble digesting the latest from our regular graphman Jonathan Miller. Today, a look at monthly co-op (blue line) and condo (red) listing inventory from January '02 to November '05. Click on the graph for a life-size version.]

Many people have pointed to the recent rise in co-op and condo listing inventory, which was up in the third quarter of 2005 by 12.8% over the prior year, as a sign that the real estate market is "downshifting." Buyers are starting to show their muscles to sellers, but sellers still hold the cards. I thought it would be interesting to break out the stats to tell more of the story.

It is striking how condo inventory has remained in a relatively tight range of about 1,500 to 2,000 units, with the exception of the past few months, suggesting that the increases in condo development have been readily absorbed until recently. Condos have just now exceeded their October 2002 high.

After the jump, the co-op story and why you shouldn't jump to any conclusions.
On the other hand, co-ops remain well below their post-9/11 high. Co-ops also seemed to show more volatility over the past four years than condos did, but it is at least partially illusion. They have had a spread from high to low of about 2,000 units, while condos showed a spread of about 1,000 units. However, percentage-wise, the spread was actually about the same since co-ops represent about twice as many sales as condos do during any given period.

As we approach the end of the year, the inventory of both co-ops and condos has started to drop, which is consistent with the end of each of the prior three years. Historically, apartments continue to sell at a relatively brisk pace from Labor Day through the late fall, but the inventory is not replaced as sellers wait to list their properties after the first of the year. Inventory typically rises again in the first quarter in anticipation of the spring market, which is the peak of the housing year, in terms of both price and volume levels.

Co-op and condo listings have trended upward since the beginning of 2005, showing weakness in the demand supply equation, but levels are well within recent norms. In other words, its hard to pinpoint some sort of reliable macro trend here.
· Co-Op and Condo Listing Inventory [Miller Samuel]
· Three Cents Worth: Your Gain Is Your Loss (in Inventory) [Curbed]