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Three Cents Worth: Listing Inventory Bumps, Not Humps

[This week, Jonathan Miller explains what camels have to do with the real estate market, and why you can't count on 'em like you used to. The graph below plots Manhattan monthly listing inventory over the last five years. Each January is highlighted in red. Click on the image to expand.]

One of the main concerns about the housing market these days is the topic of listing inventory and how much it impacts sales price levels. If inventory continues to rise, what will happen to the direction of housing prices and when? We know that inventory has been rising since the summer in New York as well as in much of the country, which has prompted the intense discussion.

In prior decades, listing inventory was generally predictable and consistent. Known as a two-hump camel, listing inventory tended to rise in the spring as sellers wanted to catch the most active market of the year, fell in the summer and then rose again in the fall for the second most active purchase season, falling again in the winter.

These days, the camel has bumps instead of humps and the market is not as seasonal as in years past. It has become less predictable and is more influenced by mortgage rates and the pace of new construction entering the market as it competes with re-sale inventory.

I've highlighted each January for the past 5 years and the patterns of subsequent months vary quite a bit. There is a mixture of falling, leveling and rising inventory in the months that follow January, making predictions based on historical trends limited in reliability.

However, I'd say that odds are good that inventory will continue to rise for the next few months as sellers continue to join the market and new developments continue to come online. If the rise in sales activity for December and January are any indication, buyers seem to be reacting to increased choices with a purchase decision, but it's not clear yet if this interest will be sustained through the spring.

The camel can't seem to find the oasis right now.
· Manhattan Monthly Listing Inventory Survey (Exclusives) [Miller Samuel]