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Three Cents Worth: Bracket Creeps Us Out

[This week, chief graphisto Jonathan Miller delivers a graph that's so beautifully self-evident, we're going to swing right into his prose. Click on the image to expand.]

With all the weak U.S. real estate related economic news coming out this week—think declining existing and new home sales, rising inventory, falling consumer confidence, rising mortgage rates and a revised but still weak GDP—I thought it would be fun to pile on. Well, sort of.

I looked at percentage breakdown of the number of sales in Manhattan by price. I know, I know. I generally don't like to set categories based on an absolute dollar threshold but after 9/11 I started to do this to see how the upper and lower ends of the markets were behaving. In the 4Q '01 period, there were no $4M+ sales which I found quite amazing. Now this segment accounts for 3% to 4% of all sales, although much of that has to do with appreciation than a higher market share.

If I was doing this chart in 1977 (and I skipped my high school math class to do it), I suppose I would have set the categories at $50,000, $75,000 and $100,000 while I was eating my 10 cent Hershey Bar and we would be amazed at those $125,000 co-op sales on Fifth Avenue.

Since 1Q 03, market share for sub-million dollar apartments has eroded from 80% to 64% of all sales in the second half of 2005. This does not mean that fewer apartments were being sold at the low-end of the price spectrum. It simply means that the entire price strata has moved upward. This is Bracket Creep. Rising prices push apartments into the next market segment. I suspect we will see less, if any, of this over the next year.
· Market Strata By Number of Sales [Miller Samuel]