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Three Cents Worth: Inventory's Up and It's Not Our Fault

[Please excuse our graph wizard Jonathan Miller. He got a little excited by this week's topic, inventory, and squeezed a lot into his shiny graph. But it's worth getting out the magnifiers (or clicking on the image to expand). We'll let the maestro explain himself below.]

Whenever we see large swings in listing inventory over a short period of time in Manhattan, it's usually some significant external event or financial cycle that is not local in nature. In other words, we don't live in our own insulated world here, much to the chagrin of many.

I started capturing inventory data about six years ago, first on a quarterly basis, then on a monthly basis. I opted to look at inventory changes in hard numbers, not simply as changes as percentages. What I found helpful about looking at the actual number of units for sale rather than the percentage change, is that we get a better sense of the relative size of the swings and the relationship between co-ops and condos.

I ended up with this week's chart, which I apologize is a bit wide (actually way too wide, the fault of my 21" monitor), but I thought it would better illustrate the time line graphically, to give a clearer perspective of how much has happened in a short period of time. I then selected three time frames on the chart (in yellow) which had the most pronounced change in the number of listings in the market as compared to the same month in the prior year.

After the jump,Miller reveals the 3 key frames and analyzes the condo-coop gap.

Here are the three time frames I've highlighted (there are certainly more areas I could select but I think you get the point):

· The pre-Iraq inventory build-up as many buyers sat on the fence until the war started and the "unknown" became more clear, good or bad.
· Short-term rates bottomed out in early 2004 which spiked demand and restricted available supply.
· The hurricanes of last fall and the economic problems they caused in addition to rising long-term rates eased demand caused inventory to rise sharply.

Clearly co-ops are seeing larger swings in the actual number of units, but that's more of a function of the sheer size of that form of housing stock. Co-ops represent 75% of Manhattan's owner occupied housing. Most of those units are existing apartments.

On the other hand, condos, including existing and new development, stayed relatively consistent throughout this period, until last fall. The addition of new development to the market began to outpace demand, which was being tempered by rising mortgage rates. Despite the smaller overall size of the condo market relative to co-ops, the addition of new condos to the market outpaced or at least equaled co-ops over the past 8 months.
· Inventory Change Over Prior Year [Miller Samuel]