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Three Cents Worth: Wavy 5-Year Price Cycles

[This week, Jonathan Miller, the man of a thousand charts, takes a seasonal approach to the Manhattan sales market. We don't want to spoil it, but the winner is spring. Click on the image to expand.]

For this week's chart I took three 5-year windows of the Manhattan co-op and condo market?1991-1995; 1996-2000; 2001-2005?and overlaid them to see if there were seasonal trends. It would be better to look at this sales data monthly but the data set in Manhattan is not large enough to make monthly analysis reliable.

There's a lot going on in this chart so I apologize in advance. I looked at the change in the average price per square foot from the prior year quarter adjusted for inflation. I am pushing the reader tolerance level here I realize by trending three lines but I thought it would be neat to see how they match up. I also highlighted in pink the first half of each year which includes the Spring real estate market in the second quarter.

Generally there was a upswing in prices in the second quarter of each year presented. No matter what 5-year period was presented, the trends were largely in sync but clearly not perfect. That's because so many external influences on price like 9/11, the economy, mortgage rates, employment, etc. also come into play. When the line goes up, it means that the rate of appreciation is rising, or gaining momentum.

This is probably a stretch but there seemed to be a more pronounced swing in prices in the latter half of each 5-year cycle. I am not sure that means much of anything but I am open to ideas. I wonder if there is some sort of larger macro cycle going on here?

"Up markets," like 1996-2000 (pink) and 2001-2005 (green), had larger and steeper price changes (more intense volatility). Meanwhile, in "down markets," like 1991-1995 (orange), when the city was in a recession or economically stagnant, the price fluctuations were more frequent but the seasonal swings were smaller (more frequent volatility).
· 5-Year Average Price Per Square Foot Trends [Miller Samuel]