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Three Cents Worth: Radar Love

[This week, graphiste Jonathan Miller digs deep into his bag of chart tricks for this trippy representation of Manhattan real estate prices in relation to the U.S. market. Our man explains it all below. Click on the image to expand.]

I wanted to show the relationship between the Manhattan real estate market and the US market since the last housing boom peaked in 1987. I adjusted the Manhattan and US annual median sales price for inflation. The Manhattan median sales price was then divided by NAR's US median sales price to arrive at a multiplier. A multiplier of 1 would denote that the Manhattan and US medians are equal while a multiplier of 2 would indicate that the Manhattan median sales price is double that of the US median sales price.

I experimented with this radar chart format since there was only a single line plotted. Just follow the orange line (the multiplier) from 1987 clockwise to 2005. It's clear that Manhattan housing prices have outpaced US housing using this indicator since 1987. The multiplier began at 1.8 in 1987 and finished at 2.5 in 2005. The multiplier is influenced by the strength in the upper end of the Manhattan market, as the national statistics are less volatile due to the significantly larger sample size. This indicator can help make the argument that Manhattan prices are growing faster than the US as a whole.

The multiplier first peaked in 1988 at 1.9 and then declined until it bottomed out in 1995 at 1.2. 1997 is generally associated with the beginning of the housing boom in Manhattan and this is the year the multiplier began to rise (This was 9 years ago, by the way). After peaking at 2.2 in 2000, the dot com bust, recession and 9/11 weighed heavy on the multiplier as it fell to 2.0 for the years 2002 and 2003. The last two years reflect the booming housing market, with a 2.3 and 2.5 the highest on record for this multiplier. I suspect the multiplier will stay at this high range for the year as evidenced by the fairly robust activity at the high end of the market in the first half of 2006 in our most recent Prudential Douglas Elliman Manhattan Market Overview. Of course, a lot will depend on mortgage rate trends through the balance of the year.
· CPI-Adjusted Median Sales Price [Miller Samuel]