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Three Cents Worth: PPSF Volatility, A Nice Spread

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[This week, our graph guru Jonathan Miller does a little inflation adjusting and gets all volatile on us.]

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For this week's chart, I took the average price per square foot for each general region of Manhattan?Downtown, East Side, West Side and Uptown?and adjusted each of them for inflation. I then compared the percentage change in price per square foot of the current quarter as compared to the prior year quarter.

I wanted to look at the volatility in the change in prices and see if there was a pattern. I looked at the quarter with the highest percent change and lowest percent change and presented the difference in the vertical dotted lines.

The uptown market had the smallest difference in price per square foot between the highest and lowest quarters ($532) but the price point is about half the remaining three markets, so the spread of its percent change is much higher than the other regions (50.2%). This would appear to indicate more price volatility. I had expected the price per square foot volatility to be the greatest in the Uptown market since it is an emerging area and also expected the remaining three to be clustered since their price per square foot levels are relatively consistent. My assumption was only 2/3 right.

The hi-low spreads for the Downtown and West Side markets were relatively close at $641 and $652 respectively. The difference in percent change for these markets from peak to trough over the decade was also consistent at 28.4% and 28.3%.

However, the dollar spread for the East Side market was largest of all 4 regions at $680 per square foot. The percent change is higher because the price per square foot of the East Side is consistent with the Downtown and West Side market. As a result, there was 38.9% spread between the highest and lowest quarters over the decade.

I had always attributed greater price change volatility to markets considered "emerging" but perhaps because the East Side has a wider variety of housing stock (more extremes), the volatility of change in overall price price per square foot is more attributable to the wider variety in housing stock.

Regardless, there is some degree of volatility in all real estate markets, regardless of where the property is located.
· Manhattan CPI-Adjusted PPSF By Area [Miller-Samuel]