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Three Cents Worth: Market Logic and Insanity

[Special Friday edition of our weekly market analysis from Jonathan Miller. This week, Jonathan examines the tug of war between the number of sales and sales prices. Click on the image to expand.]

A lot has been made about rising prices in Manhattan in absolute terms, but what about the tug of war between the pace (% change) of the number of sales and price levels? Although there is probably a lot more to this, the change in price levels and the number of sales don't seem to move in tandem very often, and when they do, it's usually briefly.

Properties get too expensive for the buyer pool, so buyer interest slips. Prices level off or drop, buyer interest returns. Pretty logical, I suppose.

At the height of the housing boom in 2004 and early 2005, the sales pace began to stabilize and then slip as prices spiked. The jump in the fourth quarter of 2006, was not unprecedented and probably came from pent-up demand of the prior year and a half. The last time this happened was in 2002, which was followed by modest growth in the number of sales and prices and then ultimately, a little insanity.
· CPI-Adjusted Median Sales Price vs. Number of Sales [Miller Samuel]