Over the past several years, there has been the slow erosion of sales activity as prices rose. The reduction in affordability pulled people from the purchase market into rentals. Given this trend, I was especially struck by the large jump in the number of sales last quarter and its affect on inventory. The sharp increase in demand as evidenced by the unusual level of elevated sales activity appeared to eat away at inventory levels at a time when an increase in inventory, as seen in the past few years, was to be expected.
This suggests to me that if demand is not maintained at its current elevated levels, inventory will quickly return to the levels seen in the middle of 2006.
· Manhattan Number of Sales vs. Listing Inventory [Miller Samuel]