[Our market analyst Jonathan Miller returns! This week he provides a look at the "contrarian market" of Manhattan, where inventory does crazy things as compared to the rest of the country. Blame the foreigners. Click on the image to expand.]
In the summer of 2006, housing inventory in Manhattan began to decline as national inventory levels continued to rise. The growing spread is quite striking and has become evidence of the "contrarian market" argument for Manhattan.
As an add-on, I placed milestones for the exchange rates for the US Dollar as compared to the Euro and the British Pound. Nothing definitive here other than the fact that the ratio is steadily rising, but I don't mean to suggest this proves a direct correlation. The logic simply is that a weaker dollar makes NYC attractive more attractive to foreign buyers as an investment, increasing demand for apartments, thereby eroding inventory.
Demand has been at record levels for the past three quarters in Manhattan, resulting in a nearly 40% reduction in inventory since last summer. I would guess that the weak dollar would likely have less impact on residential real estate purchases in other parts of the country, say for example, the Midwest.
However, the credit market "turbulence" will likely serve to weaken the "contrarian market" argument a bit as reduced bonus income and layoffs in some areas of employment in the financial sector (i.e. structured finance and equity markets) will temper disposable income available for real estate purchases in New York City.
· Housing Inventory Versus Exchange Rates [Miller Samuel]