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This week I plotted nearly 20 years of year-over-year quarterly percentage changes based on Manhattan median sales price adjusted for inflation, and parsed the data out by the number of bedrooms. I dropped four-bedrooms from the mix because of their wild fluctuations, largely due to their nominal 1-2% market share and diversely priced housing stock. I was interested in the pace of growth during different economic periods.
I wanted to show market behaviors between two significant recessions, 1990-91 and 2007-09, with the 2001 recession being the general midpoint.
The first decade was generally comprised of a long climb from double-digit declines during the recession to double-digit increases.
In many ways I see the 2001 recession as the divider in market patterns, largely because I think the Fed kept interest rates too low for too long after 9/11. Speaking from a shaky soapbox, the recession that began in Dec. '07 could have been a continuation from 2001, interrupted by a credit bubble with the housing boom as a symptom.
The second decade showed more of an erratic trend. In many ways the 2003-2007 jump in the pace of price increases was pure credit bubble. Lenders dropped underwriting standards to the floor to keep the pipeline flowing as affordability dropped sharply. Without the combination of low rates and little concern for loan quality, the change in prices may have actually declined over the second decade.
If we are out of the recession, future price stability is a shaky proposition until we see a meaningful improvement in core fundamentals like unemployment and purchaser access to mortgage money. I think demand for purchases is clearly there as evidenced by the release of pent-up demand this summer, but held back by reality.
· Manhattan Co-op/Condo CPI-Adjusted Median Sales Price by Number of Bedrooms [Miller Samuel]
· Previous Three Cents Worth [Curbed]