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Three Cents Worth: Absorption Mumbo (Conforming) Jumbo

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[This week, podcaster and Curbed graph guru Jonathan Miller pulls off a triple play to get to the bottom of market absorption.]

This week I cover absorption rates to show how different price segments are performing.

Here's how this was done: I cover three broad regions: East Side, West Side and Downtown (the graphs for the latter two appear after the jump). No slight meant to Uptown but the data I have at the moment is too thin to derive anything meaningful, similar to the $10M+ markets on the West Side and Downtown. It's also important to mention that this data does not include shadow inventory which, at the moment, is believed to be higher than existing condo inventory?so condos in the charts here are definitely underrepresented. I also use a 12-month moving window of sales activity in order to have enough data to represent each segment.

Over the past decade, the average rate of monthly absorption is 9.7 months (and rising). One of the patterns that jumps out of the charts is the faster absorption rate of properties below $1.5M, especially on the East Side and Downtown markets. This is likely due to the distinct difference in the mortgage markets they serve. Sub-$1M is within the realm of the conforming mortgages ($729k and below) and everything else is jumbo. All the stimulus/bailout activity as it relates to housing is through Fannie, Freddie and FHA which is conforming mortgage related.

In other words, not all markets are created equal at the moment.
· East, West and Downtown Monthly Absoprtion [Miller Samuel]
· Previous Three Cents Worth [Curbed]