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Three Cents Worth: Absorbing With A Wet Sponge

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[This week, podcaster and Curbed graph guru Jonathan Miller compares our sponginess with the rest of the country.]

Last week I covered absorption in Manhattan by geographic region. This week I wanted to extend it to the New York region (at least the markets I cover) in the context of the national market. I know, I know?the national market is the combination of thousands of real estate markets. But I still think it helps to see where we are. After all, as a region, we were one of the last housing markets to enter the downturn.

Absorption as defined in this chart as the number of months to sell off existing inventory at the current pace of sales. This chart does not include so-called "shadow inventory" locally or nationally.

The U.S. absorption rate (blue line) has nearly doubled over the past three years due to the rise in inventory and the fall in the number of sales. The U.S. absorption rate does seem to rise between the first quarter and second quarter (dotted blue line) because inventory is added to the market early in the year to take advantage of the increased spring demand.

The New York region roughly bracketed the U.S. absorption rate until the last quarter, reflecting the sudden impact of the September tipping point. The jump was significant in all markets we report on, showing the strain and pain the market will be facing over the next year or more. However, the jump in contracts at the moment may wring out the sponge a bit next quarter, as mortgage liquidity for conforming mortgage financing begins to stimulate more activity, albeit not at the levels we have seen in previous years.
· US/New York Metro Area Monthly Absorption Rates [Miller Samuel]
· Three Cents Worth archive [Curbed]