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Three Cents Worth: Sales v. Rentals?Ratio This!

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Tonight at 7pm at 92YTribeca, Curbed graph guru (and real estate genius) Jonathan Miller will join Prudential Douglas Elliman's Dottie Herman and Curbed's own Lockhart Steele for a chat about the sales market, the rental market and whatever crazy topics are brought up in the audience Q&A portion. Tickets cost $12, and are available here. Join us, won't you? Now, on to JMillz's latest mind melter.

It's a special day, so it's time for a special Three Cents Worth with double the expandable charts and graphs action! On the above chart we've got both rental-price-per-square-foot and sales-price-per-square-foot showing their relative trends back to 2003. We are currently building the historical on rentals to go back further. After the jump, we divided the sales-per-foot by rent-per-foot for each quarter to show a ratio between the two.

The rental and sales trends on a per-square-foot basis show a similar trend over the charted six-year window, including the recent decline. The increase in the spread between the two (red line versus black line) from 2007 and later is due to the surge in new development sales which skewed the sales-per-square-foot results higher.

The sale-to-rent ratio saw a large drop in 2006, which was a weaker sales market characterized by near record inventory levels. The higher the ratio, the less likely the market is economically driven by investor sales. This is probably not a great comparison, but small rental buildings are seeing gross rent multipliers (price/income) of 10 to 15, so the higher ratio of sales and rental apartments on a per square foot basis (the second quarter of '09 = 23.9), consistent with prior years perhaps explains why Manhattan didn't see the rampant speculative investor activity seen on the west coast during the recent housing boom.
· Manhattan Rental PPSF v. Sales PPSF and Ratio [Miller Samuel]