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Three Cents Worth: New Development Spiked The Punch

[This week, real estate appraiser, Curbed graph guru, and podcaster extraordinaire Jonathan Miller opens the doors and checks for that new-condo smell.]

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To get some context of the influence of new development activity on the Manhattan housing market, I have been tracking the market share of new development closings each quarter, as well as the price indicators for new development and resale activity.

New development closing activity spiked in the second quarter of 2006 with a 57.9% market share but has been trending lower, seemingly bottoming in 1Q 2010 at 16.6%, but hovering post-Lehman around 20%. Incidentally, the surge in market share in the quarters immediately following Lehman was due to the fact that re-sale closings fell through the floor, skewing new development market share higher.

The market share in 2006 was so high it felt like new development simply dominated the Manhattan housing market, and in many ways it did. The pace of closing activity now and any future gains in market share is wholly dependent on an easing in mortgage underwriting standards for new developments (hopefully not to circa '07 levels). Any easing seems unlikely in the near term until we see real job growth, so market share may not change a whole lot until that time. Still, market share for new development is roughly at or just above pre-housing boom levels of 2003.

Aggregate new development price-per-square-foot has been surprisingly stable since Lehman, but with limited activity. This is all part of commercial banks' "extend and pretend" efforts and doesn't give the market a chance to clear.
· Manhattan Co-op/Condo New Development PPSF, Market Share [Miller Samuel]
· Three Cents Worth archive [Curbed]