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Three Cents Worth: Manhattan Absorption Tall Tales

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[This week, real estate appraiser, Curbed graph guru, and podcaster extraordinaire Jonathan Miller wonders how long it would take to sell out Manhattan's current apartment supply.]

This week I looked at absorption of Manhattan apartments, considering all possible units as available to be sold (i.e., including shadow inventory). I looked at the period 4Q 08 to 1Q 2010 because I wanted to show conditions in the post-Lehman Manhattan housing market. I defined absorption as the number of months it would take to sell existing supply (including shadow inventory for new development) at the current pace of sales.
New Development Absorption (based on listed inventory + shadow): The red columns represent the number of months it would take to sell out new development listings, including shadow inventory, at the current pace of new development closings. In reality, since the new development closing can represent as much as a 12-18 month lag from contract signings (in 1Q 2010, roughly 30 percent of new development closings were pre-Lehman), the absorption rate is likely higher because the demand (the denominator in the equation) was overstated significantly by including older contracts that closed in the current period.

Re-sale Absorption (based on listed inventory): The blue columns represent the number of months it would take to sell out re-sale inventory at the current pace of re-sales. Over the past 1.5 years the absorption rate averaged 11.6 months. While I have re-sale inventory closings back to 2003, I don't have re-sale inventory parsed out back that far. If I did, I am fairly sure the average absorption rate would be closer to 8 months and therefore the current market would be closer to a long term average level.

Overall Absorption including New Development + Re-sales (based on listed inventory, excluding shadow): The black columns represent the number of months it would take to sell out all listed inventory at the current sales pace. Over the past decade (as far back as I can go on this metric with the data I have), the absorption rate is 9.9 months, consistent with the 10.1-month absorption rate of 1Q 2010.
· Manhattan Co-op/Condo Monthly Absorption Rate [Miller Samuel]
· Three Cents Worth archive [Curbed]