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Three Cents Worth: Living Micro in a Macro Market

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[This week, real estate appraiser, Curbed graph guru, blogger, and podcaster Jonathan Miller embraces the micro.]

There has been a lot of attention lathered on the mayor's recent announcement that would allow the creation of smaller studios to improve affordability, so I thought I'd take a look at this sub market for a reality check. Since a "micro unit" was defined as 275-300 square feet, I took a look at how common they were in the sales market over the past decade (I don't have enough sqft data compiled for small rental studios yet) and I also compared all sale studio sizes against all rental studio sizes over the past five years.

From the "Number of Manhattan Co-op/Condo "Micro" Studio Sales" chart, it was apparent that not only are there a fair amount of "micro-studio" sales, there were also a handful of "smaller than "micro' studio sales each year over the past decade. And what gives with the market in 2007? There was a lot of "micro-studio" activity so I suspect that in the final year of the boom (market peaked in 2008), apartments got so expensive that there was more demand for smaller apartments simply because their sales prices were lower (i.e. more "affordable").

Since the credit crunch in 2008, the number of units has trended higher, most likely due to the more immediate response to their demand from falling mortgage rates versus larger units. The 2010 spike was a product of the expiration of the federal homebuyers tax credit.

In the second chart "Manhattan Studio Average Square Footage" I took a five-year quarterly look at the average square footage of studios that were sold or newly rented during each quarter. After the credit crunch began, 2009-2010 saw a surge in first-time buyers and more and smaller studio sales, pulling down the average size. I would have thought that the average size of a studio rental would have been somewhat smaller than the average studio sale in general but this is not the case.

What's the macro about this "micro-unit"talk?

I'd say we've been here before, so its not uncharted territory (sorry). Units this small already trade in this market and are readily accepted.
· Matrix [matrix.millersamuel.com]
· NYC Apartments About to Become Smaller Than Ever Before [Curbed]
· Three Cents Worth archive [Curbed]