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Three Cents Worth: A Dozen Manhattan Housing Market Stages

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[This week, real estate appraiser, Curbed graph guru, blogger, and podcaster Jonathan Miller thinks back on a dozen years of real estate ups-and-downs.]

After reviewing an appraisal of a Manhattan sales transaction yesterday that had more than a dozen backup offers above list price (and not the first such situation we've seen recently), I thought I'd keep the listing inventory discussion train rolling on 3CW. I looked at a 12-year monthly co-op and condo inventory and named the housing stage at beginning of each year.

Incidentally, Manhattan inventory has collapsed 54.5 percent from peak. The monthly 12+ year co-op and condo average is 7,292.

Some notes on annual housing stages:

2002 Recovery: Post 9/11 Fed drops rate to floor, pulling economy out of recession. Bidding wars begin 5 weeks later. From bottom up.

2003 Hiccup: By late 2002, activity began to cool as uncertainty fell over the market as the Iraq War build-up began. Activity began to spike on day after beginning of war as uncertainty (good or bad) was removed and spring as inventory plunged.

2004 Boom: Housing prices were rising at more than 20 percent annualized as housing frenzy began.

2005 Fog-a-Mirror: Affordability fell as prices squeezed many out of the market. Lending standards dissolved to the point where credit was chasing bodies and you needed nothing to get a mortgage.

2006 Bubble: Housing bubble formed as prices continued to rise but sales slowed and inventory spiked. Concern over future rise in mortgage rates clouded the market.

2007 Boom II: The development boom kicked in and overshadowed the re-sale market. National housing market prices were already falling and the credit crunch began in the summer.

2008 Zombie: Greater fool theory firmly in place as sales continued to fall while prices and inventory rose. Lehman collapse in September enunciated the credit crunch we live with today.

2009 Bust: Housing prices fell 30 percent in one year and initial contract activity was 50 percent to 75 percent below historic norms as interest rates plunged. Stock market rise gave housing participants more confidence to jump back in.

2010 Arm & Leg: Credit conditions remained irrationally tight, kept inventory from entering the market as many would-be sellers had low or negative equity and couldn't buy so they couldn't list. Shadow inventory remained bloated.

2011 Safety: Moving sideways?not much changed other than inventory declining which helped firm up the market. Shadow inventory began to be absorbed.

2012 Pre-covery: Lower supply gave rise to an era of more optimistic housing stats both locally and nationally.

2013 Pre-Insanity?: Chronically low supply causing national and regional market to see rising prices despite tight credit, flat income, and high unemployment. I like to say that when you choke off housing supply and you release pent-up demand, "crazy things happen."
· Matrix [matrix.millersamuel.com]
· Three Cents Worth archive [Curbed]