Now that I am fully recovered from Micro Week, I thought I would think a little bigger and present the Manhattan inventory picture by comparing new development and re-sales. I've charted it from the pre-Lehman high (PLH for those in the know) through the end of 2014 in two graphs. One shows the year-over-year change, and the other tracks inventory by units to help tell the whole story. Inventory was in a state of free fall for both types from 2009 through 2013, but in 2014 the picture clearly changed.
Manhattan re-sale inventory reached a record low in fourth quarter of 2013, a little more than a year after U.S. inventory bottomed in 2012. I think many of us assumed that was the beginning of a long term upward trajectory of supply. However, Manhattan re-sale inventory hasn't increased all that much since finding bottom, and this will likely continue to keep upward pressure on prices for the first 90 percent of the market.
New development's inventory path is quite different. While it represents about 10 percent of sales activity (and expanding), new supply appeared in droves in early 2014 resulting a dramatic inventory spike on a year over year basis. This spike somehow became the way the overall market was perceived when it represents only a slice of it. In the context of units, new development supply is still 28.7 percent below the 2007 year end total, but it's much more firmly concentrated in a smaller segment of the market (super-luxury). Look for a multi-year absorption period of new product as a result of the low cost of capital and the fact that these lenders are outside of highly regulated commercial banking sources.
· All Three Cents Worth [Curbed]
· Miller Samuel [official]