inventory numbers: different firms, different issues

why can’t we all just get along?
Back to real estate here, as I see that five of the last 13 posts have been of the Caution: no real estate content variety, but these things run in cycles….

I got into the weeds of real estate number reporting by StreetEasy in my post two days ago, babbling in the Real Estate Industrial Complex / NY Magazine edition, and I am going to wait until I actually speak with Sofia Song of StreetEasy before commenting again on what they report as "inventory" (soon, I hope, soon). But that confusion of Apples and Oranges on my part reminds me of two other oddities in major firm quarterly reporting on the Manhattan real estate market.

the Terra Team throws the towel
(Saying "throws in the towel" ruins the alliteration.) When the Terra firms, Halstead and Brown Harris Stevens, report quarterly, the only "inventory" number they reported was "Number of New Listings". (The Halstead version of the Manhattan real estate market report for 4Q08 with "Inventory" on the last page, is here, as a pdf.) I never understood that metric as the sole thing to report on the supply side of the equation (I complained about it as long ago as MLG Year One, on October 6, 2006: whatever happened to "Supply" & Demand? carping at Halstead’s quarterly), and I have discovered that they re-thought that approach.

I guess the last time I asked a Halstead or BHS agent about their "inventory" report citing only new listings was more than a year ago. I never got an answer (few agents really care), though I assumed that it was a matter of firm tradition: that they had always circulated within the firm the number of NEW listings. So that when they started doing public reporting in 8-page glossy brochures suitable for mailing and handing out, they went with what they had a history for, instead of starting counting something that they had not previously counted. I can’t think of another reason for counting only about new listings, but maybe my imagination is too limited. (I noted that the Terra firms at least occasionally reported "the number of apartments for sale" when I carped way back in 2006, but this was never a standard reporting category for them.)

It is an interesting number, looking to see how many sellers in which neighborhoods and with what size apartments have decided to brave the market in a given quarter. That last page of the 4Q08 report has one-, two-, three-, and four+- bedroom "new listings" for four broad neighborhoods (Eastside, Westside, Northern Manhattan, and Downtown, with Downtown also included new loft listings), with comparative data for the prior quarter and the prior year. Interesting stuff, just not the only stuff I would talk about if I were talking about "inventory".

In upholding blogging standards, I checked the most recent Terra quarterly reports (to cite in this discussion) and was surprised to see that they no longer report any inventory number. (The 4Q09 market report is here, as pdf, but I also checked back to 1Q09, the first report in which that data category was omitted.) As curious as I am about the decision to use that number alone, I am even more curious about the decision to stop talking about inventory at all.

With all the data they have, it can’t be very difficult to report that x,xxx listings are for sale. I don’t get it, but maybe they think that this sort of detail is too geek-y for their ideal upscale ideal client….

Corcoran likes absorption; Property Shark explains
The Corcoran quarterly reports have three sub-sets of data related to inventory, which is nice. They report Total Listings, New Listings, and Absorbed Listings, in neat bar graphs. (See, for example, page 6 of 15 in the 4Q09 Manhattan market report.) I could never figure out why Corcoran’s inventory numbers tend to differ so radically from The Miller’s, but some things just can’t be explained.

Long before I joined Corcoran I was miffed about the firm’s use of the term "absorption" in that inventory section, and with the fact that it is given only as a dot (and a line) on the bar graph, without the specific quarterly numbers. It clearly does not mean "sold", as there is separate reporting for that (in the case of 4Q09, on page 4 of 15). I have never seen Absorption defined in a Corcoran report, and if there is a definition somewhere on the Corcoran website, it has eluded me.

But when I was backtracking on the StreetEasy data reporting in Sunday’s rant about babbling in the Real Estate Industrial Complex, I also checked Property Shark to see if they had numbers similar to those I was talking about from StreetEasy. In the course of strolling with the Shark I stumbled upon the definition of Absorption. It is driving me nuts that this morning I cannot find that definition again, that I can’t retrace my steps from Sunday. But take my word for it, Absorption means the number of apartments sold or taken off the market.

why count that?
I think the definition is obscure, that it counts something that is an odd thing to count (and counts it in a way that obscures one possibly interesting bit of market trivia), and I suspect that it is a legacy number … something that Corcoran ‘always’ tracked (for whatever original reason) and that Property Shark now picks up as Corcoran’s reporting partner.

I think this is a weird use of the term, absorption. Artificial. If a loft owner takes a loft off the market, it has not been "absorbed" by the market; it has been "rejected" by the market. As I say, it might be interesting to track rejected listings as a gross way to determine how well (or poorly) sellers predict where The Market is, but if you are going to do that you should be more clear about doing it. Lumping "rejected" listings (taken off the market) with "successful" listings (listings that sold) makes sense only because neither category is now available for sale. But the reasons that each category has become unavailable are completely different; in fact, they are opposite.

Given that Corcoran regularly and plainly reports on sales and inventory, it is a matter of quibbling to carp on the term "absorption", but I know I have done it before (well before becoming affiliated with Corcoran), though I can’t find that link this morning either. (Arrggghhh.) But one of these days i am going to talk about the StreetEasy apples and oranges again, so this is something of the same piece. As well as similar to my moaning about what the Terra firms reported but no longer report. Equal opportunity moaning, if you will.

Real real estate commentary will follow soon. I promise.

© Sandy Mattingly 2010