Yes Virginia, inventory is up but buyers are buying (Q1 report)

Inventory is the big news

As mentioned in my original post on this report THE big news in the Miller Samuel 1Q 06 Market Overview is the inventory data, about which Jonathan Miller has been quoted elsewhere as describing as indicative of a market "between" a Seller’s Market and a Buyer’s Market. The little big number is the 15.8% increase in available Manhattan apartments and townhouses for sale in the first quarter of 2006 compared to the last quarter of 2005. The big big number is a stunning 59.6% increase in inventory from the first quarter of 2005 to this year’s first quarter.

Miller has noted that the Q1 2005 inventory was near historic lows, but still…. A big big number, indeed.

Much of the rest of the story from this report has been told in the press (sometimes breathlessly, sometimes confusedly, sometimes in contradictory fashion).

Finding the key data point (hint: look at price per square foot)

One of the things I like about Miller and his reports is that he tries to identify "key" numbers in a blizzard of data. For him for this quarter it was average price per square foot, which he says

"best characterizes market conditions for the current quarter since it is least impacted by the shift in unit mix toward larger apartments this quarter"

(meaning that the "average" or "median" prices for transactions are heavily weighted by whether relatively more studios and 1 Bedroom apartments sold in a quarter compared to 3 and 4 BR units).

For Q1 06, the average price per square foot was $1,004, which is essentially flat Quarter Over Quarter ($1,002 in Q4 05) and up 10.3% Year Over Year. From which one could credibly argue that prices held steady at historic highs — the headline in many press articles about the report.

Buyers bought, though many sellers didn’t sell

The number that I think is under-appreciated in the data blizzard is the number of transactions. Much press attention was focused on the mix of transactions being majority condo rather than coop for the first time, which is generally explained by the nearly all new construction or conversion of apartments as condos rather than coops and a ton of new condos that continue to come to market.

But the overall number of transactions was 2,005 in Q1 06 (1,073 condos plus 932 coops), up about 30% over Q4 05 and nearly even with the Year Over Year total of 2,028 transactions in Q1 05. From which one could credibly argue that the buyers were still there in early 2006, and that they were buying and not just shopping. I did not see much mention of this datum in the press commentary.