another Miller nugget on Manhattan real estate absorption: trend is stronger than national

stop him before he puns again
The Miller’s latest data nugget about the absorption rate of Manhattan residential real estate listings compared to the national trends is on Curbed, in the Three Cents Worth series: Manhattan Absorbs The Turkey and (though it took a while) is up on his blog also.

defining a Most Valuable Stat
With Manhattan Loft Guy congratulations to Joey Votto and Josh Hamilton, let’s look at how The Miller defines and explains “absorption”:

I took a look at absorption—the number of months to sell out available inventory (excluding shadow inventory) at the current pace of sales. I like tracking absorption because it shows inventory and sales in their proper context – the health of the market at the present moment. If you simply publish the number of sales or the amount of active inventory, you get half the story. For example you might see inventory (supply) rising rapidly but if sales (demand) were rising rapidly too, the absorption rate might remain flat.

Sometimes half the story is interesting (tracking inventory or sales alone), but the combination is most interesting.

Here, The Miller looks at quarterly Manhattan data compared to national data going back 10 years, with five quarters of New York City aggregate data as a bonus track. His main take-away is in his bold:

Manhattan is absorbing units more readily than the U.S. housing market.

are single markets likely to be more volatile than the US?
The Manhattan absorption rate is obviously much more volatile than the national rate over this ten-year period, and I wonder to what extent that would be true of all individual local markets, as averages will flatten out peaks and valleys. (I bet a similar chart for Miami, or Phoenix, or Las Vegas would look even more bumpy.)

Regardless, the change in rate, national vs. Manhattan, is remarkable. Back In The Day (through 2006), Manhattan was consistently absorbing coop and condo listings more slowly than the nation overall absorbed houses for sale. As The Miller put it:

In the first half of the decade, the Manhattan absorption rate (9 months) was double the U.S. absorption rate (4.5).

By then, the national market had hit The Peak (looks like 1Q06, on this measure) while the Manhattan market was still frothy for another six to eight quarters.

Credit standards for mortgage underwriting had started to tighten by early 2008, as I recall. By then, the national housing market had been in the dumps for a good 18 months or more, but Manhattan did not really feel it until that Fall. Of course, the Lehman bankruptcy filing on September 15, 208 was a big deal nationally, but the local impact was dramatic (that part of the graph will poke your eye out, if you get too close): there were concerns about the viability of other Wall Street firms at the time, there was the prospect of thousands of Manhattan jobs to be lost in the financial sector, and mortgage lending standards were getting even more stringent in late; your proverbial Perfect Storm of (relatively) new factors with greater-than-national impact for Manhattan and the metropolitan region.

Those were the days! brrrrrr…..

the future is dim
(I don’t mean that the future will be bleak, but that I can’t see it very well.)

The last four quarters of Manhattan absorption suggest that the Manhattan market is back within the ten-year average range. If that proves to be true going forward, one can expect a relatively stable market, with a rough balance of buyers and inventory.

The US numbers look very different. There have now been 16 quarters in a row of slower-than-average absorption (compared to the previous 20 quarters), matching or (in the last quarter as a single data point) exceeding the Manhattan average. That says less about the Manhattan market than it does about the overall US housing market.

THX for the chart, JM, and please pass the stuffing (and gravy).

© Sandy Mattingly 2010


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