Curbed’s recent article, which covers Manhattan’s 1st Quarter 2015 performance, is a classic example of a sensationalized report written largely to insight market hysteria. It is easy to pick a few statistics and make a generalization about the overall state of the market, but that does not tell the whole story. Average price and price per square foot are not great indicators. A slight dip simply means there were more sales of smaller units in that particular quarter, just as a slight increase means predominately larger, more expensive units traded that quarter. For a true understanding of the overall state of the market, it is essential to observe the average days on the market, month’s supply, and asking versus sales price.
While it is very important to point out that quarterly market reports vary by company, both Douglas Elliman (the report cited in Curbed’s article) and Corcoran register decreases in average days on the market year over year. In fact, Elliman’s figure is the most staggering, citing a 13% decrease, down to from 115 days in 1Q2014 to just 100 days in 1Q2015. This figure suggests that buyers are active and product is not lasting long when it comes to market. Similarly important is the month’s supply indicator. This statistic calculates the number of months it would take for every actively listed apartment to be purchased if no new inventory came to market. According to Corcoran, the current supply is 3.8 months. A stable market equilibrium is considered to be between 6 and 9 months, meaning Manhattan is significantly undersupplied. The number of closed sales is also up 13% year over year, indicating strong buyer confidence. The other significant measure of market status is asking price versus sales price, which remained steady year over year and quarter over quarter, hovering between 98.9% and 98.3%. This shows that there is strong competition across the market.
Overall, it is evident that buyers are very active and the market is in need of inventory, so don’t put too much stock in a market “reset” happening any time soon.