The Numbers Are In!
The complete second quarter data reports came out earlier this month, and they told a direct story of the current state of the Manhattan market.
The volatility rate is the degree of variation between residential properties currently for sale and ones currently in contract. The higher the rate, the more properties on the market for sale compared to the amount in contract. In an even market, this number is about 1. Today the number is 2.71, almost three times above normal. This number has grown from last spring’s peak of 1.82 and far from its lowest point this decade in 2014 at .89.
We also have a new high for absorption rates. The absorption rate is the rate at which available homes are sold in a specific real estate market during a given time period. It is calculated by dividing the average number of sales per month by the total number of available homes. Sellers want to see healthy absorption rates at about 3 in their market. We have held rates as low as 2 in some markets like in 2014. Calculating the past three months in Manhattan we are at 8.2, well above normal for any market we have seen in many years.
We have been discussing the market slowdown for over a year now. But with these new stats, the market state has gone from hearsay to fact. This means that the mainstream media will now start writing stories about these not really new facts. This picture of a damper market will lead new buyers off the sidelines this fall with expectations of super low values.
The news will also scare many sellers. But the truth is the story is old, and like many economic situations, by the time the mainstream media gets a hold of it, the story is nearly done. We may just have started recovery by the time the bulk of these stories make print. We believe the market upswing is not far away. Next month we will address the signs of change.