NEW YORK—The number of apartments for sale in New York City hit a 12-year low in the fourth quarter of 2012. A Douglas Elliman report showed that listing inventory is down 34.2 percent from 2011 levels at just 4,749 units. The numbers are the lowest since the agency began tracking the metric in 2000.
Real estate publications followed with stories on how brokers coped and improvised given the scant supply. It seems the market is primed for sellers to start coming forward, yet if that were true, the supply would expand.
Now, Jonathan Miller, a real estate appraiser and blogger, weighed in with some startling data. According to Miller’s column on Curbed, inventory has been sharply declining since the beginning of 2012. In the first two months of 2013 it showed no sign of a rebound, which is customary during the months of Jan. – April.
“A big unsung factor is that many sellers can’t sell (sellers when they sell become buyers, and if they don’t qualify for a trade up they don’t sell—this is more than a third of U.S. mortgage holders)—otherwise we’d see a surge of inventory enter the market this spring,” Miller wrote. “But we aren’t seeing that.”
Miller also noted that new developments will not solve the problem, because they comprise only 10 to 20 percent of the total supply. Furthermore, the trend is not isolated to New York alone and is occurring on a national scale.
The principal cause, according to Miller, is tight credit. Miller predicts that credit will remain tight this year, forcing the inventory to remain low. Would-be-sellers with low equity don’t qualify for a trade up and since they are not under the duress of losing a job or having to move, they do nothing with their properties. As a result, the inventory remains low and prices are driven up. In an earlier post, Miller called the current trend a “pre-recovery.”
“Since low inventory is not a local market phenomenon but is happening in nearly every housing market I can think of (sales rising modestly and listing inventory falling sharply) it makes this a credit phenomenon. I like to say ‘housing is local but credit is national,’” Miller wrote.