Inventory is up.

october- Your patients will be rewarded handsomely. Good luck.

"patients."

October, are you a doctor?

dco - I agree with you on a lot, but dude, the spelling!

stevejhx- HAHA sorry, Hey how do you know he's not a doctor. haha.

Thanks guys - Urban Digs has the inventory around 7800 - how high do you think it will get?

do you have a link to the chart?

http://www.urbandigs.com/charts.html

Charts here.

thank you. and ouch.

And note that the graph does not include the latest 7864 inventory number.

What it doesn't include, is thousands of New Construction units, being held from the market, to manipulate precisely what this report is trying to capture. I say add about another 4,000 at least.

October: It's down to 7863. The tide has turned!!!

Or maybe today's broker feeds haven't been imported and indexed yet.

it also doesn't include the apts that people are thinking about selling in the next year, I'd say add another 15,000

"What it doesn't include, is thousands of New Construction units, being held from the market, to manipulate precisely what this report is trying to capture. I say add about another 4,000 at least."

dco, you've repeated this point many, many times. I agree with you, one should be aware of units that are held back, but I think you make too much of a fuss about it - facts are, until the units are actually on the market, they're not on the market. If they're all dumped on the marketplace at once, you will definitely see impact, but realistically, that just won't happen.

equally important is the fact that sales pace has slowed dramatically. Last few reports I heard were 20-30% over the last 2 quarters. Meaning its even worse than the absolute inventory number shows, because now it takes more time to sell the same inventory.

exactly bjw.

I can't believe, that you guys actually think, that thousands of units sitting unaccounted, have no affect on the market. Guys really, think about what you are saying. As sales continue to grind to a halt, what happens to those units. Holding and releasing units, in a timely manner, only works in a sellers market. Eventually being selective on releases, of particular units, goes out the window. It becomes, sell what ever you can, as fast as you can. I think you guys are just being naive about this.

And yes bjw, I have said this many of times and will repeat it, as long as I can type it, because unlike some, it's actually a significant factor in NYC RE at this time. Ignoring it like it doesn't exist is just ludicrous.

"until the units are actually on the market, they're not on the market."

Yogi Berra, where are you?

"If they're all dumped on the marketplace at once, you will definitely see impact, but realistically, that just won't happen."

Unless you think they can hold onto them forever, yes it will happen. It is well documented that nothing is moving right now at these prices, and new inventory is being added daily. Every empty apartment is money out the window.

I'm with dco. They matter.

If one complex has 100 apartments, and they are only making 5 available for sale at one time, they are still going to act a lot more like someone with 100 apartments to sell rather than someone with really only 5 apartments to get rid of. Not to mention, the existence of empty apartments anywhere does not have a positive impact on the market.

Also, don't forget that in good times, a portion of inventory is BS inventory. Folks who put their houses on the market just to see what they can get, with no real intent to sell. Sucks, but this happens a lot. Figure there are a LOT less of those in bad times, making the inventory increase even worse.

nyc10022- "Also, don't forget that in good times, a portion of inventory is BS inventory. Folks who put their houses on the market just to see what they can get, with no real intent to sell. Sucks, but this happens a lot. Figure there are a LOT less of those in bad times, making the inventory increase even worse."

Excellent point. Definitely something to think about.

10022/dco/stevejhx: Of course they matter. But how do you count them, let alone quantify their effect?

no one said they didn't matter, its a matter of degree. and constantly throwing it out there as a huge problem, and throwing out an estimate of how many such apts there are, when in fact he doesn't have any idea how many there are or how significant a factor it is, is just more of the same.

"10022/dco/stevejhx: Of course they matter. But how do you count them, let alone quantify their effect?"

I don't think you can predict the amount of the effect (and note that I haven't here), but you can certainly point directionally here... We are just talking about factors that are going to continue to put downward pressure on prices.

There were folks that claimed there would be no effect, and the points made were to counter that, not to count the result.

"There were folks that claimed there would be no effect"

nah

"one should be aware of units that are held back, but I think you make too much of a fuss about it"

"I can't believe, that you guys actually think, that thousands of units sitting unaccounted, have no affect on the market."

Hold up - I never said they don't matter (I don't understand you guys' need to turn every discussion here into an us vs. them argument - make it stop). What I was trying to convey was that your harping on this point is a bit silly. Just because we're not talking about it constantly does not mean we're "ignoring it like it doesn't exist."

"Unless you think they can hold onto them forever, yes it will happen."

I'm not at all sold on this. They will eventually sell - they won't stay unsold "forever." Even if they start bringing them to market more quickly, it would take complete and universal panic (put your hand down!) for them to dump everything at once, and they're at least smart enough to know that's not a good strategy. Larger developers/sponsors do have contingency plans for market slowdowns and can be pretty creative in their methods - many of them have been here before. I think it's the smaller groups that will suffer, but then you're talking about a smaller number of units there anyway.

"Also, don't forget that in good times, a portion of inventory is BS inventory. Folks who put their houses on the market just to see what they can get, with no real intent to sell."

Pretty unquantifiable claim - sounds nice in theory, but it's quite a stretch I think.

Steve, last I checked Yogi Berra was at the Yankee Stadium farewell. Cheers for the compliment (even though I'm a Red Sox fan!).

West81st- I have no idea how you count them, but make no mistake, if you do an analysis and draw a conclusion, on future market movements and ignore them, you are going to arrive at a seriously flawed picture of market conditions.

Does anyone have an opinion or fact, on what the new construction inventory numbers being held, off the market actually represents? Because the best I can see throughout NYC (Brooklyn & Queens "it" areas included) is thousands. I think there are thousands from 14th street to the battery alone.

"Holding and releasing units, in a timely manner, only works in a sellers market. Eventually being selective on releases, of particular units, goes out the window. It becomes, sell what ever you can, as fast as you can. I think you guys are just being naive about this."

dco - in a sellers' market (ie: extremely high demand, outpacing supply), holding back too many units doesn't make much sense, as you can get your price and quickly at that.

4000 is my guess. course I just read that on an internet message board so take it fwiw.

As much as I'd like to join in on the bear frenzy, I'm not sure that the indicated inventory chart is particularly useful. Seems to me that what you see in this chart is a relatively normal seasonal fluctuation. We're moving into a prime selling season following the normally slugglish summer season. Hence, all the new listings.

By Christmas the inventory numbers go down as folk take them off the market during that sluggish selling season.

I'm still a bear - just don't think the data offers any particular insights. Would be more interesting if we could compare year-over-year numbers.

"dco - in a sellers' market (ie: extremely high demand, outpacing supply), holding back too many units doesn't make much sense, as you can get your price and quickly at that."

I don't agree at all.. and I saw a lot of held back inventory with new construction in 2007.

You can't sell 50 apartments at once in one sales office, so they use "limited availability" as part of the sales pitch. They might immediately pull another onto the market immediately after each sale, so its an endless supply. But there were certainly developers who only presented a limited set of choices of released apartments.

It will be interesting to see the inventory figures during and after the 2009 spring selling season, assuming it materializes. Ditto for 2010.

The shocks from this financial bust will be hard felt for at least the next 2-3 years. We also have yet to see the impacts from fiscal budget cuts (city & state) which will further contract economic activity. There is some very serious dislocations going on out there and far more problematic than the 1990s financial fiasco.

"You can't sell 50 apartments at once in one sales office, so they use "limited availability" as part of the sales pitch. They might immediately pull another onto the market immediately after each sale, so its an endless supply. But there were certainly developers who only presented a limited set of choices of released apartments."

True, but my point was that you'll tend to see even more holding back when sales start to slow down. I think that's what's happened in several developments I've had an eye on. Back when they were selling relatively quickly, they'd pull the trigger on releases without much hesitation, especially after sales, as you said.

bjw210 "dco - in a sellers' market (ie: extremely high demand, outpacing supply), holding back too many units doesn't make much sense, as you can get your price and quickly at that."

No, in a sellers market you have options as a developer. Selling quickly is not the priority the bottom line is. Releasing undesirable units first is the game plan. In a bad market that theory back fires and you have to decide to offer more desirable units as needed. It becomes a matter of survival. The best units are your ace in the hole.

bjw2103- They are holding back units, for exactly the reason I stated earlier. To keep the inventory numbers as low as possible, for as long as possible. Nothing kills a market more then raising inventory, so it's in their best interest to keep the numbers low. The only problem is, it can't last forever. Eventually the bills come due and they have to lower prices and offer all their various units to the market in the hopes it attracts more buyers.

lets not forget, it may not be up to developer whether to withold units.. If the bank has to call in their loan, they have no choice but drop prices pretty quickly.

"True, but my point was that you'll tend to see even more holding back when sales start to slow down. I think that's what's happened in several developments I've had an eye on. Back when they were selling relatively quickly, they'd pull the trigger on releases without much hesitation, especially after sales, as you said."

Fair point. Though I think its still bad news... given that we have more inventory hit in the last couple of years, and we seem to be agreeing that much of it is hidden from the already bad numbers...

In the end, what do they call this, tilting at windmills?

The bubble has clearly popped, we know the direction, and now what's left to see is how bad... and inventory analysis isn't going to answer that for us.

Hidden inventory is the second biggest threat to the NYC RE. market. I have been saying it for almost a year. The inventory numbers are actually about 50% higher and most will hit the market in the next 12-18 months.

"Selling quickly is not the priority the bottom line is."

I'm not sure about this. I've heard from sponsors first-hand that many times, they are eager to move on to the next project. If they get their asking prices (which they do in a hot market), they'll sell and won't hold back at the rate they are now. Anyway, I think we agree on more than we're disagreeing on. My point was, while this is by no means good news for the RE market, I wouldn't get all bent out of shape about it and point and scream at the "hidden" inventory.

"The inventory numbers are actually about 50% higher and most will hit the market in the next 12-18 months."

and around and around we go

bjw2103- Point taken. I just have one question. And I'm not being a wise a$$. If there were say 4000 additional units on the market, would it affect it positively or negatively?

dco, if there were 4000 additional units on the market (I assume you mean that they're actually ON the market and not being held back anymore), that certainly exerts a downward pressure on prices. Though not immediate, reductions would manifest themselves in a fairly obvious way.

Let me posit a question - do you think the units currently being held back already have some kind of impact on the market? In other words, do you think most buyers are completely unaware of this phenomenon?

Topper, here you go. We're WAY up, YOY:

http://www.millersamuel.com/charts/gallery-view.php?ViewNode=1204831603HmXFR&Record=3

Tenemental, that is a REALLY good chart, because it shows 2008 inventory all the way through February of 2008, really giving us a clear indication of the effect of the seasonality on 2008's inventory vs last year. GREAT JOB!! Only problem is it is actually September. Quick question: did you have to use the round pieces of paper in school?

dmag2020, take it easy. tenemental's contributed a hell of a lot to this board.

This is a slightly more current chart, though only shows January-May data. We are/were above average, clearly, though I'll point out that the way this chart is oriented, it makes jumps look a bit more pronounced than they actually are (this is inherently the problem with not starting your axes at 0, though I understand why that's done).

http://www.millersamuel.com/charts/gallery-view.php?ViewNode=1213790164pfqxp&Record=5

why was 06 so high?

though don't forget sales pace is at a low.... meaning we are likely at an all time peak in months of inventory...

Ok, apologies are in order. We are WAY up YOY, and I thought tenemental was being sarcastic, based on limited info on the chart he posted. Sorry, the wrong chart threw me off. Next time I'll ask questions first and then shoot.

dmag2020 "Ok, apologies are in order"

Kudos to you. Apology accepted, no harm done.

ccdevi (and someone correct me if I'm mistaken here), but a lot of new development came online in '06.

dco, uh, the apology was not directed at you. Awkward...

Regarding "shadow" inventory discussion, I would say that the real issue will come when construction loans start coming due, often one year or so after the building is delivered. By that time the developer needs to have closed enough units to cover his loan, of course. If the loan can be repaid, usually 80%+ of the total development costs, then the developer may choose to wait as long as he likes to sell the remaining inventory. But before then, there will need to be some sort of discounting if the units are not selling. So this shadow inventory will basically accelerate any price declines until these units are flushed through the system.

bjw2103- You my friend are an idiot. I was admiring his honesty and ability to admit he was wrong like a man. Stop trying to pick a fight, I'm not the cause of your poor financial decisions.

TenthStreet- Very well said, thanks for the info.

Thanks, bjw2103. The chart was obviously meant as a source of last year's numbers. We had the current numbers from Digs' widget.

dmag2020 - easy, killer. Apology accepted.

dco - you're joking right? Chill out. It was just very odd for you to write "apology accepted" when the apology wasn't directed at you. Who does that? As for picking fights, you tell me what calling someone an "idiot" and inventing something about their "poor financial decisions" amounts to.

bjw2103- I don't see how odd it is. When you post on a board it for all to read. The apology is one directed at all. Read the apology again and you will clearly see it was meant for all. And as for me calling you an idiot I'm sorry, the "poor financial decision" comment was just salt on the wound. Sorry.

dco, no worries. You'll need to ask dmag to be sure, but sure sounded like he was dogging tenemental for the chart post.

"But how do you count them, let alone quantify their effect?"

You wait, until the developer a) converts them to rentals, or b) succumbs to market pressure and lowers the price and releases the inventory.

It's not possible for them to hold onto all those units for a very long time, as they must continue to make payments on their construction loan and need the revenue to pay it down.

The price and inventory pressures on sellers are going to be overwhelming in the medium-term. Search on "perfect storm," and see what I wrote months ago about what was happening, and everybody (those who no longer post here, mostly) ganged up on me. There is no credit and not likely to be any, even after the bailout. 50% of Wall Street jobs will be lost. Those that remain will not be paying out huge bonuses because the commercial bankers are in charge now, and they can't, and don't, pay out huge bonuses. Hedge funds are soon to be regulated since (as we saw with LTCM) they pose a systemic risk to the financial system.

Anyone who thinks that we're not returning to 2003 prices is deluding himself. The last 5 years have been pure bubble, which is now burst.

My only complaint is that they needed to do this bailout 2 weeks ago, and I wouldn't have lost a penny on the stock market. By delaying they've cost me - and many other sideliners - a lot of money. That's going to exacerbate the problem. I can recover most of my losses within a year by making a few changes, and I've begun. The same can't be said of all the Wall Streeters who lost a lot more than I did - jobs, retirement, investments, etc. They are going to have to reinvent themselves.

These market forces are far to strong for developers and brokers to resist. Mark my words.