NEW YORK ( TheStreet) -- In the tiny island of Manhattan, supply of homes has always been limited and homeownership has been the privilege of a lucky few.
But the supply-demand dynamic in the city is now so out of whack that even a million dollars in the bank and pristine credit doesn't do you much good.
Buyers who are re-entering the housing market after waiting on the sidelines for so long are waking up to the cold reality that there are few homes left to buy.
"The market is absolutely insane," says Jacky Teplitzky, managing director at Douglas Elliman Real Estate. "It has completely changed in the last five weeks. There is just no inventory."
Manhattan inventory has been steadily declining over the last couple of years as new developments stalled in the aftermath of the financial crisis and sellers held off from listing their homes in a tough market. But the inventory levels are now at their lowest levels in over a decade, as you can see from this stunning chart from real estate appraisal company Miller Samuel. The absorption rate -- the number of months it would take to sell the amount of listings in the market at the current sales pace -- fell to 5.5 months at the end of the fourth quarter of 2012, compared to the 10-year average of 9.3 months. Listings have dropped even further since then in the early months of January and February. Doug Perlson, CEO of online real estate company RealDirect.com says prices are on the rise with bidding wars among buyers starting to drive offers above the asking price. "It is amazing how in such a relatively short time, Manhattan has gone from a neutral
Manhattan is certainly not the only market with a shortage of homes for sale. Nationwide, inventory levels are at a 13-year low, with the absorption rate last reported at 4.2 months. In a balanced market, it should take six months to clear all the existing inventory.