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 [housing] market to a buyers' market to a sellers' market now because of a lack of inventory. It is frustrating for buyers who have been sitting out for so long only to find out that there is nothing left."
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.