Professors Explore Historical Shifts in the Manhattan Real Estate Market
A recent article in Real Clear Markets co-authored by professors from UC Davis Graduate School of Management (US Davis GSM) and Rutgers University, Newark presented a thorough look at the state of the Manhattan real estate market.
Associate Professor Anna Scherbina, who teaches finance at UC Davis GSM, and her co-author Jason Barr, Professor of Economics at Rutgers University, Newark, offered their views within a historical context.
Manhattan has experienced two decades of consistent price increases, with the current average price of a condominium at $1.9 million. Notably, the city has retained records of all real estate transactions since 1890. “What can we learn from the history of Manhattan real estate prices? Most importantly, that real estate prices are very volatile,” the authors say.
Barr and Scherbina created an index of land values from 1950-2014. They note that from the years 1950-1993, an investor would only have received a return of .45% a year; but in 1993 the values began to soar, eventually reaching an apex in 2007 prior to the burst of the real estate bubble. By 2014, write Scherbina and Barr, land prices climbed back again to a higher level than during the 1993 peak. They note, “Had an investor purchased a plot of land in Manhattan in 1993, the investment would have risen by a factor of 28 in inflation-adjusted dollars, and the buyer would have realized a real annual return of 16.3% per year!”
The team theorizes that the 1993 spike was caused by decreased crime statistics, foreign investment in Manhattan properties, and an influx of baby boomers who relocated after their children departed for college. The impetus for the rise in real estate prices in 2014, they assert, was the high land values that only the wealthiest buyers could afford.
About the Author
Maggie Boccella
Maggie Boccella, a lifelong resident of Philadelphia, is a freelance writer, artist and photographer. She has consulted on various film and multimedia projects, and she also serves as a juror for the city's annual LGBTQIA Film Festival.
