According to the US Census, there were 3.328 million Housing Units for NYC in 2008. Of this, 61,000 rental units were held vacant and 26,500 owner occupied units held vacant. The total number of units held vacant in NYC is 2.6% of the total housing units. This is well below the National Average of 13.8%. (See the Housing In Crisis report for more details).
Remember that Real Estate is three things: Cyclical, Seasonal and Emotional. Population growth is over 390,000 people since 2000. This represents over 43,750 individuals per year or 16,203 New Households per year. Growth in Housing Units from 2000 to 2008 consisted of 29,006 new Class I Structures for a total of 53,567 new housing units. Class II and Class IV properties increased by 3,472 for Walk-up and Elevator Apartments accounting for over 97,583 new housing units and there were 26,699 new condominiums built. All told, this property development can accommodate a population of 461,167 individuals with an average Household Size of 2.7.
This does not consider the temporary housing for college students and foreign workers. Nor does it accurately reflect that most condominium units are owned with a population size less than 2. If one considers the unique trends of Manhattan, the current building supply in New York City, as stated above, is in balance.
New York City does not have a Shadow Inventory, just smart investors. Why sell when the housing market is weak? Hold on a year and get at least 10% more for your property. We are confusing a smart investor/developer with a property owner who panics. When you can rent and wait out the market, that is smart. Developers, unlike banks, know that dumping product drops values.
Where did all of the common sense go? Sales activity is down because unless you need to sell, you sit tight. Determining current housing market values based on reduced sales activity is not only misleading, but just flat our irresponsible.