Metamorphosis Consulting, Inc.

Management Consulting Firm

Seller Considerations – Luxury Market Blues

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2014 Seller Considerations – Luxury Market Blues

If you believe everything you hear and read, you’re probably thinking that the entire housing market is experiencing a great recovery.  Unfortunately, this approach is not one that can be used for the luxury real estate market.  For the most part, the highly touted comeback in housing applies mostly to lower price-points and new construction.  For example, with median prices in the low $200’s, all systems are go with respect to properties valued under $300,000.  In many markets, the $300,000-$1,000,000 price-points are also moving well. Unfortunately, this is not the case with luxury properties valued at over $1 million. This is why you should focus your research an “inch wide, and a mile deep,” or exclusively on activity in the luxury real estate market.

If you’re considering selling and have a home that is worth more than $1 million, you should look at four market indicators that will help you identify when to sell and what you can expect to sell for.

  1. Supply – Have inventory levels or the number of homes for sale in your specific price point been dropping year-over-year?
  2. Demand – Have the sales of homes valued similar to yours been increasing year-over-year?
  3. Consumption – What is the month’s supply of homes for sale in your price point?  This is a combination of both supply and demand.  If there’s greater than a 6-8 month’s supply of luxury homes on the market, it’s probably still a buyer’s market.
  4. Price – Have average prices for luxury properties over $1 million stabilized, or are they still decreasing?

By looking carefully at all four indicators above, you’ll have a pretty good feel for what you can expect if you sell now or later.  Also, keep in mind that economic conditions such as increasing income tax rates and mortgage interest rates are likely to have an adverse impact on the possibility of a strong recovery in the luxury real estate market.

In most cases, the luxury market is not experiencing the same aggressive recovery and price appreciation as average homes priced under $300,000.