If you have had your luxury home on the market this summer but it did not sell, you may be asking yourself what has happened to this hot sellers’ market. Or if you are thinking about putting your luxury home on the market, you may be asking yourself if it will sell. They’re all good questions and the answer to them is the same. The luxury market is now tipping towards a buyers’ market again. I believe we are ultimately headed towards a balanced market, but it won’t be for a few months. You see all of this talk about the inventory being so low and it’s a red-hot sellers’ market seemed to pull luxury sellers out of the woodwork. When we talk about absorption rate of homes at 1,000,000 plus according to Metrolist, you have about 9 to 10 months’ supply. I saw one report put it at a 17-month’s supply. At 9 or 10 months, it would be considered a buyers’ market for luxury.
How did the luxury market switch so fast? I think we can point to two specific reasons.
1) I think many luxury sellers held off putting their properties on the market during the down years of ‘10, ‘11 and ‘12. Once they were sure that the market was going up, they decided to give it a try. Moreover, many of them were hoping to capitalize on the low inventory and were asking for a premium price. The result was a lot of luxury homes hitting the market all at the start of the selling season this April.
2) Builders have been building luxury homes again, thus adding to the available inventory list. This will continue and builders will take more and more of the market share as we enter 2015.
I do expect the luxury inventory to decrease and we may see it go down further to a more balanced market with inventory of six months or less as we get closer to October. Many sellers who have had their homes on the market since April and with little showings or no offers will take their property off the active MLS.
The important point here is that we are headed to a more balanced market of buyers and sellers in the luxury space. This means that if sellers want to move their million-dollar homes, they will need an agent or a team that has a superior marketing effort. Remember to be patient and pay attention to the three rules I always talk about to get the highest price in the shortest amount of time… price it right, make sure it shows fantastic, and have a great marketing plan.