Sunday, March 7, 2010

SELLING: Luxury Market Update for Year End Massachusetts 2009

Luxury Market Update Year End for Massachusetts 2009

For the purpose of this writing we will define the luxury market as properties with a price point of $1-$3M, $3-$5M and $5M+. We also reviewed the development of the market over the first nine months of the year.

The Industry has experienced an interesting ride since the last quarter of 2008 with the challenges in the economy and the financial system in particular. Substantial expectations have been put on the new administration to take steps to stimulate the economy and establish some balance in the financial and lending sectors.

So you might wonder how did the high end market end for 2009?

In comparing the year end sales in the $1-$3M range from 2007 to 2009 it is interesting to see that although the number of unit sales dropped significantly year-to- year, the average sales price didn’t. In 2007 there were 1872 units sold, compared to 1429 in 2008 and 1210 in 2009. The average sales price went down from $1.5 to $1.45 million (-3%) over the 3-year period. Average list prices for sold properties were constant at about $1.5 million for the whole period.

There was not a significant change in new listing inventory over the past three years in this price range with 3976 listings in 2007 and 3699 in 2009. This corresponds to a drop in listings of 7% over the 3-year period.

The charts below represent the change in new listing inventory as well as the change year-to-year (orange) and the cumulative change (green).

As we go up in price point to $3-$5M we see the same trend. Unit sales dropped significantly year-to-year, but average sales price and average list price for sold listings show little change.

In this price range there were 122 units sold in 2007, 91 in 2008 and 65 in 2009. The average sales price dropped from $3.5 million to $3.4 million (-4%) during the 3-year period. Average list price of units sold varied between $3.9 and $3.8 million.

New listing inventory at this price range increased significantly from 2007-2009 with 284 listings in 2007 and 334 in 2009, an increase of 18% over the 3-year period.

Let’s take a look at the $5M+ range. We can see some differences here compared with the lower price points, even though the drop in units sold shows the same trend – from 32 in 2007 to 24 and 16 during the following years. Interestingly, in this sector the average sales price was higher in 2008. The average sales price in 2007 was $6 million while it was $6.8 million in 2008 and $5.3 million in 2009. This corresponds to a price increase of 10% between 2007 and 2008 and a decrease of 20% between 2008 and 2009 with a net change of 13% over 3-years. The average list price for sold listings shows a change of- 7% over the 3 years.

In this price range we can see new listings did not change significantly year-to-year. There were 101 new listings in 2007 compared to 95 for 2008 and 96 for 2009, resulting in a 5% drop over the three years.

If we take a closer look at the development during 2009 we can see an increase in activity during the second half of the year for all price points. For the $1-3 million range the units sold during the second half of the year were 781 which is an increase of 76% compared with 443 sold during the first half of the year. $3-$5M shows a 64% increase in the sales from the second have over the first half of 2009 with 41 sales after July and 25 sales the first half. The $5 million+ showed the least change of 13% between the first and second half of the year with 8 sales for the first half and 9 for the second.

As buyers become more confident and the numbers seem to reflect that, the unit sales should continue to rise for 2010. We should remember, though, that the average supply of inventory is up considerably compared with two years ago for all price points. In the $1-3 million range the supply of inventory has increased from 12 to 22 months, in the $3-5 million the corresponding increase is from 21 to 39 months and finally for $5 million from 79 to 88 months. Consequently, buyers have a wide choice of inventory: and sellers need to take note of this when pricing their home for sale.

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