Reports of the Upper Bracket housing market’s death are greatly exaggerated.
Mark Twain uttered a similar refrain when the New York Journal published his obituary a bit prematurely. It seems that the same has been done for the upper bracket housing market in a recent Star Tribune article titled “Buyer’s Market” (October 28, 2010). Click here
It is true that this is a buyer’s market. Yes, home sellers have been reducing list prices. Yet the upper bracket segment of the market is faring better than the rest of the market.
The Minneapolis Area Association of Realtors recently published statistics comparing the periods October 2008-September 2009 with October 2009-September 2010. This report offers the first chance to see how the housing market is doing on a broad scale since the stock market downturn of October 2008. Click here to see the full report:
Here is what we see when drilling down to sales of Previously Owned Single-Family Detached homes for October 2009-September 2010 compared to October 2008-September 2009:
$500,0001 to $1,000,000
$1,000,001 and above
This is good news! Inventory is down; months supply of inventory is down significantly; the percentage rise of $1M+ sales is significant.
Here is what we make of this report based on our experience these last 2 years. There is a return of buyers to the market, less than pre-2008, but a return nonetheless. The recreational buyers had all but abandoned the market. Most of these current buyers and sellers are moving because there is a change in their household that provides a significant reason to move (marriage, births, divorce, job transfer, empty nesting, and death). While these buyers and sellers have always been in the market during good times and bad, many waited out 2009, watching to see what would happen.
In the first three quarters of 2008, we witnessed dramatic price reductions from some sellers. By the time of the market drop in October, if sellers hadn’t made price changes already, many were reticent to make big price cuts. This was partly out of fear of leaving money on the table, but also due to the limited numbers of showings they were getting in 2009. A dramatic price change did not necessarily equate to a showing or sale in 2009. In 2010, as price changes were made, we have seen greater activity as demonstrated by the statistics above. And yes, much of this is from buyers writing offers on those listings which they now perceived to be a good value due to the price reductions, or by virtue of coming to the market at an attractive price.
This wave of sales in the upper bracket also provides a baseline moving forward for both sellers and buyers. We anticipate that over the coming months and into Spring 2011 we will see current and new sellers pricing their homes in accordance with these recent sales. This should in turn create a slow, but stable market for the coming 2-3 years. We do not anticipate a rise in home values so much as a continued increase in the numbers of sales.
Helping entice buyers should be the very attractive loan rates available. Jumbo Loan (over $417,000) rates are an incredible bargain at less than 5.00%, while conforming loans (under $417,000) were for a brief time at a ridiculously low 3.875% (now just above 4%).
There are some great properties on the market, as well as some great values. This truly is an opportune moment for buyers to purchase a home.