The 1% Problem
I recently pulled the final statistics for the year using MLS searches and did some additional comparisons with data from Davidson County and Williamson County. In all of my analysis I have defined “luxury” somewhat arbitrarily as anything over $700,000. On closed transactions, I use the sold price not the list price. All data is derived from MLS searches that any REALTOR can do. Here is what I found:
- In 2008, there were 27 homes in MLS that sold for over $700K in Sumner County. 12 were in Hendersonville, 14 were in Gallatin, and 1 in Goodlettsville.
- During the same period 203 luxury homes were sold in Davidson County and 327 in Williamson County.
- In Sumner, there were a total of 2,162 homes sold in 2008. Luxury Homes being less than 1% of that total.
- The average size and cost per square foot of homes in this luxury segment for Sumner is at 5964 square feet and $216 per square foot. In Davidson County its 5600 square feet and $271 per square foot and in Williamson County its 5729 square feet and $244 per square foot.
This might be interesting, but to somebody selling one of these homes the real telling statistic is the absorption rate. One way to assess that is the average days on the market. I prefer to use a simple ratio of current homes on the market to recent sales history to measure absorption. Here’s the scoop on that:
- In Sumner, there are currently 73 homes listed at over $700K. If you divide that by what was sold in 2008 of 27 (Which is actually lower than 2007 at 37) the ratio is 2.70, which means it will take 31 months to sell the current inventory or there are twice as many homes on the market as needed to meet historical yearly demand. Not good, obviously, and it could get worse if economic conditions don’t improve.
- In Williamson, there are 529 luxury homes on the market for a ratio of 1.62 which basically says that there is a reasonable expectation that a home placed on the market should sell in at least 18 months.
- Our neighbors in Davidson County have 318 on the market for a ratio of 1.57 or about 17 months inventory.
To beat the odds that this creates for a Luxury home seller in Sumner County, the home and the community must be marketed more aggressively. None of the 73 homes in Sumner are not in a “pending” status either. It’s not “first in, first out.” There are no guarantees that any of those 73 homes, many of which have already been on the market for a considerable period of time, will be one of the 25+ that the Sumner market would normally absorb in a year. In fact, new listings could come on the market at any time that are marketed better and sell immediately. In the luxury market, slashing prices is not necessarily a successful strategy either. The bottom line is that Listing Agent/Marketing Directors must do more than they were used to “pre-bust” and create marketing plans that use all the elements of the marketing mix.
This is my focus for 2009. I moved to Gallatin from Brentwood in the summer of 2008. In October, I relocated my license from SilverPointe Properties in Brentwood to Martin Realty House in Gallatin. If you are looking to sell your Luxury home and are not being represented currently by a Realtor®, I would enjoy the opportunity to become your Listing Agent/Marketing Director.
*All information gathered from the Multiple Listing Service (MLS). This information deemed reliable but not guaranteed, and should be independently verified.
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