Good News and Bad News for Luxury Home Owners
While the real estate market has seen many changes over the last couple of years, it appears that the luxury market is facing even greater challenges. While it has become more difficult to sell a luxury property, it is still possible and we are able to get it done!
Here’s the Bad News … The luxury market is facing increasing pressure, aggravated by credit market difficulties in the jumbo mortgage market. As a result, The National Association of Realtors reported that the share of home sales above $750,000 has fallen from 4.4% of total home sales in 2007 to a projected 2.3% of total sales in 2009 (NAR Projection based on partial year statistics).
Limited loan availability, higher than usual interest rates for jumbo loans (from 150 to 200 basis points higher than conforming loan rates), and stringent loan qualifying requirements have slowed sales of luxury properties. This has caused the national inventory level of homes priced above $750,000 to rise from 18 months worth in 2007 to more than 40 months worth as of the second quarter of 2009.
The lack of refinancing opportunities, fewer qualified buyers for luxury homes, a growing inventory of unsold luxury homes, and an economy in recession are all creating the “perfect storm” for luxury homeowners who need to sell and can’t. NAR also reported that as of October 2008, the foreclosure rate on jumbo loans was more than double the rate on conforming loans.
Here’s the Good News … While the above facts are creating greater challenges for us, as Realtors who consider the luxury home market our forte, we are steadily looking for options for our luxury home owners in selling their property.
In fact, we made a trip to the closing table today, representing the seller of a luxury waterfront home today, with a selling price of $1,100,000 here in Hot Springs.
One of the most critical bits of criteria for this home sale was the fact that this luxury home had all the basic necessities – meticulously maintained, in perfect condition, appraised for the selling price or better, and had a great location. Knowing that we had a great home that we believed would pass the inspection and appraisal process, along with the fact that we had an extremely savvy businessman as the seller, we began to look at options for him and his wife.
We knew that our seller’s first interest was to sell the home outright and move on. However, in this difficult market, we realized the chances of that were getting slimmer based on the facts mentioned above. We began to discuss the “trade” option to our seller, as we believed that this would be an option for our savvy seller to reach his final goal more quickly, while he sold his large luxury home, and then scaled down to a smaller, more sellable property.
We then reviewed all the previous potential buyers who had expressed any interest in the home, and believed that we had one that would love to buy the home at a fair price, but he also needed to sell his waterfront condominium (valued around $400,000) at the same time. We approached this buyer’s agent and began discussing a trade option, and to make a long story short … it was a perfect match.
The trading of real estate property does take some creative matchmaking skills and extra work, and it can be done as long as we have the two major ingredients … 1) Great property and 2) Savvy seller willing to consider options.