Luxury homes stay longer on the market than less pricey homes. Surprised, Anyone? Of course not, it takes money to buy real estate and a heck of a lot of it to buy million-dollar properties. More than half of the buyers can afford an average-priced home most anywhere in the US, but way less than 10% can buy their million dollar dream home.
The problem is not whether or not the sticker-price is relevant, as it can usually be justified based on comparable sales or active listings. The problem is simply that qualified buyers are not legion at the top end of the market. Today, in some of the most exclusive zip codes from one coast to the next, you may have 10,000 homes for sale over $3M with “only” 9,000 possible buyers looking in that price range. Over $10M, you may have 1,000 properties fighting over 800 buyers.
With the prospect of better tomorrows, million dollars homes have been mushrooming all over the land a lot faster than the number of millionaires. At that price level, the demand can only buy a fraction of the supply. Lowering the price is not necessarily the recipe to capture a buyer since, as stated earlier, the price, most of the time, is right on target. We are in a catch 22 dilemma. Only time and effective targeted marketing to connect with the right buyers can help.
Talking about targeted marketing, it is pretty obvious that the pool of luxury buyers is very different today from what it was only 10 years ago. The qualified and interested domestic demand is substantially down as a fraction of the entire demand. The segment which is up and continues climbing is the demand from foreigners originating from Asia, Europe and the Middle East, etc. Thanks to this game changer, the luxury market is remaining active if not steamy, and promises to keep on growing.
As I wrote here a couple of times, the huge appetite that Chinese buyers alone have for US real estate, especially the crown jewels, is the best insurance policy that guarantees a high level of transactions, a robust volume of sales and a growing average price. Last year, the Chinese bought something like $30B worth of real estate here. The US is their N.1 destination, well ahead of Australia, the U.K. and the rest of the world.
The buying frenzy is not likely to slow anytime soon. More and more wealthy Chinese come over as tourists to check the territory with the idea of emigrating someday. Last year alone, about 100 million of them traveled abroad and, here again, the US was top of list.
The supply of high-end properties, as stated earlier, is abundant today, most everywhere in the country. However, not all listings respond to the needs & wants of today’s buyers. They want it all: location, quality, style, size, etc. They know what they are looking for and, given time and a good Realtor, they will find it.
In the Silicon Valley, the land where the word ‘impossible’ does not exist, the supply inventory of relevant homes for sale is barely more than a month. That’s what you call a hot market. But, believe it or not, in spite of it, a massive number of would-be sellers are still waiting for better times to sell. Puzzling. What do they know that I don’t?
I suppose many sellers are waiting for the traditional Silicon Valley IPO bonanza. Well, it’s here, but not quite as juicy as sellers & buyers are hoping for it seems like. Startups are being created in waves but not developing in the valley as much as in the past, during the heydays of the late 90’s. Having said that, I am not the least worried about the future growth of the luxury market in Silicon Valley or elsewhere. The big Mo is here to stay at the top end.