There is undeniable polarization happening in the U.S. luxury property market right now — well-positioned, high-end homes either sell quickly in the first few days, or they languish, says Laura Brady, president of luxury real estate marketplace Concierge Auctions.
The amount of luxury homes that fly off the market has dropped 11 percent since 2015, according to the company’s 2018 Luxury Homes Days on Market Index, which is based on an analysis of the 10 highest property sales in each of 40 markets across the country.
Luxury properties at the top of the market are not as easy to liquidate as those on the lower end of the pricing spectrum. And with its small pool of buyers, the luxury sector doesn’t suffer from low inventory like the average market does, so homes sit.
In 2017, 72 percent of the top 10 homes in 40 markets sold in over 189 days — an increase from 65 in 2016 and 59 in 2015. In 36 markets, they took over a year on average to sell; and twelve of the markets had an average days on market of over two years for the most expensive homes, according to the research.
As days on market goes up, price comes down
The report also showed a correlation between days on market and sold price — in fact, days on market proved to be the largest determining factor of luxury property pricing. Seventy-two percent of homes that were sold after 180 days of marketing were sold in an average of 680 days for 74 percent of the listing price.
The report shows that extended days on market statistically lead to a greater difference between sale price and list price when compared to properties that sell in under 180 days. Price reductions not only undermine the value of a property, but they may cause buyers to sit back and wait.
In Oahu, Hawaii, days on market increased 150 percent in two years from 293 to 737, and prices dropped accordingly for the top 10 homes. While the average sale price in 2015 was a bit over $12 million after 293 days on market, the average sale price is now slightly over $8 million.
Auctions can help
Concierge Auctions has been doing research in luxury home sales for a number of years before publishing the research as a report last year. The New York-based company, which is active in 38 U.S. states and 19 countries, believes that auctions yield the best results for luxury homes.
The whole process of the auction, after a week of preparing the home, is 30 days of intense marketing culminated by the auction at the end. And the listing agent remains involved throughout.
Some sellers come to the company with properties that have missed the “early window” sale, while others prefer the auction route from the start, said Brady.
“There are more sellers interested in our product than agents realize with over 70 percent of the calls we receive coming direct from the seller,” she added.
The company’s growth rate has been steady at 35 percent each year since starting 10 years ago, but U.S. growth in Q1 2018 doubled year-over-year, and Brady is expecting even more growth for the future.