When I posted the May’s numbers a couple weeks ago (see May median sold price, units, DOM, and $/sq.ft.) the big news was that the median sold price had dropped below $150,000 for the first time since February 2000. However, lying a little deeper in the data was the fact that five properties sold for greater than $1,000,000.00 during the month.
Why is this noteworthy? Because May continues the trend observed this year of increased sales at the million-and-above price point. Since the first of the year there have been 23 such sales. If sales continue at the pace seen thus far this year, then we should round out 2011 will more than 40 sales at or above $1,000,000.00 – reversing the downward trend in units sold since peaking in 2005. (See the table below.) [Incidentally, 17 of the 33 sales in 2010 occurred in the second half of that year, so 2011 looks on track to easily surpass 2010’s and 2009’s numbers.]
* partial year
What is driving these luxury purchases? Falling prices? Bargain shopping? Pent-up demand? Hedging other investments? Whatever is the answer, it certainly is not the availability of jumbo financing.
Jumbo loans are difficult to obtain today. And even if jumbo financing were available, some buyers would elect to purchase with cash regardless. Consequently, we see that nearly half of the sales in this price stratum were all-cash purchases. (See table below.) And the remaining sales were either owner-financed or partially financed with a conventional loan (Note: current conventional loan limits are $417,000).
48 percent of the $1M+ sales this year have been purchase for cash. Compare this to 2005 when cash purchases made up only 10 percent of the sales at this price brand.
Can bargains be found at the over-a-million price point? Absolutely. However if you’re looking for bank-owned properties in this price range you’ll have a tough time finding them. Unlike the Reno-Sparks housing market as a whole, where distressed properties (bank-owned and short sales) comprise the bulk of the inventory and sales (nearly 70 percent); at the over-a-million price point distressed properties are seldom seen.
In looking at the current listings and sales priced at $1M and above, we find the distribution by type as follows:
|Type of Sale||listings||sales (2011)|
But “bargains” can be found in other ways. In looking at the sold price per square foot at the million and above price band, we find that median sold price per square foot is currently 25 percent off its peak reached in 2006.
* partial year
Clearly these high-end properties are selling below their peak pricing, however the 25 percent decline observed in the sold price per square foot is not nearly as great as the 60 percent decline observed in the market as a whole. But perhaps it is enough of a discount?
I am still curious as to what is driving today’s purchasers of these luxury properties? I would love to hear your thoughts.
And if anyone has recently purchased one of these million-dollar properties, what motivated you to do so? And what were/are your concerns purchasing at this price point in this market? Would love to hear from you.