The extraordinarily low inventory levels for existing homes across our area has left buyers frustrated and unable to find the perfect home. As a result, we’ve seen an increase in purchases of homes as tear down opportunities for new construction. We have also seen extensive renovations of existing homes that most buyers wouldn’t have considered a couple years ago when inventory levels were much higher and there were plenty of houses to choose from.
This has helped drive the overall market for lots and land towards recovery with sales rebounding 64% from the lows reached during the recession with estate lot sales rebounding 77% during that same period. The momentum is still increasing and we’re already seeing sales activity 25% higher in the 1st quarter of this year versus last year across the Louisville market. Putting these numbers in perspective, the market activity is still off about 20% from the pre-2007 highs, but the recovery has really started accelerating in the last 18 months and we’ve returned to a healthy, normal market.
One of the things that I think our clients who are considering new construction find most surprising is that it is now a process that must be completely initiated by the buyer. In other words, the spec house market, at least in the high end segment of the market, is virtually nonexistent. This is primarily due to the difficulty securing financing for spec houses. The balance sheets for the builders that survived the downturn are still strained with unsold lot inventory, much of which was purchased at the height of the market making the financing process difficult.
As the exclusive listing brokerage for six of Louisville’s most prestigious communities we have a wide footprint in the new construction market and are actively involved in the process from neighborhood and lot selection all the way through the building process with our clientele. From a business perspective, the biggest change has probably been that lot sales have gone from a wholesale operation to a retail model. As the builder spec market evaporated the vast majority of our sales are now directly to end-users, some of whom come to us with the builder in mind, but most who rely on us to help guide them through the involved process of designing and building a custom home to ensure that the all-in investment is in line with the market.