Greg: Welcome to this edition of the Louisville Luxury Homes Podcast Series brought to you by Jon Mand with Lenihan Sotheby’s International Realty. We are talking about Louisville real estate market trends. Jon, good to see you. How are you today?
Jon: Doing great Greg. Thanks for having me.
Greg: My pleasure. We just ended a month a few days ago, end of May. I know you like to get into the computer and crunch some numbers so I’m hoping you brought some stats with you today.
Jon: I did. I did. Now, these are not finalized as of yet. We’re only 2 days into the month so there’ll be a couple stragglers that’ll report some sales I’m sure.
Greg: Can you explain how that works to the people who listen to you? Break down statistics, understand where you get them from, and why if we talk about them 2, 3, 4 days after a quarter or a month they might not be final.
Jon: Yeah. All the numbers that we reference come out of the multiple listing service. That’s kind of a decentralized database that all of the data input, or entries into that, come from individual agents and brokers around Louisville, so depending on what they did over Memorial Day weekend, who knows. They might not even be back in the office yet to report the sales that happened last week. Typically by the end of the first week anyway of the new month, or the new quarter we’re 99.9% there in terms of the accuracy of the data. I think it’s safe to report. It’s not going to change the trend lines or any of the stuff that we’re going to be talking about.
Greg: Right. Big trends are still the same. It’s just a few homes have sold, haven’t gotten their paperwork into the MLS yet.
Jon: Exactly.
Jefferson & Surrounding Counties Overall Market At A Glance
Greg: Okay, so can you give us a big general overview of the market and then maybe we can sort of tighten it down into specific markets, areas, or prices whichever you prefer?
Jon: Sure. Yeah, I mean overall the market’s doing well. There’s a lot of kind of macroeconomic trends that keep continuing in the favor of home buyers. Low interest rate environment, high stock market values. Kind of the general trends we’ve talked about over the past year have remained in place. Of course you’ll read a lot of positive coverage in the local newspaper and things, just about the real estate market in general. Sales this year across the entire market are doing well. They’re up about 10% year over year from where we were at the end of May of 2015. The bad news is the number of homes that are available has continued to dip. We’re down to just about 3 months of inventory remaining, which is about half what we typically like to see. Kind of a balanced market is typically about 6 months of homes available. At the rate we’re selling houses right now we’re down to 3 months, so it can be a little bit of a frenzied environment if you’re a buyer trying to find a nice Cape Cod in St. Matthews or a nice home in the Highlands or something. Those typically have an incredible amount of buyer competition on them right now because there’s just not a lot of inventory available.
Greg: You mentioned, too, the smaller and tighter markets in the area. When you’re talking general market, are we talking primarily single family residents in Jefferson County? Is that the basic market? Are you including Oldham County, kind of our whole MLS?
Jon: The broader statistics that we’re going through today include the entire MLS.
Greg: Okay.
Jefferson County Is Responsible For The Majority Of The Sales
Jon: Of course the majority of those sales are going to be in Jefferson County. That’s the majority of the population center, but the surrounding counties are included in the broad market statistics that we’re covering today.
Greg: Okay, so inventory overall is down and we’re talking across all the price points, but in some of the areas, as you mentioned, St. Matthews, Highlands, it’s, I guess along those lines, it’s tight out there. Is that true across price points?
Jon: No. Interestingly it has not been. What we have seen historically, well for the past couple years is that the high end segment had been leading the charge in terms of sales growth year over year, in terms of the inventory levels were very tight in that sub-market. When you get to $400 or $500,000 and above we’re starting to see kind of a reversal of fortunes there in that the high end segment this year actually, while the overall market is up 10%, sales of homes $400,000 and above have actually dipped about 6% year over year. That’s a slight change there. Then the number of available listings. Again, over the entire market it’s been very competitive. We’ve seen about a 7.5% dip in the number of homes available for sale, but again, at the high end we actually have a small increase. Anywhere from kind of 2% to 7% increase depending on the area, and price range, exact price range we’re talking about. Sales are down at the high end and the number of competing homes that are available has actually increased.
How The Luxury Home Market Compares
Greg: That’s kind of a double whammy for the luxury homeowner right? There’s more competition and fewer buyers. Well, I’ll just throw this one right in your wheel house. It becomes more important to make sure that the marketing and the pricing of your home is done correctly from day 1, right? Because if you get out there with a high end home in this market and you don’t hit the ground running, it sounds like you’re going to be in tough shape.
Jon: Oh, absolutely. If you’ve got a beautiful little kind of starter home in the Highlands, you can almost just put a post on Facebook and get a bidding war going that afternoon at the rate that that inventory level and the activity in the market. Yeah, if you’ve got a high end, luxury property and you’re trying to sell it, you are entering into an area where the sales momentum has slowed down. More sellers are putting their homes on the market so it is critical to make sure that it’s positioned properly on the front end, that you’re doing professional photos, professional videos, that you’re actively marketing it digitally and in print, and that you’re really networking with other brokers in town working in that price point and with those potential buyer clients because it is getting to be a more competitive environment. There’s a big difference to a seller. Right now for home sales at $400,000 and below we have 3 months of inventory as an average across the market. Well, at the high end we have 12 months once we cross that $400,000 threshold. If you’re a home seller there’s a big difference if you sell a house in the 1st month or the 12th month. You want to make sure that you’re positioned competitively against all the other properties that are out there.
How Well Do Sellers Know The Market Trends?
Greg: When you’re talking to a home seller before they put their home on the market, how important is it to let them know ahead of time what the inventory levels look like, what they might expect time on market? Do you find that a lot of people just aren’t aware of market conditions and that’s one of the benefits of talking to someone like you who works in the luxury real estate market all the time?
Jon: Absolutely. I mean, most people are getting their news from larger media outlets. It might be a Zillow blog post, or USA Today, or Courier Journal article, and those just aren’t going to be nuanced to identify the trends in the different sub-markets, the different price levels within the Louisville market, or the different neighborhoods around Louisville, so it is extremely important. We go through the full valuation process, obviously, with every client which uses historical sales data and makes adjustments on the differences between any 2 properties. One thing that we do that I think is equally important is that we’ll spend a lot of time looking at the active listings. An appraiser will just look at sold properties. We really want to look at the active inventory as well because it’s great to know what sold last month, or 6 months ago, and use that as a baseline to help establish the value for a property, but equally important is, we want to know when a buyer comes in to see your home and they leave, where are they going next? What’s their next shopping experience going to be like? We want to make sure that we’re competitive with the other homes that are out there in the market, in the neighborhood, or in that price range. It is extremely important to keep an eye on that.
What The $1 Million+ Louisville Real Estate Market Trends Look Like
Greg: All right. If you’re okay going into a little bit more detail I know that our brokerage Lenihan Sotheby’s International Realty is known for high end listings, high end sales, and you’ve been talking today about $400,000, $500,000, but if you could peel out even higher. What does the $1 million market look like? I recognize that’s small in the number of sales, a small piece of the market, but people like to follow it. It’s always interesting. The homes are beautiful. What can you tell us about that part of the market?
Jon: You know, it is obviously a very small segment of the overall market. In our best years we’ll have between 50 to 60 transactions across the metro area at $1 million and above. It doesn’t take a miss, or an addition I guess, of too many sales to start dramatically changing the percentages involved, but this year, again kind of mirroring the activity from that $400,000 and up, the $1 million segment has had a little bit slower start to the year as well. We’ve closed 21 sales so far this year at $1 million and above. That compares to 29 through the same time last year, so we’re down about a quarter in terms of year over year percentage difference there. Then the inventory levels. We’ve had a lot of high end homes come on the market. There’s 131 properties currently listed at $1 million and above. Again, based on selling 21 listings through the past 5 months, well that puts us at about 31 months of inventory remaining, so a considerable difference. 31 months at $1 million and above or 3 months in the overall market. It’s a big difference, but I just would like to add the caveat with such a small sample size it just takes a few sales and those numbers and percentages can swing pretty dramatically. I wouldn’t put too much emphasis on it, but at least it’s good having in the back of your mind if you’ve got a $1 million plus property, just knowing what that competitive landscape looks like and being prepared for it, and of course we’re doing everything we can to Lenihan Sotheby’s to help those numbers increase as quickly as we can.
Greg: Right. Well, the percentages that you threw out were a little bit scarier than the raw number, right?
Jon: Yes.
Greg: We’re down 8 homes from the previous year.
Jon: Correct.
Greg: That sounds not quite as scary.
Jon: Exactly, exactly.
Greg: As always, thanks so much for crunching the numbers. Hopefully when we wrap up the next quarter you’ll come back in and we’ll talk some more.
Jon: All right. Will do. Thanks Greg.