Semi Annual Statistics…Break it Down (by price)

I manually ran the # of units sold for the first halves of 2008 & 2009, then broke it down by price point.  I was very surprised.  We’ve only seen negligeble median depreciation, but we’ve seen a larger (3-4%) average depreciation this year.  My assumption was that demand for luxury property is down, and we would see a larger decrease in units sold the higher the price point.  I was wrong (with the exception of $2mm+ homes.)

So, price is typically a function of supply & demand.  Demand is down, so it would logically follow that supply is up.  I ran the numbers for months inventory in each price point (# of homes available/absorption rate.)

And, voila…  The reason for the discrepancy (in my opinion) between average & median price depreciation is the increasing inventory as you go to higher price points.  Unfortunately, I don’t have historical data on inventory, or I would show year to year change.

What does this mean?  Prices will probably continue to decline in the luxury market for the near future – demand will have to go up, or remain constant while supply is allowed to absorb.  Most luxury builders have haulted production for the time being, so supply will be absorbed over time – it will just be a matter of when.

Up next….inventory conditions in different areas of town.