Home sales are up in the Twin Cities, as you may have heard.
But here's the tricky part: sales are only up in certain price ranges. Specifically, sales are way up in the price points below $200,000 where foreclosures and short sales are more prevalent. Things look a little different the higher up the price ladder you go. So we thought it'd be advantageous to take a quick look at what's happened over the last few years at the market above $1 million.
Million Dollar Takeaway #1: The supply-demand balance is moving in the wrong direction. The Months Supply of Available Homes above $1 million currently sits at 33.5. In other words, if nothing else new comes on the market in this price range it will take almost three years to sell through the current crop of available homes. That's a growth of 26.5 percent from this time last year, and is the largest year-over-year increase of any of the price ranges we track in our Housing Supply Outlook.
Million Dollar Takeaway #2: Home sales haven't reached bottom yet. When the Twin Cities market as a whole began to slow down in 2006 and 2007, the luxury market didn't slow at the same rate. 2006 saw only a 6.3 percent drop in sales and 2007 sales were basically flat during a period in which the overall market saw sales decline by 35 percent. Now the tables are turned with the high-end market suffering a projected 22.7 percent drop in 2009 as the overall market heats up.
Million Dollar Takeaway #3: A growing share of listings are new construction. In the year 2000 only 8.8 percent of the new listings above $1 million were new construction. That number has steadily grown to 24.1 percent of the new listings in 2008. Considering what we know about the lack of new construction projects currently in the pipeline, this is probably an indication that builders are still marketing high-end homes they built a few years ago but haven't sold yet.
Million Dollar Takeaway #4: Lender-mediated activity is growing, but is still relatively small. Only 2.6 percent of the properties sold above $1 million last year were lender-mediated foreclosures and short sales, which compared to the overall market number of 31.7 percent looks pretty good. We do have to note, though, that it's a considerable increase over the typical 0.2% seen in 2007.
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