Luxury Home and Condo Sales Remain Strong in 2014

Following the lackluster real estate market of the first quarter, activity has started to come back reflecting a higher level of sales typically associated with the arrival of spring. Periods such as what we experienced through this past winter where demand softened this year due to the harsh winter, typically serve to create a pent-up demand and this time was no exception.

MLS® sales reported by the Southern Georgian Bay Association of REALTORS® during May reflected an 11% increase in unit sales for the month versus May 2013 while dollar volume for the month was up 14%.  While stronger sales through both April and May have helped to lessen the impact of the weak sales activity we experienced January through March, MLS® unit sales are still trailing behind 2013 particularly for single family homes.

  The upper end of the market which we define as any homes or condominiums, priced over $750,000 has remained very bullish in 2014.  As per the accompanying graph, sales though the end of May for properties over $750,000 total 27 units.  Baring any downtown in the market we are on track to handily exceed last year’s sales of 58 properties.

  Upper end homes and condominiums is one segment of the local market where there is always an abundance of available inventory.  As per the accompanying graph, there are currently 180 active MLS® listings priced above $750,000.  Based on the current pace of sales in 2014, the current level of available inventory reflects a 2.8 year supply.  If we move up to the $1 million plus range, year-to-date there have been 10 sales whereas there are currently 98 active MLS® listings over $1 million.  This translates into a 4 year inventory of homes for sale over $1 million. 

  I am always amazed when I see a contractor building a $1 million plus home on speculation ie: they are building it merely to sell.  This is in my opinion is a very risky move.  First is the obvious issue of over-supply.  With 4 years of available inventory for homes over $1 million, you are really rolling the dice so-to-speak when you are custom building a million dollar plus property strictly for resale.  It could takes months even years to find a buyer. Secondary to that but of perhaps even greater importance is the matter of clientele.  In my experience the numerous buyers that I have been fortunate enough to work with for upper end properties are very specific in what they want.  Many have been thorough the custom home building process.  They have very specific tastes and desires and more importantly they can afford it.  More often than not, they would just as soon build their own home to the standard they want and we have no shortage of available vacant land for them to fulfill that desire.  Based on their prior building experience these people are also very knowledgeable on costs.  In my next post I will speak more on the matter of luxury home pricing.