If you’re having trouble selling your luxury home don’t blame your agent, blame Paul Ehrlich and Gregory Goodwin Pincus.

Why you're having trouble selling your luxury home.

The Population Bomb is a best-selling book written by Stanford University Professor Paul R. Ehrlich and his wife, Anne Ehrlich.  It warned of mass starvation of humans in the 1970s and 1980s due to overpopulation, as well as other major societal upheavals, and advocated immediate action to limit population growth. Fears of a "population explosion" were widespread in the 1950s and 1960s, but the book and its author brought the idea to an even wider audience.  This was because the Baby Boomer Generation, which were born between 1946 and 1964, was the largest generation in history and if they reproduced at the rate of their parents and their children continued the trend the US would run out of space and would not be able to feed the resulting population.

1960 The first oral contraceptive, Enovid, (developed by Gregory Goodwin Pincus) was approved by the US Food and Drug Administration (FDA) as contraception and as a result the population boom was brought under control resulting in Generation-X which is 25% smaller than the Baby Boomer Generation.

Demographic Population Economics

From a financial perspective a population is split into four groups.  The first are the children, they’re not working, but their eating, needing clothes needing shelter and needing education. They’re expensive and they’re not adding anything to the financial equation.

The second group are the young workers.  This age group eighteen to forty-five are massive consumers.  They’re buying everything and they’re raising the children.  These are your first and second and third home buyers. They’re our consumers our borrowers and they don’t save or invest much.

The third group are the mature workers.  Their kids have moved out, they’ve paid for their home, they own their automobiles.  They do have bills but they’re no longer living from paycheck to paycheck.  They’re at the heights of their earning potential. Their primary concern is to save enough for retirement; they're investors.  They pay the bulk of the taxes thus are funding the needs of the government.

This is the group who has financed the extraordinary growth of the 90’s and the early 2000’s.  They made Google, Apple, Amazon and Facebook possible through their savings and investments.  They also own 75% of the luxury homes in the United States.  These are the Baby Boomers and because of their disproportionate size our economy has boomed as interest rates remained low.

The fourth group are the retirees.  As they move into retirement, starting in 2011, their investments move into more conservative investments.  Volatility is their enemy.  Their investments move into CD’s and Government bonds.

They’re now and will be living off their investments, and their largest investment is often their home, which they want to sell and downsize providing more funds for retirement.  They pay less taxes, so as they age the availability of money, that has been financing the growth or our economy, will shrink, pushing interest rates higher.

In a “normal” population there is a straightforward distribution among these groups forming a pyramid, younger at the bottom and older at the top.  The young workers prduce and support for the children and the mature workers finance our economy and provide for the retired workers anticipated needs like Social Security, Medicare and pensions.

This has worked well in the past but because of Paul Ehrlich and Gregory Pincus the Generation-X  (part 3 of our population) is 25% smaller than the Baby Boomer Generation (part 4 of our population) through 2030.

Add to the demographic inversion the Sub-Prime Crises of 2007, which hit Generation-Xer's hardest with foreclosures and loss of home equity, and you have the “Perfect Storm” working against the Baby Boomers selling their luxury homes.  But wait it will get worse.  As the Baby Boomers retire and move their $14 trillion of retirement investments out of the stock market there will be a squeeze on investment capital and interest rates will rise, making luxury homes even more expensive.  Then you've got the collapse of the Chinese financial system looming.  Because of the "one child policy" of 1979 through 2015 the Chinese have an even worse demographic inversion which will put strains on the Chinese economy that they will not be able to solve by pumping more yuan into their economy.  They won't have workers, and their aging population will put demands on a population that will not be able to sustain.  But not to worry, in the long term the US will emerge an even more dominant super power than they are today but in the short term we're going to have to deal with some difficult decisions.

All this is why you’re having trouble selling your luxury home.

As we move through the next 30 years the Baby Boomers will die and the population distribution will correct itself with generation Y being larger than Generation X and Generation Z filling in as the Millennials start to have more children. 



Using this information however doesn’t paint a pretty picture for the sale of luxury homes over the next fifteen years. 

This is a study of the most recent history of luxury home sales in Birmingham. 

As you would expect the number of listings are growing and the number of sales are growing but so are the number of unsold homes; while the average price of a sold home is holding steady.  Looking forward we can expect interest rates to increase as boomers move their investments out of stocks and into more conservative investments, making the purchase of a luxury home more expensive.  Under the new tax bill, the deductible mortgage interest allowance will drop from a cap of a $1 million mortgage to a cap of a $500,000 mortgage, again making buying a luxury homes more expensive.  As the Baby Boomers continue to age they will enter the Baby Boomer Die Off and even more homes will come to market which will result in a lowering of the average sale price as supply continues to outpace demand.

Currently 50% of the luxury homes that come to market sell within a year of listing, that will drop to 40% then 30% where it will remain until the Generation-Y part of the population become luxury home buyers in 2030 and beyond.

So, if you’re among the luxury home sellers today your challenge becomes one of putting your home into the sold category as the percentage of homes sold becomes smaller and smaller.

A formula for selling your luxury home in 2018

Identifying your Buyer

The Numbers:  Past sales data indicates that there’s a 58% probability that the buyer of a luxury home will come from the homeowners currently living within a 3-mile radius of the home for sale, a 22% probability that they currently live in Alabama but outside the 3-mile radius and a 20% probability that they will come from out-of-state.  We also know that the average home owner lives in their home for an average of six years before considering the purchase of a new home.

Using MLS past sales data, we can identify all the homes and homeowners that have been purchased within greater Birmingham in any price range or any neighborhood from 2000 to 2011, thus having lived in their homes for over six years.  This will produce your Target Market #1 for your home.  As an example, this data would produce a list of 24,200 potential buyers for $750,000 to $3,000,000 homes in the greater Birmingham market.  That might seem like a substantial number, but it effectively reduced your target market from 460,000 Birmingham households to 24,200.

There are over 3,600 active real estate agents in the Birmingham market, 150 of them sell 96% of the homes priced at $500,000 or more.  There’s a 90% probability that an agent other than your listing agent will bring your eventual buyer to your home.  These 150 agents are your Target Marker #2.

There’s a 22% probability that your buyer will come from outside the three-mile radius but within the state of Alabama and a 20% probability that your buyer will be from out of state, these two groups are your Target market #3.

If you have your home up for sale there’s an 85% probability that you’ll be in the market for a new home once you sell your current home.  There are currently 631 listings in Birmingham for homes valued at $500,000 or more, 536 of those sellers will be in the market for a new home, 311 of them will buy a home within a 3-mile radius or their current home; this is your Target Market #4.

Marketing to your Target Markets

Facebook AdvertisingThe Pew Survey found that 79% of adult Internet users logged into Facebook at least once a week and spend an average of 20 minutes per visit.  By uploading our 24,200 Birmingham homeowners (Target Market #1) into a Facebook custom audience you can direct advertising for your home directly to your potential buyers.  The add should consist of a carousel of 10 picture of your home as well as a link to a dedicated webpage featuring an 8 minute “walk and talk” video presentation of your home.   Your website should then gather the IP address of the viewer of your video and remarket your advertisement to them throughout their continued internet use.

Such a program creates awareness of your home and even if these viewers aren’t in the market for a new home they may know someone who is looking for a home just like yours, thus potentially reaching your Target Market #3.  Through awareness you’ll generate showings and showings lead to a sale.

Other Agents:   There’s a 90% probability that an agent other than your listing agent will bring your buyer to your home.  These 150 agents, your Target Marker #2, are highly motivated to swiftly find the perfect home for their buyers.   Each of these agents need to be made aware of your home, this can be achieved by sending each of these agents a brochure on your home and a link to your “walk and talk” video presentation.  This can easily be achieved through email and can be repeated at any opportune time.

Zillow and Trulia:  90% of all US real estate transaction begin on the internet and the biggest players are Zillow and Trulia.   This is particularly true for out-of-town buyers, your Target Market #3; ask yourself if you were moving out of state where would you start your search and what would you look for?  Professional photography, drone photography and video are a must.  Zillow and Trulia allow a 2-minute video on each listing, those listings with a video are shown at the top of the presented homes relative to the website visitors search.  You must take advantage of this opportunity to gain exposure of your home.

Current Sellers are Future Buyers:  These current sellers, your Target Market #4, are easily identified by downloading their names and addresses from the MLS listings.  You will add these names to our Facebook custom audience as well as send them a “Just Listed” postcard making them knowledgeable of your home.  You will also encourage them to sign-up for your mailing list on your dedicated website.

Friends and Family:  The average American has an email list of 649 addresses consisting of friends and family, church, synagogue, and club members.  You know somebody who knows somebody who might be interested in your home.  Why not send them a link to an 8-minute video of your home. 

From Marketing to Selling

Your primary goal is to get prospective buyers through your front door.  If your home is priced right and presented right it will sell but you can accelerate the process with some on-hands involvement.

Predictive Analytics:  Why do some home sell quickly and others linger on the market?  By using Predictive Analytics, you can compare your home to those homes that have sold and those that have not sold in your neighborhood and determine the probability that your home will sell in the average days on the market for your neighborhood. The MLS sales data provides over 500 data points to compare that will result in a 90% accuracy as to how long it will take your home to sell at any given price.  It’s then your decision as to what your priorities are; get top dollar or sell and move on to your next dream.

Showings:  Showings lead to sales; a potential buyer and their agent preview you home to determine if they have further interest.  We believe that your listing agent should attend all the showings of your home; first someone needs to protect your property, second, you will want to gain feedback from the potential buyers, third you want your agent present to answer any questions and finally you want your agent to know the buyer and their reactions should you enter negotiations.  This practice is contrary to the real estate industry standard; less than 5% of listing agents attend their showings.   You will be paying a 5% to 6% commission to sell a $1 million home, you deserve more than a sign in the yard and a MLS listing, you deserve research, marketing and you deserve representation.

The real estate market is changing as the demographics of our city, country and world are changing. Technology and big data provide us with sales tools that did not exist 10 years ago.  Best of US Homes is sharing this information to make you a more informed buyer or seller of real estate.  If you are already working with an agent and you feel this information can assist in the sale of your home share this information with your agent. 

If you’re not working with an agent and would like to learn more about our program give us a call.

Invite Kerry to speak to your group about the changing Luxury Home Market in Birmingham. BestofUS.kg@gmail.co   205 919 6006

Kerry Grinkmeyer is a real estate agent in Birmingham, AL specializing in the marketing and sales of luxury homes. Kerry's a retired financial advisor, he sold his firm, one of the largest in the Ameriprise Financial Advisor system in 2005 to his son, daughter and nephew.   Now he's building one of the largest boutique real estate agencies that he'll eventually sell to his grandchildren.  He the author of the children’s book The Christmas Web- A Family Christmas Tradition.  Kerry competes in the Senior Olympics in to 50M, 100M and 200M dash as well as the 5k and 10k time trial cycling events.

Kerry offers you his financial background, knowledge of the community, love of business and family and energy to assist you in one of the most important financial decisions you'll make in your lifetime.

205 919 6006