Before Zillow, Trulia, Redfin, and Realtor.com, if you were interested in buying a luxury home would have to consult a local realtor to access information about what was available on the market.
As these online property databases rose to prominence, homebuyers have become more picky and more informed. That is leading to some serious problems in the luxury home market, where expensive homes are increasingly taking longer to sell and at lower prices. If your home is price below $750,000 it will, on average, be on the market for 136 days but if it’s priced over $750,000 it will be on the market an average of 178 days, over $1.5 million 231 days and there are homes that have been on the market for over three years.
Websites like Zillow and Trulia let consumers find what the current owners paid for their home, the price per square foot compared with that of the rest of the neighborhood, and even how many people have viewed the listing page before you. Homebuyers today are better equipped to understand when a home they're seeing is overpriced, which could explain, in part, why some of Birmingham's most expensive homes have languished on the market for years.
The highest end of the Birmingham real-estate market has indeed seen a fair bit of softening over the past several months.
According to recent data from Trulia, since last year the US luxury real-estate market has seen a significant increase in for-sale homes needing to reduce their asking price. Trulia's analysis, which looked at for-sale listings at the Birmingham and national level, showed that 11.99% of luxury listings — defined as the top third of all active listings — had experienced a price reduction since first appearing on the market.
That's an increase from 11.01% last year and higher than the 10.66% for all for-sale listings nationally.
The luxury segment is slowing down more quickly this year than it had in the past. Birmingham markets, as well as markets across the country have seen the largest increases in price reductions in years. Home prices got too high too quickly, and people who listed these homes for sale kind of got ahead of themselves.
In the meantime, income hasn't caught up with such huge increases in real estate prices, there's not as many people who can afford those homes — supply has grown faster than demand. This is in part driven by the Baby Boomer downsizing.
The situation has changed from just a few years ago, when the luxury market was hot and there wasn't much supply to go around. But now that 9,000 Baby Boomers are celebrating their 65th birthday every day so many luxury homes are coming to market and buyers have more options and no sense of urgency to choose between them.
If you’re a seller in the luxury category, you must be very realistic on pricing. There's more importance placed on being the correct price than there had been in the recent past. There's a lot of choice. If you're a buyer looking to spend $750 thousand to $1.8 million, you know there's a lot more selection than there had been in the past few years. The importance of “pricing right” is proven out in the numbers. Last year there were 186 homes sold in greater Birmingham for over $750,000 and the average days on the market was 41 yet as stated earlier when you throw in those that didn’t sell, the average days on the market was 178. If the price isn’t right it’s not going to sell.
In the past a seller could throw out a crazy price and it would sell for that if the location was right. People are looking at the fundamentals now, really assessing what the property is and what the price is and will be in the future when they want to sell; if those things make sense, there's a demand for it, but it has to be objectively a good deal.
Ask yourself, “If you were in the market to buy a new home would you pay what you’re asking?”