We are well into the first month of 2010, a good time to reflect on the last year and beyond. For those who own high value properties, it may be of interest to see what the market development looks like now that we hear more positive news about stabilization in real estate.

Is the sales volume increasing again, and are prices stabilizing in the high end as well?

I am providing a snapshot below and used homes/condos in a price range of over $ 3 Million, which we can call the high end. The period covered is from October 2008 to December of 2009. To view the charts and graphs associated with this information, please click here.

Here are the results:

• Between 130 and 160 properties, valued over $ 3 Million were listed at any time during the 15 months period
• 28 properties went under contract during the period
• The inventory level is steady at around 135 months. This means that there is enough inventory out there to cover the next 10 years, at current sales levels.
• With one exception in November 2009, SF prices for homes over $ 3 Million have deteriorated from $ 885 per SF to $ 569 per SF.

What can we expect considering these facts?

• A continuing low sales volume in this high end is demonstrated again in January, a month in which we would expect a stellar performance. As of January 19th, 2010, two homes went under contract. This does not look like an improvement over last year.
• Many of the contracts are for short sale or bank owned properties, reducing the value potential of regular sales as well.
• Not all large deals are cash deals. Jumbo mortgages are very hard to get however.
• The general economic situation keeps many buyers on the sideline
• Price stabilization and appreciation will only take place after a considerable reduction of inventory.
• In order to achieve this, demand must go up. This can only be achieved by offering the properties at prices buyers see as bargains.
• Experts believe that even the modest 2009 price levels will deteriorate for another year or two and will only be back at 2009 levels by earliest 2012.

I realize that this message does not sound like a realtor talking. I, however, think that it is important to look at the situation realistically. This means I cannot suggest that everything will be ok again this year. We will hopefully see more sales in the high end but only because sellers realize that they have to reduce the prices and to remove the bubble effect.

For home owners who purchased before 2001 a good test is to use a 6% appreciation p.a. from the time the property was purchased until today and add the improvements. This will bring up today’s market price without the bubble effect. This is probably the realistic price for today’s sale as well.

Should buyers continue to sit on the sidelines? By no means. The inventory is considerable and dream homes can be purchased at prices as low as they can get. As in the stock market, one may not purchase at the absolute bottom, but one can be rest assured to purchase a home with a high potential of appreciation for the future.

I am available for any further questions. It will be my pleasure to provide more detailed statistics for specific areas.

Klaus Lang 941-320-1223 E-mail: klaus@klauslang.com

Posted by:Klaus Lang