With Terry Story, 27-year veteran Real Estate Agent with Coldwell Banker in Boca Raton, FL
Terry Story always reminds us that all real estate is local and so even when talking about high-end housing, the luxury market, it’s no different.
Since February 7, the number of luxury homes for sale in our area (those priced between 1 to 2 million) jumped from 7 to 18, that’s over 100 % increase, but there has been only one sale during that period. So clearly there’s a stall at that level.
The median price here in South Florida is in the $500,000 range, which is over double the median price nationwide. This is the range of the move-up buyer, the executive type buyer, the relocation buyer, and these homes were moving up until late 2015. Then sellers began to hear that the market was going up 3 to 4%, and they then began to price their homes accordingly, causing another stall at this level. Terry thinks the buyers are actually there, but they’re just waiting for the sellers to become more realistic with their pricing so inventory can start moving again. The irony here is that interest rates are lower today than back at the beginning of the year, and the market and the economy, in general, are doing well.
The main reason people are listing their homes right now is that they’re looking for larger or nicer homes—they’re moving up the ladder, as it were. These move-up buyers, says Terry, account for about 40% and then those relocating to other areas comes in at about 24%.
The remaining percentage can be attributed to retirement, change in marital status from death or divorce, and then those wanting to move to a better school district, which is always a factor.
We live in a mobile society in stark contrast to say 40 or 50 years ago when homes were, if not forever, at least, for most of one’s adult lifetime. Many of us move many times throughout our lives and that’s what makes the real estate world go round and round.
Disclosure: The opinions expressed are those of the interviewee and not necessarily United Capital. Interviewee is not a representative of United Capital. Investing involves risk and investors should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. Content provided is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered tax, legal, investment advice. Please contact your tax, legal, financial professional with questions about your specific needs and circumstances. The information contained herein was obtained from sources believed to be reliable, however their accuracy and completeness cannot be guaranteed. All data are driven from publicly available information and has not been independently verified by United Capital.
Steve Pomeranz: It’s time for Real Estate Roundup. This is the time every single week we get together with noted real estate agent, Terry Story. Terry is a 27-year veteran with Coldwell Banker located in Boca Raton, Florida. Welcome back to the show, Terry.
Terry Story: Thanks for having me, Steve.
Steve Pomeranz: The markets ebb, and the markets flow, and there are low priced and medium priced homes, but today I want to talk about what the luxury priced market is doing. It’s not so healthy, is it?
Terry Story: You know, I mean everything is local. You have to look in your own local marketplace. What we’ve seen, Steve, since late 2015, there’s been severe inventory woes. You can see this in Manhattan, West Village, or Beverly Hills in Los Angeles, where actually it’s more of high levels of inventory. It’s that old story, supply and demand. The inventory levels are rising, and when inventory rises, prices fall.
I can relate that to my own marketplace. I did a study the other day in an area that I sell a lot of. Interestingly enough, I noticed that the inventory since February was seven luxury homes for sale, non-waterfront homes, and that to today’s date jumped up to 18. That’s over a 100% increase in inventory. Interestingly enough, during that, however, many months, February through August, there’s only been one sale. You’ve got to say to yourself, “All right, what’s going on here?”
Steve Pomeranz: What are the general prices of these homes you’re talking about?
Terry Story: This study that I did were homes priced from a million to two million. Our median market price, in this area, is in the 500 range. This is more than double the median priced homes. This is your typical move-up buyer, your executive type buyer, relocating buyers, purchasing homes like this. It’s telling me something because these homes were moving. We saw them moving up to the late 2015. What’s happened, Steve, is these sellers hear everywhere the market’s going up 3, 4%. Sellers tend to price them comparing their own home to what’s already on the market and not necessarily looking at what has sold. When the market pulls back a little bit, the prices need to adjust. I think the buyers are actually there, but they’re just sitting there waiting for the sellers to become more realistic to what they’re pricing.
Steve Pomeranz: There’s a certain degree of irony here because interest rates are lower today than they were back in the beginning of the year. It’s surely not interest rates that are acting as an obstruction. The economy is doing pretty well. The stock market is, of late, as of … What time is it? Is doing pretty well. I never know from day-to-day.
Terry Story: What time of day is it?
Steve Pomeranz: That’s what I’m saying. Exactly. We’ve had this pretty good rally for the last few weeks, but that’s not what’s at play here. What seems to be at play is something entirely different, and I’m not sure we know.
Terry Story: No. I don’t think we really know until time passes and we can look at historic data, and we can say, “Oh. No. That’s what was going on.”
Steve Pomeranz: All right. I guess it begs the question as to what are all the reasons that sellers sell? What seems to be holding a lot of them back these days?
Terry Story: If you ask 52% of all the homeowners say it’s a good time to sell. There’s always reasons for sellers want to sell. The number one reason, Steve, is they’re looking for a larger or nicer home.
Steve Pomeranz: Move up.
Terry Story: A move-up. We call them move-up buyers. That’s the number one reason. That’s about 40%. Then the relocating people, just having to move for jobs or what have you, that’s at 24%.
Steve Pomeranz: It’s interesting because, relocating, it’s surprising how much positive impact relocating can have on our economy in general. I remember back when, after the housing crises, when people were upside down. Their mortgages were higher than the equity value in their homes. One of the problems that was stated was that people couldn’t move. They couldn’t get out from under their homes, and therefore the economy was really very in the mud. There was a big drag on it because of the lack of relocating buyers. I think that’s really not the problem so much. That’s a fairly healthy market now.
Terry Story: Yeah. You see all kinds. It really does take an effect. You say when IBM in our area, back in the 80s.
Steve Pomeranz: I had a house that was pretty much in a neighborhood full of IBMers, and when they left, man, it devastated my neighborhood.
Terry Story: That’s a real hit to your economy. You want a variety of different types of companies within your city so it doesn’t take one big hit.
Steve Pomeranz: Yeah. I’m in South Florida, and they all moved to North Carolina. One person’s trouble is another person’s gain, I suppose. What are some of the other reasons that people want to sell?
Terry Story: A lot of people are pulling them out just for the profit. I would imagine people doing that are retiring and they’re really going to more of a downsize, but they’re pulling out their equity.
Steve Pomeranz: Okay.
Terry Story: Then they say another 20%, they just want something small or less expensive home to maintain. Of course, there’s always the change in family status.
Steve Pomeranz: Yeah. There’s a divorce, or a death, or something.
Terry Story: Babies born, or what have you.
Steve Pomeranz: What about this idea about moving to a better school district? Let’s talk about that. Is that something –
Terry Story: Yeah. That’s huge.
Steve Pomeranz: Yeah, so people are very sensitive to wanting to have their children in a good school district. I know you’ve done some work looking at whether, in fact, that decision is a benefit, and whether it’s really, this idea of a good school district, is overrated. What do you think?
Terry Story: No. I don’t think it’s overrated. When you take a look at people are making these decisions, it can cost you. To give you an example, Steve, in a good school district, the average home cost in July was $427,000. If you compare it to other school zones that aren’t as good, you’re looking at about $241,000. That’s a huge number.
Steve Pomeranz: Yeah. That is huge. All because, you think, attributable to the school district?
Terry Story: Absolutely. I can see it in my own area. Just the average days on market. People fight to get into certain school districts. Right now, school’s coming up and people are trying to get their contracts solidified so that they can get their kids registered for school. They see it big time for rentals too.
Steve Pomeranz: Okay. Here’s an interesting idea. Using these numbers, if a good school district will cost your 427, and a poor school district, let’s say, will cost you 241, and the cost of a private school is 25 a year, let’s say, for so many years, that may be a better deal, using these numbers, to go to the poorer school district and get into private school rather than in reverse.
Terry Story: I see that all the time. I’ll see people do that. They’ll go to private school, but then they really want to get into this one really good high school in our area. That’s when they’ll sell their house, better school district because they really want that particular school. You can argue it both ways. Then again, to be honest with you, the home appreciates so much better in the better school district.
Steve Pomeranz: Yeah. You want to take that into account. My guest, as always, is Terry Story. Terry is a 27-year veteran with Coldwell Banker located in sunny Boca Raton, Florida. She can be found at TerryStory.com. Thanks Terry.
Terry Story: Thanks, for having me, Steve.