Too Much Inventory Pushing Prices Down
October 15, 2007
September marked the fifth straight month that the number of DFW luxury homes listed for sale has hovered around 2,400 to 2,500 homes. The low point in this range, 2,420 homes, recorded at the beginning of May, was 39.3 percent higher than at the same point during the previous year. The high point of just over 2,500 residences was pretty much the rule through June and into July, according to MLS data gathered by the North Texas Real Estate Information Systems Inc. These figures represented increases of about 30 to 40 percent over the previous year inventory levels.
At the end of September, about 2,455 luxury homes were listed for sale, which was a 23.2 percent increase in the number of homes listed for sale at the end of September last year. Sales, however, increased only 1.7 percent over the past year, from 174 homes to 177 homes, which probably caused the change between the average prices paid this September and September a year ago to edge slightly into negative territory.
The average price of DFW luxury homes sold during September decreased by .1 percent when compared to the average price of similar homes sold during the same month a year ago. While it is too early to know if this is the beginning of a fundamental shift in overall market conditions, it does point out that this market probably has reached the saturation point at which prices will begin to fall unless the number of homes being sold increases and/or the number of homes listed for sale decreases.
This notion is underlined by the supply of existing luxury homes, relative to September sales, soaring to 13.5 months. This represents a 73.1 percent increase from 7.8 months supply of homes listed for sale in August, and is considerably more than double the 5.5 months supply generally considered to be the boundary between a buyers' market and a sellers' market.
For the past quarter, however, appreciation in luxury home values continued to be seen in most price segments. The weighted average square foot price of homes sold for $500,000 up to $750,000 during the three months ending in September was $155.08, a 1.0 percent increase over the price for which similar homes sold during the same period last year, while the value of homes priced at $750,000 up to $1 million dropped by 3.4 percent to $197.41 per square foot. Homes priced at $1 million up to $1.5 million sold for $259.26 per square foot, up 7.1 percent from a year ago. Homes selling for $1.5 million up to $2 million sold for an average $308.64 per square foot, an annual increase of 5.5 percent. The average square foot price of homes selling for more than $2 million increased 1.1 percent.
The 76 average days required to sell a DFW luxury home during September was up 22.6 percent from the 62 average days required to sell a luxury home in August and 10.1 percent from the 69 average days needed during September last year.
Market Highs And Lows
For the fourth month in a row, the DFW luxury home enclaves with the largest annual increases in their three month rolling average prices ending in August were the Fort Worth / Arlington area and the Park Cities of Highland Park and University Park. Within the Fort Worth / Arlington area, the average luxury home price increased by 10.1 percent. In the Park Cities, the average annual price increase was 6.3 percent.
There was no change in average prices in the Southwest Collin / Southeast Denton Counties area. The Northeast Tarrant County area had the least price increase. Homes there on average sold for 1.0 percent more than during September last year.
The Park Cities saw their supply of luxury properties listed for sale nearly double, from 4.4 months in August to 7.2 months in September. The Northeast Tarrant County had the second lowest inventory with 7.9 months supply of homes for sale, a 38.6 percent increase over August's 5.7 months supply.
The Southwest Collin County / Southeast Denton County area again had the highest inventory in September, where the supply of luxury homes for sale jumped to 22.5 months. The Fort Worth / Arlington area again had the second highest level of inventory, with a 20.3 months supply of pre-owned luxury homes available for sale. |
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