Louisville’s 2016 Luxury Real Estate Market Trends

Q3 2016 Market Stats by Jon Mand

 

View the latest report, along with previous quarters, at louisvillemarketreport.com

 

Greg: Welcome to this edition of the Louisville luxury home podcast series, brought to you by Jon Mand with Lenihan Sotheby’s International Realty. Jon, good to see you. How are you today?

Jon: Doing great, Greg. Thanks.

Greg: We just recently had the end of the quarter, and I know you are something of a number’s cruncher, always looking to learn more about the market. Did you bring some numbers with you today?

Jon: Absolutely.

Greg: What are we going to look at? You want to look at the overall market, you want to look at them segmented?

Jon: Yeah, we’ll just start with the overall market, maybe then run through year to date, then we can drill down on the quarterly results.

Greg: Sure. We’re looking at the greater Louisville market, correct?

Jon: That’s correct. Yeah.

Greg: The overall market from zero to, whatever our highest sale is. How are we doing?

Jon: The market is doing well. It’s been a very steady year overall. We’ve seen single digit gains in terms of year over year performance in the number of homes that have been sold. Through the end of September, the Louisville market is up about 6.8% in terms of transactions.

Greg: For Louisville, single digit gains is kind of what we expect right? We’re not like some of these coastal cities that people might read about in the New York Times or LA Times, or Florida I guess. We’re not going to be doing, usually double digit returns or gains.

Jon: Sure, yeah. Keep in mind that this single digit gain that I’m talking about is just the number of transactions, not the price of the homes that are being sold. Just in terms of the number of sales we’re up 6.8%, which is certainly a solid year over year improvement because last year was a very good year for the Louisville market.

Greg: That’s what I recall. That’s interesting that we’re doing that much more in numbers of inventory. What do you have on pricing?

Jon: Well you mentioned inventory so I’ll jump to that real quick. That is something that’s been a little bit of a hindrance to some larger growth for our market in that the number of homes that available for sale is actually down about 6.5%, so kind of mirroring the increase in the sales. We actually have about 6.5% fewer homes available for sale.

Greg: In your view, does that put us at a good level of inventory? Did we have too much last year or are we actually more the stable market now?

Jon: Well it depends on the price segments. If you look at the entire market, inventory levels are tight, as a statistical analysis of it. However if you start drilling down and look at $400,000 and above price point, we actually have a few more homes on the market this year than we did last year. That segment of the market is up about 2% in terms of the number of homes that are available for sale, and in terms of the number of transactions that have occurred that segment’s actually up about 11.3%, so the high end segment posting some good gains year over year and actually has a little bit more inventory, which I’m sure is helping to fuel that increase sales activity.

 

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Greg: When you’re looking at this kind of analysis, this kind of data, do you mentally break it down into segments so that you look at the people who might be buying $400,000 and up and they’re going to be coming from say the $250,000 to $400,000 range, then you go look at that range to see how one affects the next. Is it sort of like a chain reaction?

Jon: It is absolutely a chain reaction. That’s something that is always fascinating to me, that in order for us to sell a million dollar house there have to be first-time home buyers that are active in the market to fuel this chain reaction that goes through all price levels. The first-time home buyer market sometimes it’s easy to, for us that are focused on that East End niche in the higher end price points in the Louisville market, it’s sometimes easy for us to get a little bit disconnected from that, but it is vitally important to fuel growth throughout all price ranges.

Greg: I think that you actually broke down some of the numbers even further. You probably go into more than anyone I know. You look at it in really small segments.

Jon: I do, yeah. Just drilling down, so the numbers we just talked about were the performance for the year to date through September 30th. I think it’s interesting to break these out by quarter though and compare a little bit smaller time frame year over year. As I looked at the third quarter, so July 1st through September 30th of 2016 and compare that with last year, the numbers are pretty interesting, particularly for the high-end segment. The first two quarters of this year, the high-end really just kept pace with what was going on last year, almost to the exact number of sales that occurred in the first half of 2016.

During that time the lower price points did pretty well and were charging along at again 8% to 10% year over year growth. The third quarter saw a reversal of fortunes here. The overall market slowed down a little bit, or the lower price points, and the high-end just took off. We had 32% more transactions occur at $400,000 and above this year in the third quarter than we did during the same time last year, which is a big year over year increase. Then leads itself once you average that out, that’s why the market is up 11% for the year to date is because we did 32% more transactions just in the last couple of months.

Greg: That’s a huge number. I’m having trouble getting my mind around that jump because it’s just within that quarter. I’m curious when you look at numbers, and let’s look at all three quarter so far in 2016, I’m curious how you look at it. Is it the trend for the year or did something happen in that quarter, or is it just an anomaly, people got tired of sitting on the sidelines for six months? A lot of people came into the market because summer time, get their kids into the school system. How do you look at that?

Jon: I think you could certainly draw all kinds of conclusions or inferences from the statistics. I try not to get too caught up in some of that and just really pay more attention to what the numbers are saying. The trend is certainly … Well let me qualify it one step further. The sample sizes that we’re dealing with on the high-end segment obviously are much smaller numbers in our Louisville market too, so these percentage increases can swing pretty dramatically depending on how much we’re slicing and dicing this data down to a specific price range in a specific area or neighborhood; you can get down to pretty small numbers. For instance, the million dollar plus sales, through the end of September we’ve had thirty eight. Last year there were forty three through the same time period. Five sales doesn’t sound like much difference year over year. However again, you do the percentage difference and five sales out of forty three is a pretty good number.

Greg: Maybe I get caught up in over slicing and dicing, so I’ll take that into consideration. Walk me through a little bit on volume and activity levels. I know you’re a total pro so I’m guessing you came with numbers for average pricing and average price per square foot, and a little bit more detail like that?

Jon: Yeah, absolutely. Instead of the average, because it can get skewed pretty dramatically with a couple of very high-priced sales, I really drill down on the median prices per square foot that we see during a quarter. Just comparing the last three months through September 30th, with the same period last year, we saw some good price appreciation this summer in the Louisville market. Overall, at all price points, homes were up about, a little over 6% year over year in terms of the median price per square foot that they were selling for.

The high-end segment was pretty close to that. It was just over 5% year over year price appreciation, so very respectable gains. Then of course, as to be expected, those gains aren’t necessarily evenly distributed throughout the market. We’ve had some areas of town at the high-end that saw as much as 10% year over year price appreciation, and that would be that Highway 60 corridor, out Shelbyville Road, Lake Forest, Landis Lakes, all the way out to Locust Creek, Notting Hill. The other areas we saw come in second place would be South Oldham, which actually saw nearly 10% price appreciation over there. We did have a couple of losers year over year but again, it’s something that we want to track over a couple of quarters because these sample sizes are very small, so just some differences in buyer preferences for a couple of months makes a big difference here. We saw prices slip just a little bit along that Highway 60 corridor, inside the Gene Snyder, so this would include Anchorage and Middletown, coming in that way towards Hurstbourne, saw a 2% dip, so not a huge drop there, but again, small sample size.

The Prospect area, outside of the Gene Snyder, so in Prospect we had prices dip about 2% as a median price per square foot. Actually North Oldham County dropped about 4% in terms of the median pricing, so again, we’ll want to watch them for a couple of quarters before we get too excited about anything. It looks like the buyers may have been getting a little bit of a deal in those markets for the past few months anyway.

Greg: There are two points I’d like to make about this statistic. For me, this is the most important for a homeowner to … Like when people think about their home as an investment, which sometimes it is, sometimes it’s not, it can be an emotional purchase, but this is the number that tells you how the market is viewing this part of town and the value of the home. Sometimes looking at median prices can get thrown off by what’s selling around you, but this to me, tells you the buying public views this general area at this dollar per square foot. It gives you a better idea of the movement and the market.

Then something also that I was … I’ve had people ask me because I do a little number crunching, not nearly as much as you do, and people ask, “Why do you do this?” It’s so important, I think, for buyers and sellers to know these real estate market movements. A lot of buyers go out blind right? They just want to go look at homes, but you know what’s going on in the market and you know if an area is depressed, you might have a little bit more leverage for your client. If you’re a seller in a hot real estate market, you might have a little bit more leverage. There are pockets where Louisville is not one homogeneous real estate market. You need to know what’s going on, like you said, in Prospect outside the Gene Snyder. It’s so valuable to your clients that I’m surprised more people don’t take the time that you take to crunch these numbers.

Jon: Most people look at it from the thirty thousand foot view in that they’ll read the local newspaper and say, “Oh, the market’s gone up 3% this year,” or “The number of homes sold has increased by 6%,” or whatever the global statistics are, and that’s what most people think is good enough for them. At the point you’re engaging in a transaction as a buyer or seller, it makes a lot of difference if the area you’re buying in has dropped 4% in price year over year or if it’s up 10% in terms of negotiating strategy and just the wisdom of investing or not investing in a particular neighborhood. It is very important. Most people won’t spend the time to do it, but that’s why I’m here.

Greg: That’s right. That’s why they hire you. You were telling me about a situation not too long ago, and we’ll keep names out of it, but someone is looking at a higher end price point and you were trying to tell them that in that area, in that price, things were moving pretty quickly and they might have, maybe not have believed you 100%. Then everything they looked at sold in the day or the day after they looked at it.

Jon: Exactly. I had a shortlist of three homes. We had one that sold the morning that we went to look at it, and another that sold, or received an offer the afternoon after we looked at it. Again, it’s completely geographically driven. We could have gone to some other parts of town, and looked at three homes, and they’ll probably be here ninety days from now. It just depends on where you are. Being able to communicate that to out-of-town buyers that are coming in and trying to get up to speed on the market, to be able to say, “Hey this segment, this sub-market of Louisville is very hot. Here’s what the inventory levels are doing. Here’s what the prices have been doing quarter by quarter,” and just being able to help inform them, get them up to speed and have the data to back it up so they know it’s not me just trying to talk them into making a quick offer on something, but being able to support it and quantify it and say, “Here’s exactly what’s going on.” I think it is hugely beneficial for them.

Greg: I certainly agree. If someone is listening and they want to get a hold of your information, read about your statistics, just talk to you about what’s going on in Louisville, what’s the best way to find you?

Jon: The easiest way, is my phone number, 502-417-2837, or you can just go to my website, jonmand.com. All of my contact information is there, and there’s also a quick link to the blog where all these articles and statistics get posted regularly.

Greg: Sounds good. I’ll see you on the next one.

Jon: Great. Thanks.