2016 Louisville Real Estate Market Recap

2016 Q4 Louisville real estate market report by Jon Mand, Broker - Lenihan Sotheby's International Realty

In this edition of the Louisville Luxury Homes podcast Greg and I break down the latest statistics for the Louisville market in 2016. Of course, we pay particular attention to the performance of the high-end segment (homes $400,000+) and compare and contrast results by price range in the various East-end sub-markets.

Overall, we once again saw solid gains across the market through year-end resulting in an 8% increase in the number of home sales. Continuing the past couple year’s trends, the high-end segment (homes $400,000 and above) outperformed the broader market and posted a 12% increase to 1,303 homes sold during the year.

However, further analysis of the high-end sales activity revealed that the gains in sales activity all occurred between $400,000 and $700,000. The number of homes sold at $700,000 and above actually decreased 13% from 2015 levels with the ultra-high end of the price scale showing the biggest declines year-over-year.1,303 homes sold during the year.

However, price appreciation continued across the market with homes across the metro area posting a 5% gain over last year, resulting in a median value per square foot of $111.66; another record high for the market. The high-end segment also set a new record of $171.08, albeit with a very modest gain of .6% over last year. These price increases mark the 5th consecutive year of price appreciation, a trend I expect to continue as inventory levels of available homes for sale remain low across the area.

The brisk pace of home sales continued in 2016 with the median days on the market at, or near, their lowest levels in 10 years for the high-end segment and the overall market (71 days and 29 days, respectively). Inventory levels of homes for sale have stayed at historic lows with a 2.3% decrease across the market compared to 2014. However, availability of high-end listings continued throughout the year keeping the sales momentum going with an 2% increase in the number of listings above $400,000 compared to 2016.

For more stats download the full 2016 Q4 PDF report here.

Download current Louisville real estate market report by jon mand, Broker - Lenihan Sotheby's International Realty
Download current Louisville real estate market report by jon mand, Broker - Lenihan Sotheby's International Realty

The full transcript of the podcast is below or you can listen with the media player.

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

Jon: I’m doing great, Greg. Thanks.

Greg: It is early to mid-January which means that you’ve probably been busy the last week or two crunching 2016 market stats for us. Is that correct?

Jon: Don’t you know it.

Greg: I do know it. You brought me a pamphlet, right? This is like eight pages of detailed numbers. You are the man to go to this time of year and I know that you’ve pulled out a couple … Not a couple, a lot of information. We can’t possibly go over it all.

Real quickly, if someone is listening, which different areas did you go over and where can they find the whole report? Where can they find this kind of information if they want it from you?

Jon: The best place would be LouisvilleMarketReport.com, I update that site quarterly. I put down all of the statistics for the major … Basically, everything from The Highlands going eastward through Jefferson County and Oldham County.

I segment those obviously by the different neighborhoods and those areas, as well as pricing, so I look at the overall market and then I also pay particular attention to just what that high-end segment is doing in each of those areas.

Greg: Which is a great comparison because you can see, like you said, the overall market. If someone’s living in 40207, for instance, it gets real easy on your site to pull that information out and see how their neighborhood is doing compared with the overall market.

It might give them some insight. You’re better at reading the numbers than I am, but it might give them some insight on maybe how to proceed or what the market actually did last year.

Jon: Absolutely. It gives the sellers and buyers the opportunity to see what’s the inventory doing, what are buyers doing in that market? Is it trending up or down in terms of the number of sales, and importantly, what’s the pricing doing in each of those areas?

Greg: All right, why don’t you hit us with some highlights from 2016? You want to start with the overall market, or do you want to go into some of these smaller areas?

Jon: Yeah. Let’s focus on the overall market and leave some of the details on these neighborhoods to the visitors on the website.

Looking back on 2016, it was a very good year historically for the Louisville real estate market. The number of transactions that occurred across our entire metropolitan area increased 8%, so very solid year-over-year growth. Again, I do segment these based on high-end activity versus the overall market.

Home sales that were $400,000 and above actually saw a nice uptick to a 12% increase year-over-year.

Greg: Do you know? Was that a steady increase? You and I talk about numbers every so often. It seems that maybe at some point the high-end market wasn’t doing as well as we had hoped or that it had been the year before. So can you tell, is that sort of a continual uptick or does it go month by month or quarter by quarter?

Jon: When we checked in back the middle part of last year, actually the high-end market was down just slightly up to that point. I think that was in mid-June, so we saw some really good activity in the second half of last year, the third and fourth quarters that really made up for that kind of lackluster start to that segment and finished the year, as I said, up 12%.

Greg: Do you dig into that high-end market any further? Are you pretty comfortable with the $400,000 and up or do you like to break it down because in our market … I know we don’t have a lot of multi-million dollar properties, but there’s a lot above $400,000 so do you look at it in different segments sometimes?

Jon: I do, absolutely, and that’s interesting as you go around and talk to agents in this segment, and you say, “Hey, the high-end was up 12%,” that’s not necessarily the experience that a lot of agents that work this end of the price point have had the past year.

As you drill down a little bit further on the pricing… so we typically segment $400,000 and above as kind of the high-end portion of the market. That market comprises about 7% of the Louisville sales activity, so a very small sliver, but as you dig into that section and kind of further slice and dice the data, you find out that basically $400,000 to $600,000 did very well.

Once you get at $700,000 and above, that segment was actually down for the year, and down pretty significantly. Homes that were $700,000 and above, the number of sales dropped 13% in 2016 as compared to the year prior.

Greg: Okay, so it pays to really get into the weeds a little bit and break the numbers down. Because if you say someone do you have a high-end home, you should do X, it really depends on where in that high-end home segment they fall.

Jon: Yeah, exactly, and that’s where we always say one-size doesn’t fit all, so it’s great to read an article that says the market’s up 8% or the market’s up 12%, but there’s a lot of variations that occur across the market depending on the exact price point we’re talking about, or even the neighborhood.

We had some areas of town that saw decreases in the number of transactions. Oldham County, particularly, at the high-end was impacted by this. Both north and south Oldham saw decreases in the number of transactions last year, and then in some areas, actually pricing slipped a little bit in different neighborhoods around town for that high-end segment, so it does depend kind of on the neighborhood and the exact price of the property.

I think the big take away is, you know, we say the high-end segment, $400,000 and up, was up 12% in terms of transactions, but really it was that $400,000 to $699,000 segment that was up, and then once you hit $700,000, sales dropped off double digits.

Greg: You were talking about pricing just there a little bit. What is your favorite way of looking at pricing of a home? Do you look at median? Do you look at average? How do you compare that from year-to-year to see if, not only the number of transactions is going up or down, but the volume of property being sold.

Jon: I like to look at the median price per square foot, and that’s I think makes it a little bit more applicable to the listeners out there, the readers of my website, that they can take the median price per square foot, and quickly figure up how many square feet are in their house, and do the math that way.

I use median instead of average because there are some outliers in this market that can greatly skew those average numbers that you often hear quoted, so I try to focus on median. I have found it to be a little bit more stable representation of what the market’s doing.

When I ran those numbers for 2016, overall we saw the median price per square foot across the entire market at every price point, every sale that happened in Louisville, we saw an uptick of about 5% in terms of pricing, which is fantastic.

The high-end, that $400,000 and up segment, remained pretty static. It was a pretty flat year. We had a small gain, just a little bit over a half of a percent in that $400,000 and up pricing.

Greg: Okay, and so what other major kind of statistics do you look at when you’re breaking these numbers down? Do you look at how long it takes homes to sell or how long they stay on the market on average, or median? I guess, so same question: what’s the best way to measure market timing?

Jon: The median days on market is a great measure of that, and then obviously just looking at the inventory that’s available. We calculate that number in months, the inventory.

Those are great numbers. I’ve got those details on the website as well, suffice it to say I think its old news now, but the inventory levels in Louisville are very tight, nearly across the market and consequently the days on market are down considerably, near historic lows in terms of how long properties are staying on the market.

Greg: What does that tell you? If you have a listing or someone approaches you and they say, “I know that the market’s tight,” and then their home doesn’t sell. Their home doesn’t sell, but they’re unwilling …

I’m kind of setting this up. If someone’s really unwilling to do the upgrades that need to be done to get the home sold, that kind of tells them something, right? There are buyers out there looking for specific something, and if it’s there, the homes are leaving the market pretty quickly. This is kind of information that you crunch on a regular basis that should help sellers, right?

Kind of get an idea of what they need to do to their house or how to get in the right position to sell?

Jon: Yes, absolutely. At the point you’re drilling down to an individual house and trying to get some actionable information here in terms of how to position it or what to expect, then I’d really switch over …

We’ve talked about annual numbers. I’d really switch over and focus on those quarterly numbers that I post on LouisvilleMarketReport.com. There you’re gonna find much more up-to-date statistics. You’re looking at a three-month period compared to the same time frame the year before, and it’s giving you information on inventory, the number of sales, the pricing, and you can compare different neighborhoods around town as well.

I think that that’s probably a better judge if somebody’s trying to decide how to position the property or what to expect. I would switch over and focus on those quarterly numbers rather than trying to look at the annual statistics, since it’s such a long time horizon there.

Greg: The market conditions can change throughout the year enough you like the quarter … When you’re dealing with an individual house, that’s a better way to deal with it?

Jon: Yes, yes.

Greg: Okay, so we’re gonna wrap up on time here pretty soon, but if you have a couple other highlights …

You have so much information, we can’t possibly go through it all, but were there one or two findings that kind of surprised you… One or two areas that traditionally do well that maybe were a little bit slower? Or maybe reversed. A couple of areas that are usually a little slower that did better than you thought?

Is there something you want to surprise the listeners with?

Jon: Well, I think the biggest surprise, again, is drilling down on that high-end price segment, looking sales above $400,000, and just finding that $700,000 and up, that that market really slowed down on us this past year.

You know, as you look at potential reasons for that happening, obviously 2016 was an election year in case you didn’t hear anything about it.

Greg: I think I saw a commercial or two.

Jon: Our clientele, obviously, at this price segment are gonna be disproportionately impacted by tax policies, by business regulations, and that sort of thing, so with the uncertainty that comes along with an election, it’s very typical for us to see a slow down in that high-end segment. Because these are discretionary purchases. People typically don’t have to buy a million dollar house. It’s on the want list, not the need list necessarily.

Those people often sit on the sidelines in election years until there’s some certainty in the market on what to expect tax policy-wise and regulation-wise.

Nothing that I see that’s a cause for concern in that segment. We saw very healthy new construction activity at the high-end this past year, so those aren’t represented in the numbers we’re quoting of existing single-family homes.

Greg: I was gonna ask about that. If a house gets built from scratch, that typically doesn’t show up on the MLS?

Jon: That would not. That is correct. Typically, we’re gonna see just existing single-family home sales in the statistics through the Multiple Listing Service. Again, nothing that is cause for alarm from my perspective, just kind of typical election year dip at the high-end as people sat on the sidelines and waited to see which way the pendulum swung there.

Our experience has been, regardless of the outcome, just the certainty in the market of what to expect gets people the confidence at this end of the market to come back in and make those purchasing decisions. I would expect 2017, we’ll see another great year. Much as we did following the previous election cycle.

Greg: One quick question before I let you go, and I can’t say I’m letting you go, it’s your podcast, but …

You said that the under $600,000 or under $400,000 segment was really strong. Do you ever see that sometimes those need to sell first and then the market lags behind, and then once that segment sells, then you see the next segment or the next segment up sort of have a little bit of a push as people start moving up the ladder?

Jon: Yes, I mean that is very much the case that we need to have first time home buyers purchasing homes that allow those sellers to move to the next tier, and so on and so forth, so it cascades through the market all the way up to the high end.

It’s great to see a very healthy market from a $100,000 up to $699,000. That segment did very well, so it all bodes very positively for 2017 for that high-end homeowner.

Greg: Perfect, so one more time, if people are interested in catching some of these numbers or getting a hold of you, what’s the best way to get all of this?

Jon: LouisvilleMarketReport.com. It’s gonna have all the statistics and my contact info on there, and those get updated regularly. You can sign up, get an e-mail every time it comes out, a nice little PDF report that kind of summarizes everything.

Greg: Perfect. I’ll talk to you next time.

Jon: Excellent. Thanks Greg.