2008 Year End Summary

If you thought the market for luxury homes in Durham couldn’t get much worse, you were… right.

Durham finishes the year with 34 sales of homes that listed for over $700,000, although two of the four that sold in the 4^th quarter closed for less than that threshold.  In 2007 there were 38 sales, in 2006, 31 and in 2005 there were 30. So, if you wanted to spin it positively, you could say it was an average year for Durham and it actually increased its share of the luxury market by about 1% compared to Wake, Orange and Chatham Counties.

The inventory of luxury homes in Durham is down.

The number of homes currently on the market at this price point in Durham is down somewhat at 70 homes.  There are several  factors contributing to this. The first is that sellers are lowering their expectations and homes that might have gone on the market two years ago at $700K or more are coming on at lower prices. The second factor is that there have been a fairly substantial number of homes that were taken off the market. It’s a little difficult to track this but I did come up with a number of about 50 by looking at the homes that expired or were withdrawn and did not either sell or get re-listed during the last 15 or 16 months. Finally, in this kind of climate, builders are much less likely to build large expensive homes on speculation.

The overall regional home market has slowed substantially.

To add some additional perspective, I looked at all sales in Durham. In 2008 there were 3,345 sales in all price ranges compared to 4,654 in 2007 and 4645 in 2006. In other words, the total number of sales was down about 30%. This overall drop is consistent to what was seen in the other 3 counties that I looked at, Wake, Orange and Chatham.

Wake, Orange and Chatham also had dramatic drops in “luxury” sales. Wake went from 526 sales in 2007 to 421 in 2008 for a 19% drop. Orange went from 172 sales to 91 for a 49% drop and Chatham fell from 62 sales to 40 or about  a 35% decline. The total decline for the four counties was about 26%.

The data I reviewed also showed that Durham’s relative position among the other 3 counties had not changed much either.  The overall market share Durham holds is about 18% in numbers and about 14.7% in dollar volume. Its share of the luxury market in 2008 was 5.8% of the numbers and 6% of the dollars.

Orange and Chatham still overachievers in the luxury home market.

I tried my best to create a graph out of the following chart but its just easier to understand  in chart format.

Interestingly, Orange County’s share of the luxury market dropped from about  22% in both number and dollars to about 15%. The pick up in share went primarily to Wake which went from about 66% to 72% which put it in line with its overall market share of 72% of the numbers and 74% of the dollars.

At 22% Orange County’s luxury segment still is more than twice its overall share of the four county housing market which is 6.7% of the numbers and 8.5% of the dollars. Chatham is also a luxury overachiever at 3% of the overall market in numbers and 4% of the dollars compared to almost 7% of both numbers and dollars for luxury homes.

The average sales price of homes in Durham during 2008 was about $197,000 which was down about $4,000 from 2007. This compares with averages in Wake of about $265,000, in Orange of about $332,000 and in Chatham of about $335,000. Not all this difference in the average comes from the luxury end of things. Durham’s share of the market for homes under $150,000 is almost 26% compared to 67% in Wake, 5% in Orange and 2% in Chatham.

Potential for growth in Durham’s luxury home market.

For Durham’s luxury market to grow to match its overall market share among the 4 counties in 2009 it would have to pretty much triple the number of sales in this category to at least 100 sales without much overall growth in the market.

Is this possible?   I think so, for two reasons.  The best opportunity to take share is from Wake County because a high proportion of the luxury homes sold in Wake are new homes. Builders will be reluctant to jump back into the market until they see a definite positive trend while Durham has inventory and could see homes that haven’t sold in the last couple of years come back on the market quickly.  More important though is that home sellers in Durham must become more sophisticated selling their product, which includes emphasizing a revitalized community.  They must also direct some of that marketing effort at Wake County agents.  There are more of them and they get more buyers but they have lots of reasons not to show homes in Durham, some of them good, but most related to the lag between the reality of Durham and its image.

Note: The statistics here were derived from mls searches that any REALTOR in the Triangle can do.  The searches were done on December 27 so may vary slightly from searches done now. MLS searches will not include sales between private parties that did not involve a REALTOR. Please contact me with any questions or concerns.

jay@jayzenner.com