As we pass Memorial Day, the Summer solstice and Independence Day, the dog days of summer are upon us. We’ve also had more consecutive days with rain than many of us can remember. But even if drought fears have receded a bit, sales of luxury homes in Durham have been sparse and July and August are not typically strong months even in the best of times.

Last year in the second quarter 15 homes in the $700,000+ category where sold in Durham. This year it was 7 and the dollar volume was down 49% from $14.7M to $7.5M. Since there were 11 sales in the first quarter, the year-to-date comparisons are not so dramatic; 21 sales in 2007 compared with 18 this year and dollar volumn down just 18.8%.

Both Orange and Wake Counties saw significant drops in the sales of luxury homes in the same pattern. There are two differences, however, between Durham and the other two markets. The first is that Durham listings in this luxury category represent only 8.4% of the homes while it has over 17% of the total listings in the three counties. Second, it had only 4% of the sales in this category in the second quarter. With 86 homes on the market there is enough inventory to satisfy the demand for more than the next two and a half years.

These statistics shouldn’t surprise anyone in the real estate community that has been following the luxury market in Durham for the last several years. What does surprise me is that there doesn’t seem to be any change in the marketing practices employed by the listing agents that are active in this segment in Durham. Durham is undergoing a revival led by events downtown many of which have been mentioned in posts on this site. The quality of the luxury housing stock as well as convenience to shopping, entertainment and the major employment centers, in most cases is as good or better than anything in Wake or Orange counties. The difference is that Durham is dealing with an out-of-date image that holds back sales. Sooner or later that image will catch up with the facts on the ground and the market will improve. Listing agents that market the entire experience of living in Durham and not just the bricks and mortar of their listings will be the first to benefit and help move the whole market forward.

From a marketing perspective the long term solution is to do a better job of promoting Durham and its unique and growing list of assets. The Newcomer’s Guide to Buying Luxury Real Estate in Durham available through the link in the sidebar is my attempt to provide one arrow in the quiver necessary for this effort. It may be a little too personal to plagiarize verbatim but I hope every agent who lists in this market creates something similar or an improvement upon it and distributes it widely.

However, market share and long term strategies to promote Durham’s renaissance are irrelevant to the family with a home currently on the market. There are strategies that are not widely applied today that break with tradition as well as employ new technology to better position and promote a listing. The other report available on the sidebar, The Durham Luxury Home Report 2008, describes some of the details about how to do this. Both reports are offered with no obligation.

Barbara Corcoran, according to Fortune Small Business via CNN.Money.com is the self-proclaimed queen of New York real estate. Corcoran founded the Corcoran Group 35 years ago and sold it in 2001 for $66 million. To put it mildly, she is colorful. The profile reports that when sales of her business book Use What You’ve Got were disappointing she renamed the paperback version If You Don’t Have Big Breasts, Put Ribbons on Your Pigtails…obviously not concerned that the males left in the industry might not look for her advice. The gist of the article is that her new ambition is to become a TV personality. Indeed, she’s a regular commentator on the Today Show on NCB where I saw her this morning.

The segment this morning was addressing the issue on everybody’s mind these days about buying and selling in a down market. There is no question that Ms. Corcoran is up to the role of providing an interesting segment on TV but there are some reasons to question some of the advice. First of all, all real estate markets are local and general advice from somebody with 35 years of experience in one of the most atypical markets in the country should be examined closely. But she is thought provoking. (more…)

One section of the Newcomers Guide to Buying Luxury Homes in Durham specifically addresses some of the technical issues that can vary from state to state. The most important of these is the concept of agency. Until a few years ago, all real estate agents technically represented the seller in a transaction, even when that agent was engaged by the buyer. The real estate commission decided that buyers deserved equal representation and formally established “buyer agency” with its own set of practices and requirements. All licensed agents are licensed to represent either buyers or sellers and under certain circumstances they can represent both in the same transaction. When an agent or broker (all licensed agents in North Carolina are now brokers) signs a listing agreement with a seller, or a buyer agent agreement with a buyer, they assume some important obligations to protect their clients’ interests. When interviewing buyer agents it is important to be careful about what information you share with them about your motivations or financial situation until you actually sign an agreement. An agent may show you homes without a buyer agent agreement in place, however, at that point the agent is technically representing the sellers and should use any information they have learned from you to get the best deal for the seller, not you. This troubles some buyers who do not want to commit to a buyers agent that they may have just met. However, most buyer agents will work with a client with a short term agreement or readily release a buyer from an agreement if some conflict develops. Per the Commission regulations, one of the first things any agent you talk to in a
“meaningful” way should do is explain these agency rules. This is not only a NCREC regulation, it makes sense and protects the buyer’s interests.

One of the first things I like to do with a new buyer client after discussing agency is review a flow diagram I put together that illustrates all the steps and different professionals that are typically involved in the home buying process. This only takes a few minutes but it makes subsequent communications much better and minimizes surprises in the process.

I began this blog a few months ago after watching the luxury market in Durham for several years. For most of that time I was a licensed agent but not actively seeking clients.  For almost two years I was helping manage another firm and my bosses wanted me to focus on that and not my own clients.   I left that firm and did a renovation of an investment property that I sold last year.  As I refocused on what it would take to market homes in the luxury segment it became clear that there was nothing wrong with the “inventory” in Durham. The real problem was the Durham “brand.” I began to feel strongly that reviving the luxury market in Durham was going to require that sellers in Durham and their agents adjust their marketing to address this directly. The Durham Luxury Home Report suggests a number of ways to do this.

As the blog started to appear in the search results for key phrases, I realized that potential buyers were going to find the site too. I needed to add some emphasis to why this is such a great place to live.  I started posting more about the things that make it desirable and made available another report for Newcomers to the Luxury Market in Durham.

The information needs of sellers are different than those of buyers.  Straddling the line between providing candid marketing advice to sellers and selling the community to buyers is difficult.  Ironically, I think it reflects one of the things I love about this community. We have a remarkable capacity for arguing out our problems in public. For the last few years, the finer neighborhoods in Durham have been one of the region’s best kept secrets. It’s time for us marketing real estate to help share with the world what is great about this community.

After college and teaching for several years I decided that I wanted to try the corporate world. When I went shopping for appropriate business attire, a close family friend advised that when I bought a suit to always ask the merchant to throw in a shirt and a tie. Sometimes it worked and sometimes it didn’t.

By that time I had already bought my first home and between then and now I’ve owned about 15 different personal residences. Not once did I question the commission that the real estate agent got in any of those transactions. I really can’t explain why not. With that many transactions a little negotiation on a few of them might have bought a lot of shirts. But I probably wouldn’t have negotiated for shirts either if my friend hadn’t suggested it. (more…)

Originally the link in the left sidebar to the Durham Luxury Report for 2008 took you to a landing page which captured a name and email address that had to be verified before access was given to the report. The system provides statistics on who has shared this information and downloaded the report. There was a small handful of people who shared their email addresses or an invalid one that never downloaded the report. When I added the second report, the Luxury Homebuyers’ Guide, the link I provided on the left went directly to the report and did not require an email address or verification. Without any promotion at all this report has been downloaded twice as much as the other in just a few short weeks.

Since my primary purpose is to get this information about turning around the luxury market in Durham into people’s hands, I’ve changed the link on the sidebar to take you right to the report which is in PDF format and can be downloaded, printed, saved or just read online. I should warn you, this is not a simple topic and the report is long…not book length…but not just a few paragraphs either. So, if you passed up getting the report because you didn’t want to share a valid email address, now you don’t have to worry about that and you can be anonymous. Click here or on Luxury Marketing Report in the sidebar to get your copy.

The Herald-Sun offered Paul Andrews the opportunity to talk about why he and his wife chose to live in Durham and how they feel about the decision now. Paul  moved here from the Northeast almost 20 years ago.  His “Other Voices” column on the editorial page of today’s paper adds to the chorus of people who have reflected on the developments that have occurred in the last twenty years and those underway now that are making this a pretty special place to live. It is truly heartening to see more people actually admitting that they enjoy living here and that it’s not quite so fashionable to take that cynical “only in Durham” attitude during any discussion of the city’s problems. (Although, I did hear exactly those words from a Durham native in a meeting in Raleigh this weekend.)

It’s true that all real estate markets are local. We always have the choice to spin the glass as half full or half empty…or we can just keep our mouths shut. No one will ever accuse me of being a “new age” type but I do believe that the momentum for positive community development and even good government rides on the tide of positive community feelings. If any group has a vested interest in seeing this happen it should be real estate marketers. Thanks to Paul Andrews for his contribution to a positive message. For my contribution see the sidebar for a newcomers guide to luxury homes in Durham.

In its April 28th edition, Business Week reports on a study in the Proceedings of the National Academy of Sciences that may require re-thinking a little bit the economic theory of the diminishing marginal value of the dollar and price elasticity. In the study the subjects who were students were placed in an MRI machine and given sips of red wine. One of the wines was presented twice, first as a $5 per bottle wine which was its real price and then as $45 per bottle wine.

All the subjects said that they preferred the “more expensive” wine. This was mirrored by increased activity in their prefrontal cortexes. In other words, the perception created the reality. The fact that they thought they were sipping a more expensive wine really was more pleasurable.

The article also quoted Baba Shiv, an associate professor of marketing at Stanford, where the study was conducted. “There’s a temptation among marketers to keep reducing prices,” he said. “We’re saying be careful before embarking on that strategy.”

In an earlier post here we speculated how the sellers of a luxury estate near Lake Tahoe arrived at the nice round number of $100M for a price. Wouldn’t it make more sense to drop the price by a thousand dollars and make it eight figures instead of nine? Not necessarily. Isn’t it interesting that that the price might be part of the product and not just related to the product for the same reason that the points on a buck’s rack are important to a trophy deer hunter. When I see a luxury home priced a thousand or a hundred dollars less than a round number, for example, $899,900 instead of $900,000, I alway think of the Wal-Mart smiley face with the “falling prices” sign in their TV ads. The more unique a luxury home is, the more difficult it is to objectively determine a “market price” and until the right buyer comes along even deep price cuts may have little impact. Unlike most segments of the housing market, price is less a factor in the marketing mix for luxury homes.

In my conversation with a mortgage executive in Cary last week (that’s not him in the picture,) he questioned me about the wisdom of focusing on the luxury market in Durham. I believe he used the expression “tilting at windmills.” Why focus on one of the few stagnant segments of what, until recently anyway, has been a robust market? Is Durham generally still stuck in a decades long ditch that it won’t get out of in my lifetime? Unfortunatly, this reflects a widely held view around the Triangle that makes climbing out even tougher. It was hard to argue that Durham was ready to lose its rough and ready reputation when the day before our lunch I could see the police helicopter hovering for hours over a nearby neighborhood while police were trying to flush out the young thug on parole who was eventually arrested for murders of a Duke student from India and the UNC student body president. Like the still festering lacrosse case, this brings unwanted worldwide negative attention. Still, these are my reasons for sticking with Durham… (more…)