Despite glimmers of hope coming from lower priced real estate, storm clouds continue to build in the luxury real estate segment. Prices are declining rapidly and luxury sellers in most markets should expect another 20% to 30% decrease in prices over the next 12 to 18 months.
The most recent estimate from NAR indicated that months’ supply of luxury inventory increased from 18 to 40 months since 2007. The actual number is much worse when you consider that luxury REO and foreclosures in process outstrip demand by 2 to 1. This means there is no end in sight for declining prices.
Given the daunting statistics, what should real estate professionals and asset managers do?
1. Get in front of the declining market and price property to move now.
2. Set a list price below recent comparable sales.
3. Make sure BPO’s are accurate and the provider is using real time information ideally from pending but not closed sales.
4. Let buyers know you are willing to work quickly to process the transaction.
I certainly hope the bank “stress tests” contemplated the magnitude of this issue.