Luxury Homes – News 08/31

Luxury home prices are rising; luxury home prices are falling; home sales are up; home sales are down

Given the massive contradictions in headlines in the news lately, it is hardly any wonder that both buyers and sellers are becoming increasingly confused and choosing to wait on the sidelines. One thing is becoming clear – any real estate agent that wishes to stay in business needs to start focusing on a specific niche or go the way of the dinosaur. Home sales in England are at the lowest point since the Land Registry began collecting figures, yet the hoopla surrounding an average price rise in June seems to have persuaded the newspapers that the market correction is over and all is “back to normal.”

I believe that attempting to create this illusion is widening the gap between the perceptions of buyers and sellers to the point where the market is in danger of stalling completely in Britain. Barely 40,000 houses were sold in July. There are around 40,000 real estate agents still standing in the UK (an educated guess – there are no official figures and the market is almost completely unregulated). You do the math. Buyers hear “prices are falling,” and sellers hear, “prices are rising.”

There are substantial differences between various local and niche markets currently. Some may have hit bottom already like Las Vegas luxury condos, others have only just begun their correction, and the level of bank owned properties being held off the market is substantial and skewing whatever statistics are available. This a selection of recent headlines. If ever there was a time to do due diligence on the state of the local or niche market you are involved in, now is that time.

The US and Canada

Toll Brothers Loss Widens as Recession Weakens Luxury Demand. “Toll Brothers Inc., the largest U.S. builder of luxury homes, reported a wider loss for the third quarter as the recession weighed on sales.” Bloomberg

Builder Toll Hikes Some Prices As Market Improves. “During the downturn, desperate home-building companies have cut prices dramatically and have thrown in everything from free vacations to below-market mortgage rates as enticements to get buyers to the closing table. Now, those days might be numbered. CNN Money

The interesting thing to note is that both of the preceeding articles were written after Toll Brothers’ last press release announcing losses of $472 million – and both of them have since been edited to reflect a more upbeat tone. It seems that some one has some clout with these publications.

Canada posts record July for real estate sales. “Record July sales in Metro Vancouver and Victoria helped lift British Columbia’s real estate market into balanced conditions between buyers and sellers across the province, the B.C. Real Estate Association reported Friday, compared with last summer’s slide into buyer’s territory.” The Vancouver Sun

Canada Mortgage and Housing Corporation: July New Home Construction in Vancouver down 73%. The latest figures released by Canada Mortgage and Housing Corporation (CMHC) reveal that housing starts continued to trend lower in July. During the last month, foundations were poured for 516 new homes, down 73 per cent from July 2008. CMHC

This is a trend in the US market also – the widening gap between new home sales and existing home sales. Calling a market rebound on the fact that existing home sales rose when new build fell yet again is at best, misleading. Typically, new home sales are around the same volumes as existing home sales. I expect to see existing home sales continue to rise at the cost of new builds as the inventory of foreclosures and other-wise financially distressed property begins to move at lower prices than the new builds.

Great Britain

London’s Luxury Homes Sell at the Fastest Pace Since July 2007. “London’s luxury homes this month sold at the fastest pace since the market started to slide more than two years ago as overseas buyers took advantage of a weakening pound,” Bloomberg

First house price rise for two years. House prices rose for the first time in two years this summer, according to the latest in a series of positive reports on Britain’s recovering property market. Daily Express

Why the price of an average house is not going up. Average house prices indexes may be on the rise, but the price of an average house is not. , unless I very much mistake it, is the message from the latest Hometrack survey, which in August measured the first rise increase in house prices since July 2007. Brickonomics

House prices rise in the UK – Much ado about nothing. Sales volumes are bouncing around at the lowest levels since the land registry started keeping records in 1995. Around 40,000 houses were sold in July – down from a peak of 135,000 houses. Property investment

Once again, the difference between average house prices on widely varying sales volumes are not going to be an accurate comparison. It is understandable that the media has an interest in talking up the market, but I still feel this could backfire and create an even bigger issue. Unless we return to the halcyon days of 125% mortgages that is. Somehow – I do not see that on the cards for the foreseeable future.