Luxury Insights

Wealth rebuilding bodes well for luxury market

U.S. Millionaires' Ranks jumped 16 Percent in 2009, Study Says

"The millionaires’'club in the U.S. grew by 16 percent in 2009, following a 27 percent decline in 2008," according to a new Spectrem report. Affluent households -- those with net assets of $500,000 or more -- increased 12 percent to 12.7 million. At the same time, the number of households with a net worth of over $5 million rose 17 percent to 980,000. Finally, the magazine reports, "The average age of a so-called affluent investor is 58, compared with 62 for a millionaire and 67 for an investor with more than $5 million."  Value of a household’s primary residence is not included in the calculation.

Know Your Competition

Whether you are a new agent wanting to break into the luxury market, or an experienced and successful luxury agent, it can be useful to identify your current competition and evaluate their strengths, weaknesses, and positioning relative to your own. 

Not only is this useful in establishing your competitive advantage and positioning, it can also be a good way to identify what tools and tactics are working in today's market, and the agents with whom you need to be networking. 

To identify your competitors, pull the listing and sales in the top price ranges for your market area(s) and see which brokerage firms and agents are most active.  This will give you sense of the key players in the market as well as their relative market share. Calculating market share both by transactions sides and dollar volume can be useful too.

Knowing who your competition is isn't enough.  You need to know what they are offering.  Here are some questions to consider as you evaluate your competition: 

• Is their market share increasing or decreasing?  
• Are they targeting a particular niche? 
• Do they have a clear strategy?
• What is their positioning? 
• If they had a tagline or motto, what would it be? 
• What three words best describe them?
• What are their strengths and weaknesses? 
• What are doing well? 
• What are they doing poorly (and does it matter)? 
• What marketing tools and tactics are they using and what is most effective for them?
• What do their websites and marketing materials look like?

Of course you will also want to evaluate your own competitive positioning on a regular basis. 

Home Staging and Interior Design Trends for 2010

Many of you know Kay Green and Ashley Jennings from our past Leaders in Luxury events. 

And we all know the importance of good staging.  So, if you are looking for ideas or info on current trends, jump on over to the Kay Green Design site. 

You'll find some good information, including copies of their recent presentations at the International Builders Show as well as seminar handouts and articles.

Where's the green?

2008 Median Household Income by County

Download the full graphic from the Census Bureau here (PDF 574k)

Russian billionaire backs out of deal, loses $50 millon deposit

Back in August of 2008 Russian billionaire Mikhail Prokhorov put the French mansion Villa Leopold under contract for a record $750 million.  In March of last year he tried to back out of the deal and wanted his $50 million (€40 million) deposit back. 

Yesterday the courts ruled in favor of the owner Lilly Safra, who can not only keep the €40 million but was also awarded damages of €1.5 million.  Ms. Safra indicated that she would be donating the money to charities.

The Times Online has more details here

What Nobody Teaches Realtors: Why Some Ads Work and Others Fail

Read the full article on Broker Agent Social

Analyzing and Understanding your Market: Real Buyers

In the previous post in this series we looked at Days on Market.  In this post, we'll be looking at the Number of Closed Transactions, which we like to call the Number of Real Buyers.

The number of sales (Closed Transactions) in each price range is the same as the number of buyers who actually purchased homes and closed on them.  When it comes to psychology and communicating effectively with clients, the term "Real Buyers" is more powerful. 

Here are some quick tips on how you can use this important measure in your communications and negotiations:

1. Creating Realistic Expectations with Number of Real Buyers:  If you list a $750,000 house does your seller believe that there are buyers on every corner?  Usually the seller overestimates the demand in the market. If you will track this statistic and make a simple change in terminology, it may help your seller recognize that buyers for high-priced homes may not be waiting on every corner.
   
   Be sure to talk about REAL BUYERS as opposed to closed transactions or homes sold. Using number of real buyers instead of number of sales with your sellers can be a dose of reality. “In the last 90 days, in the price range where you want to list your home, there have been six real buyers or two per month. And it has taken an average of 175 days of marketing to find each of those buyers.” That’s powerful information!
2. Negotiating List Price with Number of Real Buyers: Let’s assume you have a seller who wants to list at just over $750,000 and you think the list price needs to be a bit under $750,000. You can say to that seller, “In the last six months, in the price range where you would like to list your property, there has been one real buyer per month. However, if we keep it under $750,000 we are in a price range where there have been two buyers per month. We’re doubling the odds of selling your home by listing it under $750,000.”  When you can justify WHY you are recommending a particular list price and show the seller specific statistics regarding the alternate price ranges, you are educating your seller to the reality of the market. You are also more likely to receive a properly priced listing.
3. Negotiating for Your Buyer with Number of Real Buyers: You can also use this tool when you represent the buyer. It’s very effective when presenting a contract to be able to show the listing agent and/or seller that, “There were only ten real buyers in this price range in the last month. My buyer is qualified, likes the house, and is ready to purchase. With so few buyers out there, doesn’t it make sense to do this deal?”

Next: List-to-Sales Price

Analyzing and Understanding your Market: Days on Market

In Part 1 of this series, we covered the basics of segmenting your market by price and the important metric or measure that you will want to look at for each price segment.  In this post we'll be looking briefly at the Days on Market measure in a bit more detail.

It is generally true that more expensive homes take longer to sell.  That said the dynamics of your local market may be unique and it is important that you know them.  Keep in mind that markets change over time.  You need to keep on top of these changes--identifying and understanding these changes when others don't can be profitable for your and your clients!

Here is a sample chart showing Days on Market for a few segments of an imaginary market.

Two of the most obvious ways to use Days on Market are in negotiating PRICE and LISTING TERM. 

In the imaginary market above homes in the $700k-$799 price segments are taking almost twice as long to sell as homes in the $600-$699 price range.  If you have a home that you think should be priced in the upper $600's but the seller thinks the low $700's these average time on market numbers might be powerful in your pricing negotiations, especially when paired with the Number of Closed Transactions (aka Real Buyers) for each price range, and when the owner considers the property's carrying costs.  

Also, knowing that properties in the $800k-$899k price range typically take about 178 days to sell, you can be sure that if I am listing a $875k home I am going to want to negotiate at least a six month (180 day) listing term to give myself a fair shot at getting it sold under these market conditions. 

Next: Number of Closed Transactions (aka Real Buyers)

Analyzing and Understanding your Market: Intro

Competent agents understand their markets.  For the best and most successful agents this market expertise leads to competitive advantage.  This is especially true in the luxury market where clients are often analytical folks like corporate executives, entrepreneurs, and independent professionals.   

Here are a few basic tips on analyzing your local market:

1. Define the geographic area(s) that YOU serve.
2. Pull the top ten percent (by sales price) of properties sold in the past 12 months.
3. Segment this list by price.  Break the properties sold into logical price bands.  You should have an intuitive sense of where the natural price segments are in your market.  It might look something like this:
4. 1. $500k-$749k
   2. $750-$999
   3. $1M-$1.49M
   4. $1.5-$1.9M
   5. $2-$2.49M
   6. $2.5M+
5. Look at the following metrics for each price band:
6. 1. Sales to Expiration (percent that actually sell vs. expiring)
   2. Average Days on Market
   3. List-to-Sales Ratio (sales price is what % of list price)
   4. Approximate % of new vs resale.  This may not be available in your MLS, but give it your best estimate.
   5. Number of Closed Transactions (these are what we call REAL BUYERS)
   6. Listed vs. Sold (aka the Odds of Selling a Property)
   7. Listing Term that your competition is getting in each price band.  Again, this will require you to make your best estimate as to an average.

You probably already know these stats for the market as a whole from your standard MLS reports. That's great as it will give you an immediate sense of how each price segment at the top of the market differs from the overall market.  Since most reports, especially those you see on TV and read in the press, tend to look only at aggregate market trends across all price points, you and your clients might be surprised how different conditions are in the various price tiers at the top of the market. 

This can give you very important information and competitive advantage as you are:

• Deciding which segments to target
• Positioning yourself in the marketplace
• Establishing client confidence
  
• Setting the expectations of buyers and sellers
• Negotiating a listing term
• Pricing the property
• Negotiating a purchase offer

More on the individual metrics for each price band in upcoming posts...

Hong Kong Real Estate on Fire: IPJ

Hong Kong property company Sun Hung Kai Properties Ltd. announced it had sold 900 apartments over the weekend for a total of HK$4.2 billion ($540 million).  Not bad for a couple days work. 

The full story on the International Property Journal website.