Down the Upstairway

escher-stairs-6306396Just so we don’t dilly-dally too long and lose the plot… let’s pick up the thread of the storyline from the last few weeks.  Goes sorta like this:

Sometimes different markets develop right alongside each other. They reflect very different characteristics and levels of activity even while co-existing in the same time and space. Joined at the hip. But a hip that’s been slightly dislocated.

So far in 2013, different markets have played themselves out in simultaneous fashion.  Those involved as a buyer or seller with just one level may have a skewed perspective of the others. Realtors working across the full range of the monopoly board usually have a better view of the market’s multi-dimensional nature.

We’ve been talking about the bifurcation that currently exists between homes listed higher and lower than $800,000.  A rather broad-brushstroke of a concept to be sure – but the activity level, the price pressures, the available inventory all discernably seem to fork in and around the $800k mark.

Go to https://tombrezsny.wordpress.com/ to catch up on those previous columns.

Today’s premise is that there’s actually a third level in our ménage-a-marketplace.  One that starts with listings above the $2 million mark.

A quick background check informs us that up until 1997,  Santa Cruz County had no million dollar market. Those “kinds” of homes didn’t exist here. Maybe in Carmel or Pebble Beach. But not in the funky little beach gulag of Santa Cruz.  The tech boom of the late 90s changed all of that.   And the bubble days of the 2000s carried it along further on a rising tide.

While we haven’t had a long history in the highest-end of high-end homes here, we’ve had an enough of an active chapter over the last 15 years to see that magic million dollar threshold grow appreciably higher.  Active enough to generate a series of $5m, $6m, $7m sales.   Active enough to be able to step back, size things up and talk about the high-end as though it were really part and parcel of the larger marketplace.  Like it really belongs here in Santa Cruz.

When a property is listed at a price that has never been achieved before in SC County – say $15 million – it’s difficult to say that there’s an actual market for it.  Tough to make any assumptions about who’s going to buy it. Or how long it will take to sell. Or whether it will sell at all.

I can hear those immortal words floating on the ether right now “All it takes is one”.  Of course it’s remotely possible any of us could win the Big Spin tomorrow and become that very one ourselves!

So it’s 2013. Where is the high-end at?  Above a million dollars and up to around $1.5 – $1.8m there has been a real, actual market dynamic at work. Giving us enough transactions and comps and activity to discern and detect trends and recommend realistic list prices and purchase prices to prospective Sellers and Buyers.

But from there up…things change.  Somehow past $2m, things have ground to a noticeable and abrupt …not quite halt….but definitely a grind.  One that’s unlike anything we’ve seen for quite some time.   We’d have to go back to the early days – 1998 – to find a drought period this long.

Let’s look at a few market stats for homes listed above $2m.

Halfway through 2013, the MLS shows that 10 properties above $2m have closed. One at $2,550,000. The other 9 between $2m and $2.2m.  And nothing sold above $2.55m.

At the present moment, there are two properties in escrow above $2m.  None listed above $3m.  We won’t know what these two properties sell for until when and if they actually sell. If one or both do close they won’t close higher than the $2’s.

We have 52 active listings on the market above $2m as of yesterday.  Some…many…most are racking up significant days on market.  These 52 listings range from $2m to $15 million – with a sizeable number falling in the $3m – $5m range.

So what should we make of this high-end slump we are in?  Certainly after 6 months, with more than 50 properties on the market in the upper echelons – some properties should be selling for $3m.  Or $5m. Or more.   They did last year. And the year before. And the year before that.

I’m open to suggestions. Next week we’ll talk about possible reasons for the conspicuous lack of activity.

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