High-End Homes Market Update Going In To June 2022

2022 has continued on its frantic pace for the sale of high-end homes, but I suspect we'll see things begin to slow down and fall behind last year's record-setting numbers.

Mortgage interest rates have moved up significantly since the beginning of the year, so I wouldn't be surprised if the first quarter ends up being the strongest for sellers of homes priced above $900K.

In today's quarterly report on high-end home sales in Tallahassee, we will examine the supply and demand for these homes, report the average market time and percentage of asking price received by high-end home sellers, and then advise luxury homeowners on what to expect to see in the coming months and years as the market moves forward.

High-End Homes For Sale In Tallahassee

The following list of homes for sale includes all single-family detached homes priced at $800,000 and higher.

HIGH-END HOMES REPORT

2022 Ranks First For Luxury Homes Sold

The first graph in today's report was created from home sales in Tallahassee each year, beginning in 2003 and ending in April of 2022.

The graph ranks each home price segment from 1 to 20 based upon how well 2022 performed (with a rank of "1" if 202s had the most home sales down to "20" if 2022 had the fewest number of homes sold of all 20 years).

It's important to understand that each price segment includes all home sales from that price and higher, all the way to the most expensive home sold each year. So the easiest way to read this graph is from the bottom up.

2022 continues the feverish run on all homes, including the very top of the market. Here we see that 2022 is ranked #1 for all homes priced over $150K (that's nearly 80% of all homes sold). 2022's rank drops to "2nd-best year ever" when we look at all price ranges.

Homes priced below $100,000 are getting harder and harder to come by, so don't be surprised to continue to see it rank poorly in the future. The takeaway from this graph is that everything in the market has been hot in the first half of 2022, even luxury homes! Let's take a closer look at the very top of the Tallahassee housing market.

Our next graph zooms in on the top 1% of the Tallahassee real estate market.

Tallahassee Luxury Home Sales

This graph provides a great perspective on just how few 1% of all home sales really are. The dashed box highlights luxury home sales, and there were 15 homes sold for $1M or more thus far in 2022, accounting for just under 1% of all homes sold.

The 15 million-plus dollar homes sold were 25% more than what was recorded in record-setting 2021, and 88% more than those sold in 2020. If you are a luxury homeowner who has been thinking about selling, this graph shows that luxury home buyers were more active than ever early in 2022.

Highest-Prices Homes Are Selling

When we broaden our focus to the top 3% of all homes sold, we find that there was a tie with last year for these homes thus far in 2022.

The red bars measure sales in 2022, and we have determined that homes priced above $900K represent the top 3% of home sales by price. 2022 tied 2021 for homes priced from $900K, though there were 15% more homes sold that were priced above $950K than there were last year.

Mortgage Interest Rates Soar

I am asked often, "how are people paying for these ultra-expensive homes?" Tallahassee is still a government town and we just don't have the jobs (one would think) to support so many expensive home sales.

But that just shows you the power of low mortgage interest rates. The following graph tracks the funding of all luxury home sales from 2003 through 2022, and it has been the super-low mortgage interest rates driving the high-end homes market.

This graph shows the percentage of luxury home buyers financing their purchases. The solid green line shows the percentage of people who financed their luxury home purchases each year. With relatively few sales in the top 1%, it's not surprising that the results bounce around from year to year. The red arrow shows that 88% of homebuyers who purchased from $900K and higher financed their homes in 2021, though that percentage has fallen to 70% in 2022.

If rates are going to stay well above 5%, I'm forecasting a significant decline in homes priced above $900K. As the buyers who need to finance a luxury home purchase can no longer afford to do so because of soaring mortgage interest rates, then we'll see a serious cooling off in the luxury homes market.

How would this year look if the majority of the 70% of all luxury home buyers went away? It is my expectation that buyer erosion will continue to expand if rates do not push back below 5%.

With rates now double their low from December of 2020, the cooling of the high-end market is upon us. It was not long ago that we had a glut of high-end homes, but the low mortgage interest rates brought to the market to counter the impact of COVID have done their job. Home affordability is declining, and we'll see it first (and greatest) at the high-end of the Tallahassee real estate market.

Time On The Market When Selling A Luxury Home

The next two graphs required a lot of work to prepare and are not merely an automated MLS report. We had to scrub a lot of duplicate (and even quintuplicate) entries in order to find out how long it has been taking to sell luxury homes in Tallahassee, and I can tell you it is a lot longer than what MLS reports show.

In the graph above, all luxury home sales are segmented into 2 groups each year. The blue bars measure all luxury home sales where the homes were sold by the first broker each seller hired to sell the home. The red group shows those that sold with a subsequent real estate company.

The first thing to note is that high-end homeowners that successfully sold were on the market a lot longer than what unaudited Realtor reports would show. The MLS allows its users to manipulate listings to always appear fresh, but the reality is that many have been listed numerous times.

To give you an idea of how significant this is, the MLS tells me the average time on the market for $900K+ homes that sold was 28 days (and a median time of 25 days), yet our work reveals it was much longer than that.

Considering the red bars in the graph show the number of days with the second broker (or third, or fourth), can you imagine if I had gone back and added the days on the market from the brokers that failed to sell these homes?! So not a month to sell a high-end home, but many years unless you market your luxury home correctly and sell it with the first broker you hire (and it would have sold in a single month). And that doesn't even address all the homes that have failed to sell.

As you can see in the graph, sellers who successfully sold in 2021 with their first real estate broker took just under a month to sell, while those that sold with a second (or later broker) took nearly 4 YEARS to sell (meaning in addition to the months or years they had been listed with another broker).

If you are planning on selling a high-end home, make the effort to choose the right agent who can provide an accurate valuation of your home and get you sold for top dollar. It does not take four years to sell a luxury home in Tallahassee.

How Much Are High-End Home Sellers Getting?

Comparing the final sales prices to initial asking prices, we see that high-end home sellers did not receive the amount they had hoped for when they hired their listing broker. Consider this a cautionary note, don't let the highest bid on your home come from your listing agent! Instead, talk to several top agents before deciding who you will trust to market and sell your high-end home.

As with the previous graph, this graph shows fresh listings in blue (homes listed with a first agent), and stale listings in red (those listed with a 2nd or later agent).

In 2022, luxury home sellers who sold with their first agent received 94% of their initial asking price (after just one month on the market), while those listed with a second or later agent only received 91% of their first asking price with their final broker. You can bet it was significantly lower than what they were asking with their very first broker.

If you want to sell a high-end home, make sure you choose the agent that spends the marketing dollars necessary to attract ALL potential buyers to your home. As you can tell from this graph, it really does matter.

High-End Homes Sales In 2022 And Beyond

I really had expected the luxury homes market to cool in 2021, but the decline in mortgage interest rates helped more buyers finance luxury homes. Now that mortgage interest rates have shot up far higher, we have seen the start of cooling high-end home sales. The Fed has indicated there will be several moves higher this year in order to combat the rise in inflation that pushed to 7% last year, though even without further rate hikes, high-end home sales will slow down.

In my last luxury home sales report, I had forecast high-end home sales to be strongest early in 2022 and weakest by the end of the year. With mortgage rates having shot up higher than forecast by Freddie Mac, my forecast is all but assured for 2022.

If you have a luxury home to sell, call us immediately. We can help you determine the best asking price for your home, pre-market it to all current luxury home buyers, and help you get top dollar for your home before the luxury homes market goes cold.

Recent Luxury Homes Sales

The following table shows all luxury homes sold (priced $800K and higher) in Tallahassee going back to 1991. You can sort the table by any field in the table heading.