Luxury Homes Report January 2022

2021 was a record-setting year for luxury home sales, stimulated by low mortgage interest rates and a healthy supply of high-end homes.

Mortgage interest rates have moved up significantly, to rates last seen nearly two years ago. Will this be the beginning of the end of the blistering pace of luxury home sales?

In today's quarterly report on luxury 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.

Luxury Homes For Sale In Tallahassee

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

2021 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 2021.

The graph ranks each home price segment from 1 to 19 based upon how well 2021 performed (with a rank of "1" if 2021 had the most home sales down to "19" if 2021 had the fewest number of homes sold of all 19 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 sale in 2021. So the easiest way to read this graph is from the bottom up.

2021 continued the hot run on all homes, including the very top of the market. Here we see that 2021 is ranked #1 for all homes priced over $100K (that's more than 93% of all homes sold). 2021's rank drops to "2nd-best year ever" when we look at all price ranges.

Homes priced below $100,000 would have been ranked #1 too if there were more homes available within the lower price ranges. The takeaway from this graph is that everything in the market is hot right now, even luxury homes! Had there been more homes available, it is likely 2021 would have topped the rankings chart.

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 minuscule 1% of all home sales really are. The dashed box highlights luxury home sales, and there were 57 homes sold for $900K or more in 2021, accounting for 1.09% of all homes sold.

The 57 luxury homes sold were 50% more than what was recorded in record-setting 2020, and 128% more than those sold in 2019. If you are a luxury homeowner who has been thinking about selling, this graph shows that luxury home buyers were more active than ever in 2021.

Highest-Prices Homes Are Selling

When we broaden our focus to the top 3% of all homes sold, we find that there was a dominating performance by these homes in 2021.

The red bars measure sales in 2021, and we have determined that homes priced above $700K represent the top 3% of home sales by price. 2021 was well out in front of the previous two years for homes priced above $700K, up more than 63% last year. I think it's safe to say that there was no sign of cooling off for luxury home sales in 2021.

Mortgage Interest Rates Ease Lower

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 2021.

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.

Why does this matter? Well, if 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 88% of all luxury home buyers went away? It is my expectation that buyer erosion will occur when mortgage interest rates move up another half percent or so.

With rates still very low, this remains the best housing market ever for selling a luxury home in Tallahassee. Buyers are out shopping. Both those with cash and those who are financing the sale. Take advantage of these conditions and get your luxury home sold before market conditions shift in the other direction.

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 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 luxury 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 the luxury homes that sold was 67 days (and a median time of 35 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 2 months to sell a luxury home, but many years unless you market your luxury home correctly and sell it with the first broker you hire (typically within 7 months). And that doesn't count 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 7 months to sell, while those that sold with a second (or later broker) took six additional months to sell (meaning in addition to the months or years they had been listed with another broker).

If you are planning on selling a luxury 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 a year (or more) to sell a luxury home in Tallahassee.

How Much Are Luxury Home Sellers Getting?

Comparing the final sales prices to initial asking prices, we see that luxury 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 luxury 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 2021, luxury home sellers who sold with their first agent received 91% of their initial asking price (after 7 months on the market), while those listed with a second or later agent only received 91% of their first asking price with their new broker. This means that the percentage received was far lower than the initial asking price they had set with their first broker.

If you want to sell a luxury 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.

Luxury 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 we are seeing mortgage interest rates move to higher ground, I suspect this will be 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.

Freddie Mac has forecast rates rising to an average of 3.7% in 2022 (compared to the 3.1% rate we are seeing today). That's enough of a rise to cool the luxury homes market but not enough from stalling sales completely.

Because mortgage interest rates will rise gradually through the year, I expect luxury home sales to be strongest early in 2022 and weakest by the end of the year.

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 returns to normal.

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.