Inventory at the high end of the market in River Oaks, which we define as properties priced at $4 million or higher, has climbed steadily since summer began. As of mid-September, the inventory is at its highest level ever.
Most strikingly, much of the inventory is top-heavy – that is, well above $6 million – and quite a few were just purchased in the past few years. Only one property is in a pending contract as of mid-September, and that one is at the very bottom of the price range.
Alas, too many of these high-end properties are not fully exposed to the open market, which has worked to the advantage of those that are being properly marketed.
Contrast the increase in inventory with the drop-off of sales closed over the summer months. While July saw a strong number of sales, and nobody expects blockbuster numbers in August in this price range, it is clear that absorption is moving in the wrong direction.
Looking at the chart of sales below, one might ask what there is to complain about. Sales numbers through August 2016 are well ahead of any similar period in previous years and, with the current pending contract scheduled to close in September, it seems likely that 2016 will be a record-breaking year for the high end of the market.
What gives pause is the fact that new pending contracts have dropped to nil (see graph below), and there is a sense of indecision as the fall season approaches. In the past, prior to 2014, the market could count on a year-end boost to sales numbers that would reliably result from bonus announcements. The environment has been different since the downturn in oil prices. National political campaigns this year have not helped the mood, either.
It has been instructive to note that, at lower-priced levels of the River Oaks market, new contract activity has been more brisk of late. But those sectors have seen several properties pop out of contract, which is their way of manifesting market tentativeness. Being more price-sensitive, in the lower price sectors, contracts are entered into more quickly once the list price is deemed close to market.
By contrast, at the high end of the market, contracts are usually entered into after a long dance. Much of the wrangling is sorted out before a contract is executed, and the closing process is often less fraught with contention.
The good news is that showing activity has picked up dramatically since Labor Day. In River Oaks the pickup has been at a faster rate than in other close-in neighborhoods.
Well-qualified buyers at the high end are back in town and looking at property. The key question is whether that viewing activity will translate into new contracts before November, or if there will be a lag until December and January as we saw at the turn of last year. Either way, the outlook is promising for for properties characterized by good value, barring unusual developments in the broader economy.