You would think that inventory at the high end in River Oaks had exploded out of control in the first half of 2017 (see chart River Oaks Inventory Over $4 million below). With nearly 30 houses available as recently as May, this sector of the market current has more for sale than even during the previous peak, which occurred during the Great Recession in 2009.
Add to this the dozen speculative new-construction projects in the pipeline, to be priced between $4 million and $8.5 million, and one could be forgiven for thinking it’s a terrible time to be selling a home in River Oaks in this heady sector of the market.
A closer look tells a different story:
Forty percent of the inventory in the top tier of the market is, in fact, priced above $8 million, where the air is very thin. And half of those are in the shadow market, which is to say that they are not on the MLS system. These are technically “for sale,” yes, but rarely actually sell until they are properly marketed publicly. Of the 24 houses for sale in this sector at the end of June, time on the market for 10 of them can be measured in years rather than days.
Looking closely at the seven houses priced between $4 million and $5 million:
- Three are attempted “flips,” in which the sellers made a recent purchase and are seeking significant profit for performing cosmetic changes. Two of these were purchased at the recent peak of the market in 2014 and have slim prospects of success right now at these prices. The third is not well done and overpriced by at least $1 million.
- Another three are houses whose owners have held firm, despite financial pressures to sell, and are sticking to their price in the hope that a sale will loosen up much-needed cash. These houses are respectively 1) in poor condition, 2) outdated and 3) very personalized. Our market does not care for any of those qualities at this price.
- The last house in this price range is new construction that is nearing completion but is not yet on MLS as we go to press.
There is clearly room for more inventory at this price point.
The other good news is that one of the characteristics of the River Oaks market is that it is supply-driven. Sales this year for the high end of the market are expected to match those of 2016, albeit with a flip-flopped seasonal pattern: 2016 had a strong start and dismal second half, while 2017 had a slow start.
The more houses on the market in any price range, the more qualified buyers will come out to look — even if many of the houses are dreadful or overpriced. However, at the high end of the market, the buyer profile is different. Prospects for houses in the $4 million-plus market tend to be busy with matters other than real estate. They do not spend Saturday mornings looking at real estate listings on their iPads. Awareness of a suitable property must be delivered to them. This is what we do.
When the marketing is done correctly, sales can take place quickly at the high end in River Oaks. Our latest statistics show that days on the market since last price change, for the seven properties in this range that have sold in 2017, is a mere 15 days.
The seven houses that sold in the first half of 2017 included:
- recent construction in the 3700 block of Del Monte, with stylish interiors and well-suited to a big family with children, despite the limited outdoor space.
- an updated 1920s vintage house on half an acre in the 3400 block of Del Monte, which could use some further updating.
- an updated modestly sized 1940s house on a half-acre on Inverness. The classically updated interiors managed to balance charm and convenience.
- another updated 1920s house on Brentwood, which had only changed hands a year earlier. There were multiple buyers for this one, which sold in a day at above the asking price ‒ a rare occurrence in River Oaks.
- a recently completed house on an oversized lot on Meadow Lake in the St. John’s area, designed by Andre DeJean.
- a large and unusually updated 1920s house on a half-acre in the 3300 block of Del Monte (are we seeing a pattern here?). This was a quick and timely sale to a local River Oaks buyer in need of housing. Priced at $8 million, and clearly not suited to everyone, it could easily have otherwise stayed on the market for many months.
- and, finally, our own listing on the Willowick curve. For a sales price of $7.5 million, this iconic Georgian house on more than two acres is scheduled to be extensively remodeled and expanded.
Showing activity, an excellent early indicator of upcoming sales, peaked in June of this year (see chart Over $2m Central-Houston Showing Activity below). This is highly unusual, coming at a time when the high-rollers are presumed to have vacated Houston for cooler places.
Despite the interest from the market, there has not lately been a corresponding uptick in new pending contracts, indicating demand unfulfilled. (See chart River Oaks New Contract Activity over $4m below).
We know who has been looking and with whom they work. In addition to marketing directly to the public, we maintain and exploit a database of house-viewing activity going back to 2009. We deal with agents working in this market as if they are our customers. We know them personally, and they respect us. The value of our networking abilities is probably the most important asset we bring to the table on behalf of our clients.
During the coming months the supply of new construction will begin trickling onto the market. Many of these new houses will be priced in the low-$4 million to mid-$5 million range.
So, if you are considering selling your property in this price range, we encourage you to contact us soon so that we may discuss how we can help you.
In our market it is always better to lead than to follow.