Alison & Raul Elizalde

Sarasota Realtors

Alison and Raul Elizalde understand the Sarasota real estate market like nobody else. Their unique understanding comes from experience, specialized research, and deep community involvement. Their commitment to client service earned them the prestigious 5-Star Award given to the best real estate agents in Sarasota. Click here to learn more about Alison and Raul.

 

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The Advantage of Luxury

By some measures, luxury properties are doing better than the rest of the market. Going into a recovery, higher-priced homes should do well.

(By Raul Elizalde, 7/06)

Readers familiar with my research might remember a “Luxury Index” I developed a couple of years ago. Contact me if you would like an explanation of how I calculate it.

 

This simple index is helpful to gauge the health of the market for luxury properties in Sarasota. When the index is high, homes are listed well above the average sold price, which may create a glut of high-ticket properties. Conversely, when the index value is low, the offering price of new properties coming to market is close to the average sold price. So far this year, the index has steadily declined. This suggests that the luxury home market has moved to a balanced state.

 

 

As the graph above shows, the Sarasota real estate market has quickly moved from an excess of higher-priced listings at the beginning of 2005 to a virtual equilibrium by April 2006. What this reflects is the fact that the vast majority of new listings is priced at the lower end of the price ranges while the inventory level at the higher end has not increased as much. Since April, the index has moved up a bit as high-ticket sales have slowed, but it is still at a healthy level.

 

 

Going back to 1999, the 12-month average of the Luxury Index shows a clear cyclical pattern coincident with the Sarasota property market expansion of 2000-2002, the slower period of early 2003, the hyperactivity of 2004 and the downturn starting in 2005.

 

Why does a high-priced property index reflect the condition of the general market? When the market is going up, newer properties come to market at prices above average, giving the appearance of a glut in the high-price brackets. In reality, these newer properties get absorbed quickly as the rally continues and hits new highs, so it doesn’t get out of control – until it does. The large spike of December 2004, in retrospect, should have served as a warning (see my January 2005 Newsletter: “Last Call for Sellers”). During a downturn, an excess of lower-priced properties come to market faster than they can be absorbed. In comparison, luxury homes sell at a better clip and that activity pushes the luxury index lower.

 

Now that the Luxury Index has hit a very low level it is tempting to call for a market bottom, and I discussed that possibility last month. My personal feeling is that if we have not reached a bottom, we are very close to it and sellers may well see better demand sometime during the first half of next year. In the meantime, buyers are in the middle of one of the best buyers’ markets in Sarasota in a long time.

 

When it comes to knowing the Sarasota real estate market, Alison and Raul Elizalde have the expertise and knowledge to help you see where you stand when negotiating your real estate transaction, whether you are buying or selling a property. Our track record, added to the unsurpassed reputation of Michael Saunders & Company as the premier real estate company in Florida's Gulf Coast, give you the peace of mind you deserve.

Call us today at 941-350-7904 for a consultation, and visit our website, www.SarasotaProperty.info, for monthly updates on the Sarasota real estate market.