Friday, December 13, 2002
Is Carlisle choking on million-dollar homes?
An article in the Mosquito last spring (see "Buyers wanted for Carlisle's million-dollar houses," March 1, 2002) identified a problem with the mix of single-family homes on the market in Carlisle: too many were listed for more than $1 million, while too few were offered in the mid-range. Three real estate brokers gave their perspectives on where the market was going. We decided to go back and see how the market fared this year, how predictions panned out, and what might be in store for the near future.
Million-dollar home sales slow
Statistics provided by Coldwell Banker Hunneman indicate there was a slowdown this year. Only sixty-two homes closed in Carlisle between October 1, 2001 and September 30, 2002, versus seventy-one in a similar period the previous year. The expected slowdown in sales of million-dollar homes did not immediately materialize. In fact Carlisle had its best year for million-dollar home sales with eighteen sold, versus a previous 2001 record of fifteen. As a result, the average sale price in Carlisle rose from $589,000 to $695,000.
But what of the twenty-one homes over $1 million listed on the Carlisle market in January 2002? A comparison of the January 22, 2002 listings with those of November 22, 2002 indicates that one-third of these million-dollar homes are still seeking buyers. All are new homes owned by developers. While low-interest rates may help, it is a reality of the development business that time on the market eats into profits.
The current available inventory of million-dollar homes for sale approaches eleven months. A recent Boston Globe article ("It's lonely at the top," October 27 ) points to a nation-wide trend toward slowing sales on the high end. "Sellers of luxury homes from New York to Seattle can expect to wait months or even years for buyers." Carlisle may be experiencing something similar, as a million-dollar home has not sold since October 1.
Carlisle Assessor John Speidel has already seen the effect the slowing market for million-dollar homes is having on developers. He notes that "new construction is way off — half of what it's been." Lots in Great Brook Estates and on Oak Knoll Road now average nine months on the market. He says developers often expect to make $150,000 to $200,000 on a million-dollar home, so "they're not dropping prices much because their margins aren't high enough." Speidel also said some developers have (unsuccessfully) applied for tax abatements on unsold houses that were 100% complete. "Once they start paying those tax bills, their margins are quickly gobbled up."
Mid-priced homes needed
Another problem with the real estate market in January was the small number were 100% complete. "Once they start paying those tax bills, their margins are quickly gobbled up."
Mid-priced homes needed
Another problem with the real estate market in January was the small number of listings under $1 million — only three. As a result, buyers who couldn't afford the million-dollar range were being turned away frustrated. As the year went on, more medium-priced homes came on the market, and they sold, on average, within two months, much more quickly than expensive homes. Nineteen homes sold in the $700,000 to $1,000,000 range, and twenty five in the $400,000 — $700,000 range.
The problem of inventory mix persists. Current listings (November 22) show 16 homes over $1 million (one of these is over $2 million) out of a total listing of 28. Though only 28.8% of the homes sold over the past year were over $1 million, 57.1 percent of the homes currently on the market are above this price. As a result, the average list price overall is $1,164,592 and the average time on the market has stretched to more than four months.
Where are prices going?
The market slowdown has put pressure on prices. Several new properties have seen reductions in asking price, including properties at Hart Farm (was $1,550,000 now $1,475,000), Carriage Way (was $1,395,000, now 1,389,000), and Buttrick Lane (was $1,149,000, now 1,079,000). While these reductions aren't huge, they do reflect a buyers' market, one in which sellers must price conservatively. Marty Nestor of Coldwell Banker Hunneman Senkler says, "Asking prices are starting to come down a little bit. Where it used to be typical to look at a comparable sold property and add a bit to the price, we're now projecting a price about the same, and it may soon be a little bit lower."
"Prices have definitely softened," agrees Phyllis Cohen of Barrett and Company. "I don't think they're rising much, and may be leveling off." She notes that a slower market has taken the pressure off buyers to make quick decisions, so a competitive asking price is important. "Buyers are taking their time. They're more cautious and educated."
On the other hand, she doesn't see signs of distressed selling, as happened in 1989. "There's no panic. There's respect — buyers aren't trying to bottom-feed" as they did in the late'80s downturn, when "prices dived below the mortgage values on some homes."
Cohen notes that in spite of the soft economy, there are still people moving up in the executive ranks looking for large homes. "We're still getting showings, but it's not booming" compared to the past few years when Carlisle was hot. "This year may be more customary — the way real estate usually works." In addition she notes that the uncertainty that held buyers back after 9/11 has persisted with the lethargic economy, the weak stock market, and the threat of war with Iraq. Nestor agrees: "The stock market has had a big impact. Losses make people much more risk-adverse." On the other hand, says Cohen, interest rates "have been so good for so long. They let buyers afford more than they otherwise could, and this has been a real big help."
How has Carlisle fared versus other towns?
According to Nestor, the hottest communities are those within twenty-five minutes of high paying jobs. As building vacancies along Route 495 attest, many jobs have been lost that fed the growth of communities along this belt, and Carlisle has felt this effect. Another group of buyers, according to Nestor, prefers Concord and other communities convenient to jobs in Boston and along Route 128. Among these buyers, Carlisle is viewed as an alternative for those who want more house for the money. So far prices in Concord, Lincoln, and other Route 128 communities have remained high, and this has encouraged buyers to look in Carlisle.
Banker and tradesman offers other reasons for Carlisle's attractiveness ("Luxury Home Prices Hold Steady," December 2). They quote Judy Moore, president-elect of the Massachusetts Association of Realtors, "Homebuyers choose Carlisle and Lincoln because they can get more land with their home purchases. . . The communities are close enough to Boston, but far enough away that they feel rural, and they are generally well-managed towns that have great reputations." She adds, "In Carlisle there is a lot more land available than other communities in Boston."
But if buyers stop buying, competitive advantage won't matter much. Speidel follows the real estate markets around the country, and sees little cause for optimism. "The New York area is really hurting," he says. People he keeps in touch with in Weston, his former employer, are also concerned that high-end sales are drying up. "Last month there was only one million-dollar home sold in Weston, and that's unheard of. This could be the start of the bubble bursting, but then I've been saying that for a while."
Another factor that may dampen demand for new homes in Carlisle is competition from owners reselling large two-to-five-year-old homes as job losses in Massachusetts necessitate transfers. These homes usually sell at lower prices than new, and have other advantages as well. "They can be very inviting," says Nestor. "Many are nicely decorated with beautiful landscaping" not typical of new construction. In addition, "They are in established neighborhoods. No one wants to listen to construction vehicles for their first year." On the other hand, many buyers prefer the ability to customize that a new home offers.
Sellers are advised
Although demand remains higher in the mid-market, Cohen cautions sellers to price competitively. "Especially if a house needs updating or other work, you have to be careful to price well. Buyers paying $500,000 are not looking to put another $100,000 into their purchase." She notes that small changes, such as repainting, cleaning grout, and clearing clutter can have a big impact. "People want a home that looks fresh, clean, and uncluttered. It's work, but it may not be a big expense." In general, she would caution against big investments, although "clearing Title 5 (septic system) may be necessary."
Cohen suggests sellers should expect to wait a bit for an offer. "Sellers get frustrated," she says, "But in this market it may just take a little longer." So should sellers wait for a stronger market? Cohen says, "If your reasons for selling are solid, let's not waste time." She notes that there's no way of predicting what the market will do in the next year. "No one knows what tomorrow will bring. There are so many things our country is going through now that we haven't experienced before. So let's just move forward."
Cohen continues, "Carlisle has been slow, particularly on the high-end. Clearly new developments aren't taking off the way Tall Pines has. But we remain optimistic." She notes her office has seen an uptick in inquiries and new listings over the past month, "and this is usually a slow time. If there's no more bad news such as a war in Iraq or further terrorist activity, and if the weather cooperates, we may be looking at a pretty brisk January.
© 2002 The Carlisle Mosquito