Luxury Market for Single Family Homes on the East Side Providence - Excess inventory?

Looking through the Multiple Listing service today and doing a search on the East Side of Providence I was surprised to see so many single family properties in the million dollar and above category.  Is the East Side just growing the luxury market?  Just how much inventory is out there I wondered.

Digging deeper into the numbers, I found in this segment that there are 24 active properties on the market ranging in price from 1,050,000 all the way up to $5,850,000 with a low price per square foot of $134 to the high price per square foot of $984.  The median price for these active listings is $1,389,000 and the median price per square foot is $324. This seemed like a lot of inventory in this segment. In fact, of all the active listings for single families, nearly one third of the listings are 1,000,000 or above. 

So how much inventory does this represent?

Last year there were a total of 14 sales of properties over 1,000,000 which means that there is 1 year, 8 months of inventory on the market.  Median days on market for the properties that sold were 10 versus median days on market of 144 for all actives in this segment.

So what does this mean? Clearly, there is an excess of supply in this segment of the market. There are not enough buyers for the amount of inventory on the market.  With trends in the market, I would expect less than 14 properties to sell going forward as the rate of sales is slowing.  That does not bode well for the actives on the market.  Basic laws of supply and demand say that too few buyers and too many properties would mean that prices should fall.  The horrible month we have had in the stock market further depreciates sales in this segment as potential buyers have seen their stock accounts depreciate by up to 40%. 

Contrast this inventory with the opposite segment of the market, those homes priced under $400,000.  This segment has 14 active listings with 48 sold in the last 12 months, or only 3 months of inventory. This is a first home buyer category, which given market trends should continue to grow as renters see the opportunity to buy at historic low prices. Median days on market for this category are only 43 days.

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