What constitutes “super high-end homes” in the Dallas area? Recently Steve Brown reported in the Dallas Morning News that one part of the D/FW market that shows no sign of a slowdown is the super high-end homes. However, that depends on how you define super high-end homes. Three years ago I wrote that there was at least a six-year oversupply of ultra luxury homes in the super high-end price range on the market. The glut of these super high-end homes continues today.
It is true that there has been an increase in sales of the million dollar homes. As the Dallas Morning News reports, more than 1,250 million dollar area homes have sold already in 2018. I find more interesting and the most exciting change in the market is how the sale of homes in the $2 million and $5 million range has surged since the beginning of 2018, even when the price of homes under $1 million has cooled. The sales of these under $1 million homes have remained strong but have only increased nominally. What did not change was the glut of super high-end homes – those valued at over $10 million or $20 million or higher.
When the Dallas real estate market was red hot three years ago and Dallas led the nation in price gains, I explained that the market for homes over $20 million was frigid. Six houses had been on the market over the previous three-and-a-half years: the Crespi Estate at $100 million in Preston Hollow, the estate at 4500 Preston Road at $59.536 million, the Baron Estate on Deloache Avenue at $33.5 million, the home on Manson Court at $29.995 million, the Mount Vernon home in Lakewood at $25.9 million, and the Philip Johnson architect-designed modern home on Strait Lane at $27.5 million. I suggested that if one of these homes sold in the near future, there would still be a six- to ten-year supply of these super high-end homes. Using the same traditional formula, I calculated that the price of some of these homes would sell for 60% of their listing prices. Sure enough, over the last three years that is exactly what happened.
Allie Beth Allman reduced her $100 million listing price of the Crespi Estate by 60% and it sold at auction for $39.2 million, representing a loss of $80 million of what the original owners had invested in the home. Steve Brown reported that the Baron Estate, also listed by Allie Beth Allman, sold for less than $20 million. This would represent a discount approaching 50% from the original listing price. Steve Brown also reported that this was one of “the most luxurious residential properties in the state.” What he didn’t mention was that this 23,000 sf home on nine acres of Preston Hollow land sold for approximately the same price as nine acres of vacant Preston Hollow land had sold for three years earlier. In other words, no value was attributed to the Robert Stern New York architect-designed house which probably cost at least $20 million to build. Another good example of this glut of super high-end homes is the Mount Vernon house in Lakewood. Allie Beth Allman originally listed Mount Vernon for $29.5 million and now she has it listed for $14.9 million, a 50% reduction in the asking price. Also Allie Beth Allman has reduced the listing price of her Jourdan Way listing from the original price of $27.5 million to $19.5 million.
In the last three years only two houses have sold for more than $20 million, with the average discounted sales price of these houses being approximately 50%. Other homes that had been listed over $20 million are now listed under $20 million. Steve Brown reported that there were more than a dozen area homes that were priced $10 million and up – the most ever. But rather than this being an indication of a strong market, I see it as a sign that these homes aren’t selling quickly. There continues to be a glut of super high-end homes on the market over $10 million. However, the dramatic 40% to 60% reduction in listing prices of many of these houses over $20 million has prompted buyer activity. After two years on the market, recently when Allie Beth Allman reduced the price of Jourdan Way from $27.5million to $19.5 million, it went under contract. If this house closes, it will be the third house to sell over $10 million in the last year, which will bring down the supply of these $10 million homes to three years. Also, we see homes that had been on the market for over $10 million now on the market for under $10 million. A good example of this is the 10,000 square foot home on five acres that had been priced at $11 million. The listing price has now been reduced to $7,499,000. This makes the price of the five acres without any value attributed to the 10,000 square foot home much less than its neighboring Preston Hollow residential raw land sold for per acre three years ago. Listing price reductions like this should further stimulate the market for homes under $10 million. So we have two pieces of good news: the oversupply of super high-end homes on the market gradually being reduced, and more importantly, the economic foundation of Dallas has never been stronger.
Also, we have seen in the past an increase in prices percolating up from the least expensive homes to the most expensive homes. This past trajectory of home sales gives further hope and opportunity for the super high-end homes for sale that have been languishing on the market.
