Before Zillow, Trulia, Redfin, and Realtor.com, someone interested in buying a home would have to consult a local realtor to access information about what was currently available on the market.
But as these online property databases rose to prominence, homebuyers became more picky. That's leading to some serious problems in the luxury market, where expensive homes are increasingly taking longer to sell.
Websites like Zillow and Trulia let consumers find what the current owners had paid for a particular home, the price per square foot compared to the rest of the neighborhood, and even how many people had viewed the listing page before you. Homebuyers today are better equipped to understand when a home they're seeing is overpriced, which could explain, in part, why some of America's most expensive homes have languished on the market.
The highest end of the American real estate market has indeed seen a fair bit of softening over the last several months.
According to recent data from Trulia, since last year, the US luxury real estate market has seen a significant increase in for-sale homes needing to reduce their asking price. Trulia's analysis, which looked at for-sale listings at the metro and national level, showed that 11.99% of luxury listings — defined as the top one-third of all active listings — had experienced a price reduction since first appearing to market.
That's an increase from 11.01% last year, and significantly more than the 10.66% figure that represents all for-sale listings that had experienced a price cut nationally.
"The luxury segment is slowing down more quickly this year than it had in the past. California markets, as well as markets in Texas, are the two major ones that have seen the largest increases in price reductions. Home prices got too high too quickly, and people who listed these homes for sale kind of got ahead of themselves," Trulia data scientist Mark Uh told Business Insider, noting that many buyers know more about the market now, and could wait to make an offer once the price comes down a bit.
"In the meantime, income hasn't caught up with such huge increases in real estate prices. There's not as many people who can afford those homes — supply has grown faster than demand."
It's a completely different scenario from just a few years ago, when the luxury market — especially in places like New York City and Miami — was hot, and there wasn't much supply to go around. But now that so many luxury condo buildings have either been completed or are nearing completion, supply is way up, and buyers have more options and no sense of urgency to choose between them.
Just in New York City alone, well-heeled buyers with many millions to spend can choose between super-expensive condos at One57, 432 Park Avenue, and 111 West 57th Street, just to name a few. Many of those buildings have reduced the prices of their units, or gotten more creative with the offerings of extra amenities or unique layouts.
"If they're in the super luxury category, they have to be very realistic on pricing. There's more importance placed on being the really correct price than there had been in the recent past," Douglas Elliman Real Estate's Noble Black told Business Insider. "There's a lot of choice. If you're a buyer looking to spend $40 to $50 million, you know there's a lot more selection than there had been in the past few years."
Black's current listings include a $28.5 million penthouse in New York's trendy SoHo neighborhood, as well as an $18.9 million condo in Tribeca.
"In the past several years, [a broker could] throw out a crazy price and it would sell for that. People are looking at the fundamentals now, really assessing what the property is, and what the price is," Black said. "If those things make sense, there's a demand for it, but it has to be objectively a good deal."
Prices are on their way down
It's not just in New York and Miami that sellers are feeling the effects of a softening luxury market. We've reported on major price chops on properties owned by Tommy Hilfiger, Celine Dion, 50 Cent, and Michael Jordan, to name just a few notable people. There are many reasons why an otherwise desirable home could take months and even years to find a buyer. It could be that the property has a strange layout, that the owner's style comes off as too quirky, or that a less-than-ideal location can't be justified. Political and economic uncertainties across the globe certainly haven't helped the situation.
But to hear the pros talk about it, it sounds more and more like price-chopped homes are being brought down to the prices they should have been tagged with in the first place.
"If you want to sell something, you have to be realistic," Ryan Serhant, a broker with Nest Seekers International and star of Bravo's "Million Dollar Listing New York," told Business Insider. He added that he'll often notice potential buyers verifying listing details on their phone at the same time he's showing them around a property.
"People don't want to overpay, but they like to spend money when it's their own idea. Everyone likes to get a deal," he said.
Though Serhant got his start in New York, his team also operates offices in Los Angeles, Miami, and the Hamptons, and he says the slowing of the luxury market is a trend he's seen across the board. Serhant agreed with predictions that the market is headed towards a correction soon, but he thinks it's a great thing.
"It's not like real estate is less expensive. It's like going to a chiropractor to get adjusted — to feel better, it went down to its real price. It's a healthier market for sure," he said. "There have been more bidding wars than I can remember, in part because people are starting to price their homes correctly."
SEE ALSO: Nobody wants to buy Tommy Hilfiger's $58.9 million penthouse in the Plaza Hotel
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