There is no denying that in Coeur d'Alene, and around the world, the luxury housing market has seen a tremendous downturn since late 2008. The most basically explanation of this collapse can be summed up with the fact that most of these properties were second homes and weren't necessarily "needs" for the owners but rather "wants" for the individual. As the economy began to slow, buyers began putting a hold on their "wants" and only looked to spend money on their "needs," which unfortunately didn't include expensive second homes in resort destinations such as Coeur d'Alene.

Much emphasis in recent media has been placed on the amount of supply in the national market of these luxury properties. In fact, As of August 21, 2010, the Coeur d'Alene Multiple Listing Service (Coeur d'Alene MLS) reported that there were currently 272 active Residential properties for sale in Kootenai County priced above $1,000,000 with only 16 reported closed transactions since January 1, 2010.* If you do the math, we can see there is a huge supply exceeding over 200 months in the Coeur d'Alene luxury housing market.**

And while the realties of the current state sound like a disaster with only that small piece of information, if you dig a little deeper into the cyclical nature of the market you will find that it won't take much for the luxury housing supply in Coeur d'Alene to drop. Two realistic scenarios could play out in the very near future:

First, as the market continues its correction and sales remain flat, some sellers will become desperate to sell and the number of listings will begin to drop. If you factor in only a 10% decrease in number of listings, either because the owner must sell or the property shouldn't have been priced above $1,000,000 in the first place, the amount of supply will drop by almost two years!

In my opinion, this is an important scenario simply because many of the "luxury home listings" in Coeur d'Alene shouldn't be priced in the $1,000,000 range. A fallacy occurs between agent and seller when agents either do not properly educate the sellers on the market conditions or they don't refuse a listing that is overpriced. A principle I firmly believe in is that it doesn't do the seller or the agent any good to take a listing that is unrealistically priced.

A second scenario that will play out as the market improves results from an increase in sales. If we simply take the number of closed transactions from 2009 that were above $1,000,000, the amount of supply in the luxury market is nearly cut in half!

While half is still a long ways off from where we should be, even the slightest changes can affect the overall market conditions. An additional sale or two, or the decrease in price of a couple homes below the million dollar threshold, and you can remove years of supply from the system.

Contributed By: Scott Chesrown, MA, Designated Broker

*Some brokerages, such as Black Rock Properties, do not report all closings to the MLS.

**Housing Supply Calculation: The MLS shows 16 sales. 16/12 = 1.3 sales per month. The MLS shows a total of 272 active listings in Kootenai County.  272/1.3 = 209 months supply of active listings in the MLS indicating an oversupply.