Luxury home sales doing well
Whenever someone starts musing about declining property values, I smile to myself thinking back to my first house sale. The total price my clients paid was $18,000 for a 2-bedroom, one-bath bungalow in a seedy neighborhood. The total commission amounted to $1,080 of which my office received half. Since I was a new agent, I only received half of that. Last month I helped another client buy a home in El Dorado Hills. The price tag was in excess of a million dollars. My commission check exceeded the entire sales price of my first sale. I suspect that 30 years from now today’s housing prices will seem ridiculously low and buyers will be lamenting abut not finding anything under two million dollars.
Even in our current market, million dollar deals are not unusual. The luxury home segment of the market is down only slightly in comparison to the total market. While total home sales have declined by 40 percent from their 2005 levels, luxury home sales priced in excess of a million dollars, have only dropped 5 percent with 109 recorded last year and 60 recorded sales so far this year. So why do luxury home sales continue to do so well?
Luxury homebuyers are not affected by market sensitivities such as increased interest rates or more stringent loan underwriting criteria. The typical luxury homebuyer will have a sizable downpayment, usually in excess of 30 percent. Many luxury homebuyers do not need lender financing, having already sold an expensive home or other investment property where they had a high equity position. This eliminates the uncertainty of appraisals and loan contingencies.
The average selling price of a home in El Dorado County last month was $545,000. Of the 145-recorded home sales last month, 15 sold in excess of $900,000 and 6 of them were above one million. In the last six months 60 new and resale homes have sold in excess of a million dollars. The average selling price for homes selling in excess of a million was 1.3 and the average size for a home in that price range was 4,270 square feet. Two-thirds of all luxury home sales are located in El Dorado Hills and only 14 of the 60 were located on acreage.
About once a year I have the opportunity to work with a homebuyer in the million dollar plus price range. They have some expected and unexpected difference. When I was a new agent, I was intimidated when showing luxury homebuyers properties but soon discovered most are as comfortable being chauffeured around town in a Chevy as in a Mercedes. Since many are new to the county, they are keenly interested in an agent’s knowledge of the community, schools and recreational facilities. Typically, a luxury homebuyer is more concerned about lifestyle and neighborhoods than bedrooms and baths. Quality is more important to them than square footage. Many are without children living at home and will be attracted to a country club social environment. The security that gated communities offer is also important.
The largest percentage of luxury homebuyers in our county is in the 49 to 62 age group. These baby boomers have reached their peak earning years and are benefiting from a rising stock market, historically high prices from selling their previous home and/or a sizable inherence. The most common occupations for luxury homebuyers are entrepreneur, business executive or medical doctor. This will be their third or fourth home purchase and they will delegate much of the negotiations to a non-working spouse or rely on their trusted real estate advisor. As a busy professional, their time and attention is limited.
A few years ago I found myself chasing a doctor client down a hospital hallway on his way to surgery. A counter-offer required his timely signature. I handed him the papers on a clipboard to review and without missing a step he signed the papers and shoved them back at me. “Aren’t you going to read them?” I asked. “Why should I?” he replied, as he entered the operating room “That’s what I have you for!” while the doors closed in my face.
Increasing home values, economic prosperity and generational wealth transfer will increase the number of million and multimillion dollar home sales. The number of millionaires in the US has reached an all time high of 9.3 million households as of mid-2006. Locally, El Dorado Hills has one of the highest per-capital family incomes in the state. Could El Dorado County become a primary destination for luxury homebuyers from the Bay Area? That’s a safe bet. Already our county has a higher percentage of luxury home sales than either Sacramento or Placer Counties. Sacramento recorded 142 million dollar plus home sales last year and Placer County reported 179 of which 107 were located in Granite Bay or Loomis.
The average price of a county home doubled between 2000 and 2006. If history repeats itself, we all may end up living in million dollar houses.
Even in our current market, million dollar deals are not unusual. The luxury home segment of the market is down only slightly in comparison to the total market. While total home sales have declined by 40 percent from their 2005 levels, luxury home sales priced in excess of a million dollars, have only dropped 5 percent with 109 recorded last year and 60 recorded sales so far this year. So why do luxury home sales continue to do so well?
Luxury homebuyers are not affected by market sensitivities such as increased interest rates or more stringent loan underwriting criteria. The typical luxury homebuyer will have a sizable downpayment, usually in excess of 30 percent. Many luxury homebuyers do not need lender financing, having already sold an expensive home or other investment property where they had a high equity position. This eliminates the uncertainty of appraisals and loan contingencies.
The average selling price of a home in El Dorado County last month was $545,000. Of the 145-recorded home sales last month, 15 sold in excess of $900,000 and 6 of them were above one million. In the last six months 60 new and resale homes have sold in excess of a million dollars. The average selling price for homes selling in excess of a million was 1.3 and the average size for a home in that price range was 4,270 square feet. Two-thirds of all luxury home sales are located in El Dorado Hills and only 14 of the 60 were located on acreage.
About once a year I have the opportunity to work with a homebuyer in the million dollar plus price range. They have some expected and unexpected difference. When I was a new agent, I was intimidated when showing luxury homebuyers properties but soon discovered most are as comfortable being chauffeured around town in a Chevy as in a Mercedes. Since many are new to the county, they are keenly interested in an agent’s knowledge of the community, schools and recreational facilities. Typically, a luxury homebuyer is more concerned about lifestyle and neighborhoods than bedrooms and baths. Quality is more important to them than square footage. Many are without children living at home and will be attracted to a country club social environment. The security that gated communities offer is also important.
The largest percentage of luxury homebuyers in our county is in the 49 to 62 age group. These baby boomers have reached their peak earning years and are benefiting from a rising stock market, historically high prices from selling their previous home and/or a sizable inherence. The most common occupations for luxury homebuyers are entrepreneur, business executive or medical doctor. This will be their third or fourth home purchase and they will delegate much of the negotiations to a non-working spouse or rely on their trusted real estate advisor. As a busy professional, their time and attention is limited.
A few years ago I found myself chasing a doctor client down a hospital hallway on his way to surgery. A counter-offer required his timely signature. I handed him the papers on a clipboard to review and without missing a step he signed the papers and shoved them back at me. “Aren’t you going to read them?” I asked. “Why should I?” he replied, as he entered the operating room “That’s what I have you for!” while the doors closed in my face.
Increasing home values, economic prosperity and generational wealth transfer will increase the number of million and multimillion dollar home sales. The number of millionaires in the US has reached an all time high of 9.3 million households as of mid-2006. Locally, El Dorado Hills has one of the highest per-capital family incomes in the state. Could El Dorado County become a primary destination for luxury homebuyers from the Bay Area? That’s a safe bet. Already our county has a higher percentage of luxury home sales than either Sacramento or Placer Counties. Sacramento recorded 142 million dollar plus home sales last year and Placer County reported 179 of which 107 were located in Granite Bay or Loomis.
The average price of a county home doubled between 2000 and 2006. If history repeats itself, we all may end up living in million dollar houses.
posted by Ken Calhoon at 7:41 AM
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