Luxury Goods: After a Slump, High-End Sales Rebound
By DANIEL D. WILLIAMS
Luxury homes, the first to hit the skids last year, are back.
Sales at the high end of the Orange County residential market,homes priced at more than $1 million,went into a slump around midyear, then really fell off after Sept. 11.
“We’ve seen this happen three times in the last four years where the high end becomes skittish,” said John Burns, president of Irvine-based John Burns Real Estate Consulting Inc. “But that dissipated after a few months.”
The market now is reviving as potential luxury homebuyers,put off by falling stock prices and low bond yields,are looking at real estate as a good investment, some sources say.
A year ago, home buying by technology executives and others evaporated. Luxury homes were among the hardest hit, seeing a big rise in cancellations. That’s not an issue this year, according to brokers.
“We’ve seen the situation go from a buyer’s market to a strong seller’s market,” said Tim Carr, an agent with Newport Beach-based residential broker Strada Properties.
According to Carr, buyers want to lock in while interest rates still are low. As a result, sales of high-end homes, like others types of houses, have gone up
Strada recorded the firm’s best three-month period ending in March, according to Carr.
“Ours sales are double in volume,” he said.
There’s one problem: “We’re seeing a shortage of the good, big homes,” he said. “But the ones that are out there are receiving strong activity.”
Homes along Newport Coast,Pelican Crest, Pelican Point and Pelican Hills,are leading the way, according to Carr.
Other strong spots include Harbor Isle, Shore Cliffs and Cameo Shores. Along the coast, prices have risen so dream homes there come with at least a $3 million price tag.
“In the bay front area, $3 million will only buy you a tear down,” Carr said. “Three million is dirt value for the area.”
Of 404 active listings in Newport Beach, 305 carry a price tag more than $1 million. The median price in the area is $1.35 million and the average price is $1.73 million.
Remodeling and redevelopment are reshaping the area, he added.
Among new developments, Coto de Caza and Shady Canyon are selling well, according to Carr.
“Agents would actually like to see more listings out there,” said Trish Moore, executive director with Newport Beach-based Orange Coast Association of Realtors.
Price appreciation in the county is drawing money to the luxury market.
“OC homes experienced an 18% appreciation rate in the last year,” Moore said.
That kind of gain attracts people looking for a place to park their money while the stock market remains shaky and money market funds returns are meager. Numerous real estate sources say that inheritance money has replaced the dot-com wealth that drove the luxury home market in the past few years.
In the last year, 542 homes listed at more than $1 million have sold in the Newport area with an average of 109 days on the market.
“That’s the same as last year,” Moore said.
But the definition of luxury has shifted, according to Moore. These days, you’re really talking about homes in the $5 million to $8 million range, she said.
The luxury-home sales rebound is expected to hold throughout the year and beyond, according to Burns.
“The market is extremely hot,” he said.
The next 10 years are even brighter, according to Burns, who cites Census figures and data from Fidelity National Financial Inc.’s Chicago Title Co.
“There was a huge bubble of people born in the ’60s,” said Burns adding that puts a big portion of the population between the ages of 32 and 42.
A survey by Chicago Title found that people in OC buy their most expensive home at the age of 43, Burns said.
According to the 2000 Census, there were 407,000 people born in OC during the ’50s, 490,000 in the ’60s and 427,000 in the ’70s. And Burns believes that the extra 83,000 people who reach their prime-buying age will drive up the numbers of luxury homes built and bought locally.
“Those people will be buying their biggest and best house very soon,” Burns said.
