Deep pockets filled with cash that keep the luxury home market going

While inflation is rampant and mortgage rates continue to rise, many luxury home buyers are apparently not interested as home prices are still skyrocketing in affluent US communities.

Statistics from the National Association of Realtors (NAR) for April indicate that over 20% of homes priced at or above $ 1 million are in the West, while 6.7% of all sales above $ 1 million it is located in the northeast. Just over 4.5% of home sales worth over $ 1 million were in the South and just 1.7% in the Midwest.

Over 31% of April home sales in the West were listed in the $ 500,000 to $ 750,000 range and 15.2% in the $ 750,000 to $ 1 million baseball field. Only 2.8% of Western US home sales have been listed on the market at $ 100,000 to $ 250,000.

Unsurprisingly, California continues to lead the luxury bandwagon. The NAR’s Q1 2022 sales report shows California locations at the top of the charts with the nation’s highest median single-family home prices. Single-family homes in the San Jose, Sunnyvale and Santa Clara regions achieved an alarming average selling price of $ 1.875 million and in the San Francisco Bay Area, $ 1.38 million. The Anaheim and Santa Ana area saw median sales prices of $ 1.26 million, Honolulu, $ 1.127 million, and San Diego closing the top five most expensive areas at $ 905,000.

So where do these buyers come from and will their deep pockets ever run out of cash?

An $ 8 million single family home and cellar for sale in Livermore, CA. (Courtesy of Tuscana Properties / The Jamison Team, San Jose, CA)

A look at May’s luxury listings in Santa Clara County showed an astonishing average price for a $ 6.59 million home in Los Altos Hills and an average price of $ 5.7 million. In second place was Los Altos with an average of $ 4.86 million and an average selling price of $ 4.57. Of the 18 communities listed, there were no homes listed with less than $ 1 million, and the area with the lowest price was Gilroy, with an average list price of $ 1.25 million and a median of $ 1.21 million. .

Sandy Jamison, broker and owner of Tuscana Properties and The Jamison Team in San Jose, California, said finding a relocation-ready single-family home for less than $ 1 million in their region is becoming very rare.

“A lot of people come in and tell me their budget goes up to $ 1 million and I tell them I don’t think they’ll be happy with what we find,” he told The Epoch Times.

Jamison recently sold a three-bedroom, two-bathroom single-family home in San Jose for $ 960,000, and clients plan to demolish and rebuild it on a 10,000-square-foot lot. “I was literally attacked by fleas when I entered the house,” she recalled.

Many of his clients are willing to spend several million dollars to buy their dream home. His most expensive list to date is an 8 million dollar luxury home and 21-acre winery in Livermore, California. “This is Silicon Valley, so most of our buyers are from the tech industry or are business owners or senior executives,” she noted.

Some are still paying in cash, but the vast majority finance their homes, with typical down payments of 50%. “We had a lot of cash buyers from China, but now it’s mostly local people who have sold homes and want to upgrade,” she said.

Typically, these luxury market homes offer swimming pools, hot tubs, high-end appliances, media rooms, extra surface area, and other amenities. While it has seen a slowdown in buyer calls and leads due to rising interest rates, there is still no shortage of consumers wanting luxury homes. “If they buy now, it will still be cheaper than five years from now,” he reasoned.

On the sellers side, many “empty nesters” are putting their homes on the market and moving out of state to be close to family or to downsize. “If a property is in great condition and priced right, it will sell. There aren’t enough houses to go around yet, ”she added.

Photo by Epoch Times
Photo by Epoch Times
A $ 2.96 million single family home on the market in Westport, CT. (Courtesy of Douglas Elliman Real Estate, Scarsdale NY)

While his vendor appointments have doubled, Jamison said there are still some bidding wars, but there are now fewer bidders and properties tend to be on the market a little longer, two or three weeks instead of just days. .

John Oliveira is a Douglas Elliman Real Estate agent with listings in both Scarsdale, New York and Greenwich, Connecticut, two of the wealthiest areas in the New York metropolitan suburb. The current average price for a single family home in Scarsdale is $ 1.66 million and the average is $ 1.885 million. For Greenwich, the average selling price is $ 2.45 million, while the average is $ 2.935 million.

Oliveira, who has been in the residential real estate business for 17 years, told The Epoch Times that these are the highest prices she has ever seen. “I think it has a lot to do with how the pandemic has moved what people look for in a home,” she explained. “In pre-COVID times, there was actually a lag in the luxury market with lots of inventory and few buyers. Now, that situation is completely reversed, which is driving prices higher and higher. “

Today’s luxury shoppers, many of whom work from home several days a week, are looking for more space, more properties, and more amenities. Many of the homes in the $ 1.5 million to $ 2 million range offer four bedrooms, two or three bathrooms, at least one acre of land, close to 3,000 square feet, and sometimes a swimming pool.

For those “service-rich” properties that offer additional amenities such as home gyms, media rooms, indoor pools and pool houses, list prices can go as high as $ 4 million to $ 5 million.

Oliveira also deals with a large number of cash buyers.

Photo by Epoch Times
Photo by Epoch Times
A $ 3.43 million single family home recently sold in Scarsdale, New York. (Courtesy of Douglas Elliman Real Estate, Scarsdale NY)

“Greenwich, in particular, is a big draw for New York City people, as well as internationally,” he said. Many of its buyers are from Europe and are looking for a spacious home that is still a good commute into the city. “It is not uncommon for these families to make their second, third or even fourth home in Greenwich.”

Most of its buyers work in the financial sector, and those with younger children are always focused on the region’s high-ranking school districts.

Part of the reason the New York metropolitan area luxury market is still prone to bidding wars is the fact that rising interest rates are discouraging some people from putting their properties on the market.

“Most people who have owned a home in recent years are looking at interest rates of four percent or lower and that prevents them from making a move, as they now face rates of well over five percent,” he said. .

The lagging state of new construction in the northeast has also contributed to the problem of low inventory, Oliveira noted.

“It’s not real how much money is floating out there, but I think we’re going to start to see an equilibrium in the market, which could bring all house prices back a little more to normal.”

Maria Prenon

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Mary T. Prenon is in real estate and business. She has been a writer and journalist for over 25 years with various media and press in New York.