While inflation is soaring and mortgage rates continue to rise, many luxury home buyers are seemingly unaffected as home prices continue to skyrocket in America’s affluent communities.
April statistics from the National Association of Realtors (NAR) indicate that more than 20 percent of homes priced at $1 million or more can be found in the West, while 6 .7 percent of all sales over $1 million were located in the Northeast. Just over 4.5 percent of home sales over $1 million were in the South, and just 1.7 percent in the Midwest.
More than 31 percent of April home sales in the West were in the $500,000 to $750,000 range, with 15.2 percent in the $750,000 to $1 million range. Only 2.8 percent of Western US home sales were listed in the $100,000 to $250,000 market.
Not surprisingly, California continues to lead the luxury car. The NAR’s Q1 2022 Sales Report shows that California locations top the charts with the highest median single-family home prices in the country. Single-family homes in the San Jose, Sunnyvale and Santa Clara regions fetched an alarming median sales 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 rounded out the top five most expensive areas at $905,000.
So where do these buyers come from? Will they ever run out of cash?
A look at luxury listings for May in Santa Clara County showed a staggering median home price of $6.59 million in Los Altos Hills and a median price of $5.7 million. A close second was Los Altos with an average of $4.86 million and a median sale price of $4.57. Of the 18 communities listed, there were no homes listed below $1 million, and the area with the lowest price was Gilroy, with a median listing 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 move-in-ready single-family home for less than $1 million in his region is becoming rarer.
“A lot of people come to me and tell me their budget is up to $1 million and I tell them I don’t think they’re happy with what we find,” he told The Epoch Times.
Jamison recently sold a three-bedroom, two-bathroom single-family home for $960,000 in San Jose and the clients intend to tear it down and rebuild it on the 10,000-square-foot lot. “I was literally attacked by fleas when I walked into the house,” she recalled.
Many of his clients are willing to spend several million dollars to purchase their dream home. His highest-priced listing to date is an $8 million luxury home and warehouse on 21 acres in Livermore, California. “This is Silicon Valley, so most of our buyers are in the technology business or are business owners or high-level executives,” she noted.
Some are still paying cash, but a vast majority are financing their homes, with typical down payments of 50 percent. “We had a lot of cash buyers from China, but now it’s mainly local people who have sold houses and want to improve them,” he said.
Typically, these luxury market homes offer swimming pools, hot tubs, top of the line appliances, media rooms, extra acres, and other amenities. While you’ve seen a slowdown in calls from potential buyers and clients as a result of rising interest rates, there’s still no shortage of consumers wanting luxury homes. “If they buy now, it will still be less expensive than five years from now,” he reasoned.
On the seller’s side, many “empty kids” are putting their homes on the market and moving out of state to be closer to family or downsize. “If a property is in excellent condition and is priced right, it will sell. There are still not enough houses for everyone,” she added.
While his seller 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 bit longer, two to three weeks instead of just days.
John Oliveira is a real estate broker for Douglas Elliman Real Estate with listings in Scarsdale, New York and Greenwich, Connecticut, two of the most prosperous areas in the New York metropolitan suburbs. The current median listing for a single family home in Scarsdale is $1.66 million and the median is $1.885 million. For Greenwich, the median sales price is $2.45 million, while the average is around $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 he has ever seen. “I think it has a lot to do with how the pandemic has changed what people are looking for in a home,” he explained. “In pre-COVID times, there was actually a lag in the luxury market with lots of inventory and few buyers. Now, that situation has been completely reversed, which is driving prices higher and higher.”
Today’s luxury buyers, 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 an acre of land, close to 3,000 square feet, and sometimes a pool.
For those “amenity-packed” properties that offer additional amenities such as home gyms, media rooms, indoor pools, and pool houses, listing prices can increase to the $4 million to $5 million range.
Oliveira also deals with a large number of spot buyers.
“Greenwich, in particular, is a huge draw for people in New York City, as well as internationally,” he said. Many of their buyers are from Europe and are looking for a spacious home that is still a good commute into the city. “It’s not uncommon for these families to make their second, third or even fourth home in Greenwich.”
Most of their buyers work in the financial industry, and those with younger children are always concentrated in the high-ranking school districts in the region.
Part of the reason that the luxury market in the New York metro area is still in the grip of 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 for the last few years expect interest rates of four percent or less and that prevents them from making a move, as they now face rates well above five percent,” he said. .
The lagging state of new construction in the northeast has also contributed to the problem of low inventory, Oliveira said.
“It’s unbelievable how much money is floating around out there, but I think we’re going to start to see a balance in the market, which could bring all home prices back a little bit more to normal.”