I don’t often talk about the luxury real estate market, primarily because “luxury” means different things to different people. It’s also a fact that high-end living is something that most of us don’t get to see up close and personal. The luxury market in real estate can, however, be interesting to contemplate and dream about.
It’s not news that the Bay Area has been suffering from a lack of real estate inventory across the board. We have seen this deficit for over a year now. While prices have continued to climb (the Bay Area median price for a home in May rose by 10% from May of 2013), it does appear that this general dearth of inventory is showing some signs of easing, although we still have many more buyers than we do sellers. Using statistics from the California Association of REALTORs (CAR), I can see that the number of sales from year to year has continued to slip. June 2014 saw a 3.7% dip from the same period last year, for example. There’s just not enough to sell.
At the higher end, CAR reports from their annual “Luxury Consumer Survey” that, while the overall number of sales declined overall by 8.4% in 2013 from the previous year, the number of sales of homes over $1 million rose a whopping 35.5%. Who are these people?! Well, according to the CAR survey, it appears that the average luxury buyer is a 46-year-old single white male who makes over $350,000 a year. Seventy-four percent of luxury real estate clients in 2013 had at least a 4-year college degree, and 35% of the luxury homebuyer community paid for their homes with all cash. As an aside, 5% of the statewide luxury market was comprised of international buyers.
It was also easier to purchase a luxury home than a “traditional valued” home, assuming one had the resources. Those buyers who didn’t pay cash found it relatively easy to qualify for a mortgage. While the typical non-luxury homebuyer made a median number of three offers on properties before prevailing on securing a home, the more fortunate luxury buyer only had to make one offer to succeed.
Coldwell Banker’s luxury marketing arm, known as “Previews,” reported in April a 36% increase in number of sales of Silicon Valley properties valued at more than $2 million when compared to the same period in 2013. East Bay sales of homes over $1 million rose by 38%. In Marin County, sales of homes over $2 million rose by 37%. Indications are that buyers in these ranges are making more strategic moves as they have more properties to choose from, and are often willing to pay for that privilege. With respect again to the Silicon Valley market, the average luxury home there sold for 10% over the asking price, and in a lightning fast nineteen days.
The average buyer of Bay Area real estate would, in most cases, be considered a “luxury home buyer” around much of the rest of the country, simply based on our price points. A home valued north of $1 million by any standard, though, is something that many, if not most, of us cannot afford.
A Bay Area native, Mark Penn has been a REALTOR® with Coldwell Banker since 2004. He is also active in animal welfare, and is a former educator, facilitator, and air traffic controller. Mark can be reached at mark@MyHomeInSonoma.com.