Luxury home sales hit full stride
After taking a home buying hiatus, America's wealthiest buyers have been busy trading up.
November 22, 2004: 4:38 PM EST
By Sarah Max, CNN/Money senior writer

BEND, Ore. (CNN/Money) Consumer confidence has sagged for five consecutive months. Yet the wealthiest Americans are spending with gusto.

Luxury car sales are up this year, even while U.S. car sales overall are essentially flat. Yacht makers are backlogged, private jet companies are booked, and cash registers are humming at high-priced boutiques.

This all comes as no surprise to Nikki Field, senior vice president of Sotheby's International Realty in Manhattan.

"Our market for property over $10 million is phenomenal," she said. "This quarter will end strong and next quarter will be even stronger."

So far this year, 68 Manhattan residences have sold for more than $10 million, twice as many as last year. Sales in the $5 million to $10 million range -- "the mid-range of the market," according to Field -- will get a boost from year-end bonus season.

The luxury home market appears to have rebounded, and not just within commuting distance to Wall Street.

"This segment of the market is going gangbusters," said Jim Gillespie, president and CEO of Coldwell Banker Real Estate. "We've sold more million-dollar homes in the first three quarters of this year than all of last year."

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Jim Gillespie, president and CEO of Coldwell Banker, talks about the luxury home market.

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Until recently, zip codes with a median home price of $750,000 and up had been lagging lower-priced zips, said David Stiff, senior economist for Fiserv CSW. "But during the last six months, the high-priced zips have pulled ahead."

Some of this increase may be due to the fact that rapid price appreciation in places like Los Angeles and San Francisco has put more houses in the seven-figure range. In some markets, $1 million doesn't even qualify as luxury.

"It's hard to find a livable house for under $1 million on the west side of Los Angeles," said Eric Lerner, an architect and board member of the Beverly Hills Greater Los Angeles Association of Realtors.

For property selling for several times that amount, however, the recent increase isn't a statistical glitch, say agents. Rather, it's a vote of confidence that wealthy Americans are ready to spend.

Marching to a different beat

Unlike most of the home-buying public, luxury buyers aren't motivated by low interest rates.

Among wealthy buyers surveyed by Coldwell Banker recently, more than 60 percent said that rising rates would not affect their decision to buy. "The folks in this price range pay cash," said Gillespie.

So while low interest rates prompted a home buying feeding frenzy among the masses, wealthy buyers "sat on their hands" in 2001 and 2002, said Fahada Saad, an agent with Coldwell Banker in Naples, Fla.

"They had the money," she said. "They were just waiting to feel better about making those kind of investments."

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In Jackson, Wy., luxury sales dropped about 15 percent in 2001, according to Clayton Andrews a senior vice president for Sotheby's. The inventory of houses for sale in 2002 and 2003 was substantially higher than it was in 1999 and 2000.

Over the past 12 months, however, sales for property over $5 million was triple what it was the year before. Last month, Andrews oversaw the sale of the Bar B.C. Ranch, which was listed for $112 million and sold for an undisclosed amount near $100 million.

"The response I'm getting from buyers is that they are just ready," said Saad, whose business in Naples is quadruple what it was in 2003. "I already have on the books for 2005 what I had for all of last year."

No distressed sellers here

Once they do decide to buy, wealthy homeowners don't sweat market dips, say agents.

It's not that they don't care about losing money. On the contrary.

"High-end sellers just take their property off the market when there is a hiatus," said Field. "The don't reduce their prices and they don't become negotiable."

Field tells buyers to budget accordingly. "My advice has always been that if you're not certain you could afford to keep a property in a down period, don't buy it," she said.

Word to the wise whether you plan to spend $10 million or $100,000.  Top of page

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