By most measures, the housing market these days is a bit sluggish. Prices are flat. Sales are drooping. A lot of people are priced out.
But not everyone. The high end is hopping.
Luxury home sales in Southern California are hitting levels not seen in decades. The number of homes bought for $2 million or more in recent months is the highest on record. Sales worth $10 million or more are on pace this year to double their number from the heights of the housing bubble.
"It's pretty mind-blowing, to be honest," said Cindy Ambuehl, an agent with the Partners Trust in Brentwood. "The luxury market has been completely on fire."
Low interest rates, a strong stock market and waves of cash sloshing in from overseas are boosting demand for high-dollar homes. A record 1,436 homes worth $2 million or more were sold in the six-county Southland in the second quarter, according to CoreLogic DataQuick.
In the more recent third quarter, 1,431 were sold. That was up 14% from the third quarter of 2013, and well ahead of any three-month period in the housing bubble years of the mid-2000s. This comes even as the broader market has plateaued, with prices in the Southland still about one-fifth below their pre-crash highs and sales at less than two-thirds their 2005 pace.
It reflects a housing market that is now moving at two speeds, said Selma Hepp, senior economist for the California Assn. of Realtors. Fast for the high end, sluggish for the rest.
"It's just a completely different story between the two segments of the market," she said. "Those who are doing well are doing really well."
The biggest difference in the luxury market between now and a decade ago is that the world is smaller, said Drew Fenton, an agent who specializes in high-end homes at Hilton & Hyland in Beverly Hills. Wealthy international buyers are scooping up second homes, investment properties and safe havens for their cash. And it's easier for them to scout — and travel — the world to do so.
"Everything's just more global now," he said. Ten years ago "it was much harder to reach those people and they didn't travel as much."
Now they are, and so are the agents who cater to them. Sandra Miller, a broker at Volker & Engels in Santa Monica, last week was jet-lagged from a trip to London, where she met with nearly two dozen brokerages that represent high-end buyers. At the end of the month, she's off to Kuwait. Every week, she has a conference call with international agents.
The Southland scores points with these buyers for its weather, its glamour and a population diverse enough that nearly any transplant can feel at home. And despite its reputation as one of the nation's least-affordable housing markets, Los Angeles can look like a steal compared with other high-end havens.
"We talk to private wealth managers around the world who think California is a very good market right now," Miller said. "Compared to New York or London, L.A. real estate is a bargain."
But it's not just foreign money that's heating up the high end.
A surging stock market has boosted portfolios for domestic buyers in recent years, especially for those who have money to invest. Low interest rates have made mortgages cheap. And banks — still risk-averse — are offering lower rates and better terms to deep-pocketed borrowers than to cash-strapped first-time buyers. Meanwhile, wealthier households have seen their incomes grow faster than average in recent years.
Builders are recognizing this. Aliso Viejo-based home builder New Home Co. has several developments underway in Orange County targeting high-end buyers, including 6,700 square-foot five-bedroom homes in Irvine and ocean-view condos in Newport Beach.
Sales have been brisk, said Joan Marcus Colvin, New Home's senior vice president of sales, marketing and design, especially at that Newport condo building, the Meridian, where 34 units have sold since February, at an average price of nearly $3 million. That's without even having a model home to show customers — the site is still under heavy construction. Renderings and drone shots of the views are all that's offered.
"It's quite a testament to the strength of the high end of the market," Colvin said. "These were bought sight unseen. We couldn't even stand people there and show them it."
But it's the first new home development in Newport Center in a quarter-century, Colvin said, so there's demand. And income growth has been strong in coastal Orange County, minting new buyers for high-dollar homes. The same trend is happening in places less associated with luxury than Fashion Island.
High-end home sales are surging in "Silicon Beach," too, with tech entrepreneurs and Bay Area transplants scooping up multimillion-dollar homes in Santa Monica, Venice and Marina del Rey. Many of the buyers work in the area, said Miller, and prefer walkable neighborhoods, relatively close to work, to the traditional hubs of Westside glitz.
"These people don't want to commute an hour and a half to Beverly Hills, which is a whole 13 miles away," Miller said.
Then there's the formerly sleepy South Bay. The average sales price in Manhattan Beach through the first nine months of the year topped $2.2 million, said Barry Sulpor at Shorewood Realtors. That's up from $1.85 million in the same period last year. Even empty lots in the beach town's "Tree Section" are going for $1.3 million.
"That's just lot value," Sulpor said. "And as you get closer to the beach it goes up from there."
Prices have been climbing so fast that even fairly recent buyers say they're lucky they got in when they did. About 18 months ago, Ray Ahn and his wife bought a place half a block from the beach, a pocket listing that was never widely marketed. Before the purchase even closed, the house's appraised value started climbing. And of the eight or so houses that neighbor Ahn's, three have gotten high-end remodels since he moved in.
"I probably wouldn't be able to buy here today," said Ahn, who works for an investment firm in downtown Los Angeles.
But to live by the beach, he said, it's worth it. So did Daphna Oyserman. She and her husband — professors who relocated from the University of Michigan to USC — spent $2.2 million in January for a house just a few blocks from the sand. They expected to pay a premium to live in a nice beach town, Oyserman said, and they did. But, although their house is "half the size at three times the price" of what they owned in Ann Arbor, Mich., Manhattan Beach offers amenities Michigan can't.
"We thought, if we're moving to L.A., we'd like to enjoy it," she said. "In the morning I go for a run on the beach. When we go to sleep we can hear the ocean."
These well-heeled professionals have played a big part in the South Bay's surge, said Sulpor, along with those in the tech industry who prefer a more laid-back scene than Santa Monica and a growing cadre of professional athletes. Then there are young buyers who walk in with trust funds or family money.
"A lot of folks in their 20s and 30s are coming in and taking properties off the table at $3 million or $4 million," Sulpor said. "Sometimes all-cash."
Ambuehl said her luxury buyers also are starting to skew younger. Among her clients, tech entrepreneurs and other wealthy shoppers in their 20s and 30s are gradually replacing baby boomers, who often weren't as young when they earned enough to afford a big-ticket house. They're looking for different kinds of homes — often with more outdoor space — and in different neighborhoods. And, she predicts, they'll be driving up the high end of the market for a long time.
"You've got 70 million baby boomers. You also have 70 million Gen Yers. They are a huge part of our buyer pool," she said. "It's a market we have to pay attention to."