Home Market Falls Into Lap of Luxury
Fueled by stock market profits and growing executive ranks, construction in the luxury home market is beginning to take off again throughout Southern California.
Well-heeled managers who had put off purchasing larger homes during the housing slump of recent years are now pouring some of that newly minted wealth into flashy digs with amenities like wine and cigar rooms, libraries and home theaters.
“Consumers have said we want larger and more,” said Rudy Svrcek, senior vice president of marketing for Irvine Co.
The turnaround began last year when builders received signals that high-end buyers were ready to spend. Sales of new homes over $500,000 shot up 47% throughout Southern California, with Los Angeles County experiencing a 54% gain and Orange County a 27% hike. Sales have continued to accelerate this year in certain pockets throughout the region, from the San Fernando Valley to posh enclaves in San Diego County.
“The baby boomer market is at the peak of its purchasing power,” said Richard E. Pope, president of Taylor Woodrow Homes California Ltd. in Laguna Hills. “We are satisfying pent-up demand.”
During California’s recession, few builders were putting up houses of 3,000 and 4,000 square feet and instead were concentrating on affordable homes while interest rates were low.
Three years ago, the average sales price of a home by Pope’s company was about $300,000. Today, thanks to larger homes with ritzy features like his and her vanities and prewired home offices, the average price tag is more than $500,000.
Sales of its palatial homes--like the Castaways in Newport Beach, which run from $680,000 to $1.3 million--have been so brisk the company plans to open four more luxury communities this year.
Analysts say expensive, move-up homes are going quickly because buyers think that the Southern California real estate market has bottomed out.
In fact, prices have crept up as much as 10% at some Southern California communities like Harbor Cove in Newport Beach. The builder, Standard Pacific Corp., raised prices after the homes sold faster than expected.
Although some buyers stand to lose money on the home they are selling because of a soft resale market, Jeff Meyers of the Meyers Group thinks buyers would rather purchase more expensive homes while they believe prices are low.
“They are willing to take a hit to move up,” he said.
Experts say the new houses with modern styling are luring many buyers away from older properties.
George and Nancy Bravante, who recently moved to Newport Beach from the Napa Valley, looked at existing homes before putting a down payment on a new $1.1-million house in Signature Collection in Newport Beach.
But the houses they checked out in places like Nellie Gail Ranch in Laguna Niguel looked dated, with older design features like conversation pits. It would have taken too much time and money to remodel, George Bravante said, adding, “A home there costs $900,000 and it doesn’t have the ceiling heights or styling that we want.”.
Builders prefer constructing more expensive houses because of higher profit margins, both on the house and on its luxury options like granite counter tops, stainless steel Viking ranges and subzero refrigerators, Meyers said.
