New California Dream: The $1-Million Tract House
Sales of homes worth $1 million or more in California soared to an all-time high last year as the state’s booming economy helped put new owners into the glitzy estates of Beverly Hills, the stately Tudors of the San Francisco Bay Area and the nouveaux mansions of Orange County’s Newport Coast at a rate never before seen.
But owning a $1-million home, although still a mark of affluence, no longer carries the distinction it once did. A cool million acquires less than ever in Southern California, as many homes in pricey locales such as Malibu and Laguna Beach no longer come with swimming pools or ocean views. Many have only three or four bedrooms.
Meanwhile, million-dollar homes are becoming so commonplace that they are now being mass-produced. No fewer than 30 subdivisions--albeit gated ones--with prices in the $1-million range are under construction across the Southland, with waiting lists as long as 200 names.
Even cities not known for an abundance of affluence, such as Long Beach and Thousand Oaks, are seeing homes built in those lofty price ranges.
“A lot of upper-end people have had business success, especially in California, and they are willing to spend money on luxury properties,” said Fred Flick, vice president of research for the National Assn. of Realtors. “Million-dollar homes are more available than they used to be, or they are considered less exclusive, and therefore more people are willing to buy one.”
In all, 5,121 homes priced at $1 million or more were sold last year, a 37% increase over 1997 that shatters the previous record--set in 1989--by 20%, according to Axciom/Dataquick Information Services Inc., a La Jolla real estate research firm.
As recently as 1997, it took 35 days to sell a house that ran into the millions. Today, it’s down to about one every 10 days, according to Meyers Group, an Irvine firm that tracks new-home sales in California and 12 other states.
California’s surging economy is a primary factor behind the trend, experts said. The rising stock market, historically low interest rates and record-low unemployment have combined to send consumer confidence soaring. In addition, steadily rising home prices have given swelling numbers of baby boomers, who are entering their prime earning years, enough equity in their existing homes to make the leap to the next level.
In the absence of dire economic news, many predict the buying spree will last well into the next century as the rich grow richer. The number of California millionaires leaped 66% from 1994 to 1996, the largest percentage gain of any income group, according to state tax records. In that bracket, average incomes grew to $3.14 million from $2.64 million.
Nationwide, an average of 1,345 people a day became millionaires in 1997, a 72% increase from 1990 and the highest level ever, according to Spectrem Group, a San Francisco consulting firm.
“We’ve had household net worth increases of 10% a year since 1994, and that’s unprecedented,” said Sara Johnson, research director at Standard & Poor’s DRI, an economic research group in Massachusetts.
As a result, million-dollar-home sales also posted double-digit gains in other major markets. Such sales jumped 80% in Chicago, 67% in West Palm Beach, Fla., and 47% in Manhattan, according to First American RES, an Anaheim firm that monitors real estate prices.
For California, which has boasted the nation’s largest number of million-dollar-home sales for decades, the upward trend marks a dramatic turnaround from just three years ago, when sales slumped to 2,018 units, the lowest annual total since figures were kept.
Today’s million-dollar new home also is shrinking, to an average of 3,867 square feet last year, down from 4,132 square feet a decade earlier, according to Axciom/Dataquick.
Still, real estate agents say sales are skyrocketing.
In Beverly Hills, “entry-level” homes within walking distance of Rodeo Drive run in excess of $1 million. But they frequently are torn down by new owners who want to build grander estates. Now prices are higher than even longtime agents can remember.
“We are beyond where we were in the height of the 1980s,” said Jeff Hyland, president of Hilton & Hyland Real Estate Inc., which sells homes in Beverly Hills, Brentwood and other posh spots in L.A. County.
An acre in Bel-Air or Holmby Hills has soared to $4 million and “bidding wars” have broken out over “low-end” homes in prime locations ranging up to $2 million, Hyland said. “You didn’t have the competition for houses a decade ago that you do today,” he said.
In Manhattan Beach, prices generally rise $100,000 for each block that homes are closer to the ocean.
And in some Newport Beach neighborhoods, prices can rise as much as 10% from one end of the block to the other for homes that are nowhere near the beach but are bordered by parks or greenbelts.
“A million bucks in Newport Beach buys a four- or five-bedroom home that has been remodeled or was built in the past five years,” said Newport Beach broker Michael Dreyfus.
Homes in the Newport Ridge Estates area are “not an image you’d expect of a $1-million home,” he said.
Still, swarms of potential buyers--up to 200 at several projects--put their names on waiting lists even before the developments were advertised and the builders had finished the floor plans.
In a Newport Coast subdivision called Perazul, where buyers can choose options such as his-and-her bathrooms, three master suites and an outdoor deck the size of a living room, the first 18 homes built by Taylor-Woodrow sold out before the models opened.
In Calabasas Park in the Santa Monica Mountains, Braemar Group expects to sell 35 million-dollar homes by summer. Despite raising prices by $80,000, officials at the Agoura Hills company said interest from buyers hasn’t waned.
“Our plan was to sell out in three years, but we’ll cut that in half,” said Edward Zinke, Braemar’s sales and marketing vice president.
As a result, Braemar plans to build 26 more homes in Tarzana. Although the homes exist only as drawings on paper, 18 buyers have already signed contracts for the right to buy into a subdivision that has yet to be developed, Zinke said.
And in Rancho Palos Verdes, Newport Beach-based California Pacific Holdings is building what it says are the highest-priced new homes in Southern California: estates on up to three-quarters of an acre that will be listed between $2 million and $4 million.
The foundations are being poured for models--and the company has already received $100,000 deposits from six buyers.
