Defining luxury; what you should look for in a high-end home

“Give me the luxuries of life and I will willingly do without the necessities.” – Iconic architect Frank Lloyd Wright

These days, the word “luxury” is everywhere. The promise of high-end goods, services, and experiences is no longer reserved for the most affluent of Americans, but now available to just about everyone. We can easily buy luxury brands at the clothing store, drive luxury automobiles like Mercedes Benz and BMW – or similar facsimiles at fractional prices - and even buy a home that is described as ‘luxury.’

In fact, the L word designation is everywhere in advertising, as a recent survey approximated that the word ‘luxury’ comes up in 34% of real estate listing descriptions, up to 42% of appliance and furnishing ads, and 26% of clothing marketing. Googling a query like “How to write real estate descriptions that sell” will yield list after list including the words “luxury”, “distinguished,” “quality”, “exclusive”, etc.

So if we cast aside the watered-down marketing version of ‘luxury,’ what does it really mean? What should it represent?

The Oxford Dictionary defines ‘luxury’ as:

A state of great comfort or elegance, especially when involving great expense;

An inessential, desirable item which is expensive or difficult to obtain;

[In Singular] A pleasure obtained only rarely

When it comes to high-end and top-of-the-market homes, what makes a home ‘luxury?”  Is it merely having an abnormally steep price tag? Cavernous square footage? Fancy amenities that you don’t find in typical homes? All of those things may factor into luxury homes, but the certainly don’t define them – not in an age when high-end materials like vanity sinks and chandeliers are mass produced and offered at rock-bottom discounts at places like Home Depot and Ikea.

Too often, builders and home sellers take advantage of the public’s thirst for status and a superstar lifestyle, purposely including certain features that we associate with luxury, but are little more than a façade or marketing gimmick.

Likewise, adding expensive and frivolous features and fixtures to a mid or even up-market home doesn’t automatically propel it to the rarified air of luxury. Custom swimming pools, wine cellars and electronic self-closing blinds are great, but they are still no substitute for class.

But before we start defining luxury as a certain je ne sais quoi as the French say - that certain indefinable something - there are tangible elements we can pinpoint that most luxury homes enjoy.

1. Neighborhood:

The Locationx3 adage is a real estate cliché, but it’s also never been more true. You just KNOW when you’re in a luxury neighborhood – and so does everyone else. Over the last housing boom of the early 2000s, too many people bought into the dream of living in a luxury home and community by purchasing new(er) construction that had all of the bells and whistles. But research shows that established and mature homes and neighborhoods are actually of a higher building quality and retain their values better, as they have more long-time owners and a well-established exclusivity.

2. Uniqueness

It’s very rare that luxury homes are homogenous with the rest of the homes in the neighborhood. They have unique characteristics, architecture, and design that set them apart and are hard – or impossible- to replicate. Beware of McMansions and “semi-custom” homes that builders slap up and then adorn with fancy facing and certain high-end amenities just to justify a higher price tag, but are basically still cookie cutter. When you are looking into any luxury home, it’s important to research the builder, ask around about their reputation, other projects they’ve completed, and make sure there is a unique “story” to the architect, the home, or the community that sets it apart.

3. The little things

If God is in the details, then take a close look at the small details in a home; if unequivocal quality extends to small touches like the millwork, doors, hardware, cabinets, fixtures, appliances, tile, grout lines, etc. then you know you’re surrounded by luxury. Our eye always gravitates towards signature show pieces like grand chef’s kitchens and dazzling room-size showers, but in a luxury home, the quality of construction and use of top-end materials and amenities won’t be compromised at all down to the smallest detail, even those people rarely see or use.

4. Views

No matter where you are, most truly luxury homes have some sort of great view to set your eyes upon. Whether it be ocean and coastline, hills and valleys, a beautiful garden, park, or fountain, luxury homes that just stare out at the home across the street are almost unheard of. For this reason, authentically luxury homes are usually at higher elevations than their surroundings, or right on the waterfront.

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Tune in for part two of this blog with the rest of the top 10 things to look for in a luxury home.

The Luxury Report; High-end real estate by the numbers

When it comes to the housing market, real estate prices, sales activity, and market trends vary greatly depending on the neighborhood you’re in. But there is another segment of the market that is usually a completely different animal than typical residential home sales: luxury homes sales.

Here is a synopsis of the current state of luxury home sales in the U.S., and also in the Greater Sacramento region.

This data is based on a survey of 22,922 luxury homes that are currently on the market in the U.S. These luxury homes are all listed for at least $500,000 in the top 10 zip codes in 31 major metropolitan housing markets around the U.S.

To put these numbers in perspective, the median list price in Sacramento is now $269,900, with an average price per square foot of $186 and

$1,519,677

Median listing price for all luxury homes.

$393

Current median price per square foot for all luxury homes for sale.

176

Average days on market for all current luxury home inventory.

33%

Percentage of listed properties that have had at least one price reduction.

12%

Percentage of properties that were relisted, effectively resetting their DOM (Days o Market)

4%

Proportion of luxury homes that were flipped – or fixed up and relisted.

1,627

Average number of luxury homes that sell each week

2,190

Average new listings per week hitting the luxury market.

3,845

Median square footage of all luxury homes for sale

0.50 – 1.0

Property size in acres of median luxury home for sale

28

Age of average luxury home for sale

8%

Percent of luxury homebuyers with household incomes of $200,000 or more

9%

Percent of all buyers who purchased luxury homes worth $500,000 or more

10%

Percent of buyers who purchased home with 3,501 or more square feet

28

Market Action Index rating for the luxury housing market. Any rating below 30 means it is a buyer’s market, but at 28, it is still relatively balanced

$915,865

Median price for all luxury homes in Sacramento, El Dorado, Placer counties and Lake Tahoe. (The Greater Sacramento region.)

2,844

Median square footage for all luxury homes in the Greater Sacramento region.

316

Number of luxury homes for sale in the Greater Sacramento region.

23

New luxury listings per week in the Greater Sacramento region.

25

Luxury homes sold weekly in the Greater Sacramento region.

195

Average days on market for all luxury listings in the Greater Sacramento region.

The luxury real estate market is roaring back - but will you tame it or get bitten?

In our wild jungle of real estate, the luxury home niche is definitely the lion, king of all the land.  The days of high-priced homes sitting vacant and gloomy are certainly gone, as a recent survey by Realtor.com reports that 13% of consumers are ready to buy a luxury home.  That data comes from the total number of home shoppers, as we see our real estate market transition from recovery mode to red hot, once again.   Another 26% of poll respondents are considering purchasing a high-end home, typically priced at $500,000 or above, though price tags vary per location.  That leaves only 61% of transaction-ready homebuyers who are NOT considering purchasing a high end or luxury home, an astounding statistic.

Why is that so relevant?  As we found out with past real estate booms, a huge market factor is consumer confidence, and all evidence points to huge confidence in the market.  When that happens, prices always follow – great news for the housing portion of our total real estate recovery.  Even as interest rates rise a little as the Fed backs off intervention, a forecast of stabilization is fantastic news.  It’s also great news for sellers, who are looking to move their luxury or high end home, sell and then upgrade, or even sellers of more modest homes who can match some of the amenities found in luxury homes to make their homes more attractive. 

The Realtor.com survey revealed that valuable of the respondents who were ready to buy a home:

The reasons buyers started their high end or luxury home search:

19% attributed recent career success to why they initiated the home buying process.

A substantial 17% were buying because they were newly retired. 

14% said they were buying as an investment.

12% were buying their first home, a high number in the high-end market.

The biggest challenge high-end and luxury homebuyers cited:

40% said that finding a property that met their family’s needs was a challenge.

20% said the limited number of properties offered was an issue.

11% said properties had limited universal appeal.

8% cited challenges with getting a mortgage loan.

The most important features of a home they considered for their luxury purchase:

54% said having a chef’s kitchen was important.

44% wanted a home with a view of the ocean, mountains, cityscape, etc.

Interestingly, only 38% said the square footage of the property was a key attribute, a number that is probably much lower than home buyers only five or ten years ago.

36% wanted an expansive master suite.

What about those 61% of respondents who did NOT want to buy in the high end or luxury market?  If they had the means to purchase in that market, they’d look for a home with a great view and a chef’s kitchen, but also outdoor living amenities and a pool.  Waterfront homes would be the most desirable, followed by countryside and then in the mountains. 

A lot of top shelf home buying is taking place in the Northeast and South Atlantic coastal states, but 15% of luxury homebuyers are currently looking in California, Oregon, Washington, or Hawaii.  The number of California homes selling for $2 million or more reached an all-time high last year.  In year over year appreciation from 2012 to 2013, Los Angeles saw 14% appreciation and San Francisco 10.4% - big movement on already big numbers in a market where fewer buyers and a delayed wave of foreclosures softened things.  This year alone, price reductions on luxury real estate listings have totaled 14% as inspired sellers compete for luxury buyers.  Of course, that’s great news for high-end homebuyers, who can basically but 20% more home for the same price tag as they did only two years ago.

There are several reasons for that – jumbo loans are gaining in prevalence and popularity again, and interest rates on these high-dollar homes are favorable.  A strong job market among metropolitan areas is another factor.  International buyers are playing a big part, particularly Chinese investors who are snatching up luxury homes, vacation homes, and commercial properties.  From April 2012 to March 2013, international transactions tallied $68.2 billion, accounting for 6% of all U.S. home sales in dollars and more than 4% of total transactions.  63% of these are all cash deals and international buyers spend more, too – an average of $354,000 per home compared to $228,000 for their domestic counterparts. 

What does this all add up to?  Great news for luxury homebuyers, who are in position to take advantage of the perfect storm of market factors to obtain their dream home.  And for sellers, don’t try to stick a sign in your front yard and hope that high-end homebuyers show up to your open house – luxury homes should be listed and marketed differently than just any house.  Buyers are more tech and Internet savvy, put far more diligence into their decisions, and negotiate aggressively.  It takes an experienced agent who specializes in the luxury market to sell your home effectively and for top dollar. 

Contact us if you're interested in buying a high-end home or selling your luxury property.

Luxury home foreclosures mean bargains galore for some buyers.

When you think of foreclosed homes, you never envision this: Albemarle, the super luxury mansion in Charlottesville, Va., recently went on the auction block after its owner, billionaire-wife Patricia Kluge, defaulted on the properties loan.  The 45-room estate, including gun room, helipad, wine grotto and of course a silver vault, was once valued at $100 million, but Bank of America snatched it up for a pittance, $15.3 million. 

As of late, this story of property riches to rags is becoming more common as foreclosure in the ultra-high-end segment of real estate have jumped by 61% since just last year.  Also called the “super luxury” market, it’s defined by homes worth more than $5 million, owned by some of the wealthiest people in America.  That adds up to unprecedented opportunities for buyers in the upper echelon of our real estate market, who see mansions and estates with price tags a fraction of what they’d expect to pay only a few years earlier. 

That 61% increase in super luxury foreclosures comes at a time when overall foreclosures are way down – falling 23% in that same timeframe.  So the high-end wave of defaults is occurring at the 11^th hour, as almost every sector of real estate worked through most of their defaults and foreclosures since 2008’s market crash.  But the luxury market always remained bulletproof in the past, with very few foreclosures up until now.   As of 2010, foreclosures were still a middle class issue, with less than 1.5% of the 38 million foreclosures on properties with million dollar loans or more.

There’s a bigger story behind that 61% increase, however.  Many owners of high-end foreclosures have been in default for a year or more before the bank takes action.  Wealthy homeowners typically have the means to stay current on their mortgages but they also have far greater leverage when negotiating with the bank, that know it’s much harder to resell a luxury home if they took it back – and more costly. 

Recent surveys reveal that nationally, more than 1 in 7 homeowners with a loan of over $1 million are at least 90 days behind on their loan, compared to 1 in 12 for all homeowners.  In addition to the lag times of foreclosures on such opulent homes, it’s believed that wealthy people are more likely to walk away from their mortgage obligations based on calculated business decisions.  Another contributing factor is the changes in the mortgage lending landscape.  Jumbo loans and super jumbo loans have been clipped to near-impossible availability compared to the height of the real estate boom, so banks know there are few possible buyers for these properties, and they’ll expect huge discounts.  The result is luxury homes around the country with asking prices 50% or more below the former price tag.

Analysts also point to indications that the banks are healthier now as well as seeing rampant real estate appreciation, so they’re finally able to address the albatross of super luxury defaults and absorb those losses.  They can add up much bigger than just a loss on the sale because these properties often have significant damage from vandalism and lengthy vacancies, high costs to hold and maintain the properties after the foreclosure process, and steep tax bills and sometimes lawsuits or liens.

Where are these super luxury deals?  California and Florida mostly, with those two states accounting for more than 50% of all multi million dollar listings nationally.  The Miami-Fort Lauderdale has the highest number of those foreclosures with the Los Angeles-Long Beach area second.  What’s remarkable is that Miami saw a 488% increase in foreclosures overall while L.A. experienced only a 3% bump.  Beverly Hills, the 6^th most expensive zip code in the U.S., saw a whopping 700% increase of foreclosures on homes over $2 million in the last years.  Between 2009 and 2010 total U.S. foreclosures only jumped 2% but homes worth $3 million and up saw a 35% increase in the 90210, 56% in Laguna Beach, and 65% in Pasadena.  Other areas that have experienced this same trend are prestigious areas of Atlanta, Orlando, the NY City area, and some pockets of New Jersey and Pennsylvania. 

While our Sacramento and Placer County have far less super-luxury, or even million dollar listings, the same ripples can be seen in the pond of our high end of our market.  There is no better time for buyers who are looking to cash in on the wave of foreclosures, defaults, and short sales on the nicest homes money can buy.  They’ll just need a lot less of it these days.   

10 Tips to stage your high-end listing.

Selling a high-end or luxury home is about so much more than a transaction, it’s a transference of lifestyle values, the marketing of an image of prosperity and taste as much as a roof and walls, and the presentation of your home should be treated accordingly.  Staging your home attracts buyers, creates bidding wars, differentiates your home from others for sale, and ultimately will put dollars in your pocket.  A recent study by the Real Estate Staging Association tracked 174 homes for sale in 2011.  Those that were staged sold in an average of 42 days, while those who were left unfurnished lingered on the market for 154 days!  We recommend enlisting the services of a staging specialist or designer, which we can help you find.  You may have to spend a little money to make money but if done correctly, the results always work in your favor. 

1. Clutter free.

The cardinal rule of staging your home to sell is to clear the space of as many of your personal effects and items as possible, leaving the area open and flowing when viewed.  Buyers who walk through will love this because they can instantly envision themselves living there and their own personal affects in the house.  Remove absolutely everything that isn’t essential to decorating the property or a highly personal nature (they don’t need to see framed photos of your family but they do need to see some artwork on the walls.) 

2. Paint in neutral colors.

One of the biggest mistakes sellers make is keeping bright or noticeable paint colors on the walls.  The aim is to keep everything as neutral as possible so no matter what the buyer’s tastes, they’ll feel at home.  Dark, brooding, colors or accent walls are a no-no, too.  Stick to an off white or light tan color and white moldings and you can’t go wrong.  Once you declutter and paint with neutral colors you’ll be amazed how much bigger and airy your home feels.

3. Don’t forget to stage outside.

Remember that people will drive onto your property, up the driveway, and walk to your front door first, so that’s when the first impression should start.  De-clutter the outside of your home, hire a professional landscaper to make everything look tip top, and consider a tasteful signature piece like outdoor sitting area, fountain, or other decoration.

 

4. Original artwork.

If you really want to convey the image that your high-end listing is unique and valuable, consider hanging original art as you stage.  Everyone’s seen prints by famous artists so decorating with those comes off as a little cheap and unsophisticated.  Instead, track down some original artwork that will add a dynamic visual detail and lead the buyer to take notice.  Your professional stager will probably have some great original artwork or you can contact nearby galleries and ask for a loan to help promote their work (the buyer might even want to buy it if they like it!)

5. Designs that tell stories.

When you walk into your favorite gourmet restaurant, you go to enjoy an experience, not just good food.  Same thing when you go to the nicest golf course or to a luxury hotel.  It’s the same thing with your listing; you want the buyer to have an experience as they walk through and the way you do that is by telling stories.  Incorporate local and historical items that have some history, antiques like old books, and other rare or interesting finds that are easy on the eyes but will spark conversation and contribute to the buyer’s perceived experience that your home is something special.

6. Mix it up. 

We’ve talked about your listing being neutral and free of clutter, but that doesn’t mean we want it institutional or lacking personality.  Now that we have the “canvas” ready, we’re going to bring in stimulating and diverse elements that will really pop and catch the buyer’s eye.  A well-orchestrated symphony of fabrics, curtains, finishes, area rugs, textures, pillows, candles, and flowers will turn your home into something special.   This is a good time to reassess your fixtures and lighting, too because it’s usually easy and not pricey to modernize, simplify, those elements.

7. Get it out of there.

To be clear, when we told you to declutter we didn’t mean to move everything from your house to your garage.  Buyers look for cues of quality as they’re walking through a listing – the little details that convey who you are or what the quality of the property.  One of the best ways to show how you live is to have the garage 100% clean and spotless.  I’m serious – boxes, bikes, skis, bins – it all needs to go and you should clean it exceedingly well.  People expect a dark, dusty, packed garage, so when they walk in and see it’s been as well treated as the rest of the property, that will make a statement.  This goes for all of your closets, too.  The best thing you can do is rent a storage unit and keep everything in there in boxes but DON’T fill up closets to the brim or pack your garage with the clutter.

8. Don’t match!

Good stagers and interior designers understand the elegance of utilizing cohesion without uniformity.  Rarely in a luxury home or high-end listing will you see furniture set that all matches.  Instead, you want elements - from the couch to the tables to the lamps – that complement each other but each have their own contribution to the je ne sais quoi, as the French say.

9. Culture sells.

One of the best ways to convey a feeling of class and quality in your home is to exhibit a few cultural or artistic items.  No one cares about your huge big screen TV, but having a baby grand piano, stand up bass, rare books, or telescope in your home shows an affinity for culture that is consistent with buyer’s perception of luxury. 

10.  Paint and plant.

If in doubt, or pressed for time or on a limited staging budget, the best thing you can do outside of decluttering is to focus on painting your interior walls a neutral color, your front door, (and shutters if you have them,) and plant colorful flowers, small trees, and soothing potted plants. 

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I'f you'd like a complimentary analysis of your home's market value or some tips on staging before you list, feel free to contact the Alfano Group Real Estate.