Why luxury real estate is booming in Sacramento!

As Sacramento real estate prices remain as hot as the summer temperatures, a certain segment of the market stands out more than any other: luxury homes. In fact, luxury real estate is booming in Sacramento, Placer, and El Dorado counties, with skyrocketing sales volume and price appreciation numbers that would be considered solid for a year, yet alone a couple of months.

Far from the overinflated high-end prices during the real estate bubble a decade ago, strong financials and market causation serve as a strong foundation for luxury homes in the region. 

We’ll share plenty of data that show how the luxury home market is booming, but first, let’s examine some of the underlying reasons for the strong showing: 

The Sacramento area is exhibiting favorable financials, with steady job growth and a noticeable boost of energy from downtown revitalization and the new arena. Interest rates still near historical lows, with buyer demand remaining high, exerting upward pressure on prices. However, there are far more homebuyers than sellers – and that’s even more pronounced in the luxury market, where it’s estimated there are four buyers to every one home for sale! 

But there are two more interesting factors that are driving the top of the price range in the area. Bay Area residents are jumping into the Sacramento, Placer, and El Dorado markets like never before, scooping up luxury homes at a high rate. 

Sacramento also has more move-up buyers, as steady equity gains over the last five years have allowed more people to sell their homes and springboard to a more expensive or luxury homes.

Here are 25 more data points that show how luxury real estate is booming in Sacramento:

1. While the definition of a luxury home may waver based on the area of the country we’re looking at and the home prices in that area, a luxury home in the Sacramento region (Sacramento, El Dorado, and Placer County) is typically classified as $900,000 or more. 

2. If we examine all luxury homes sold in the second quarter (Q2) of 2016, the average sale price was a generous $1.219 million.

3. Trendgraphix Inc. tracked the 177 luxury homes that sold in the greater Sacramento area during Q2 of 2016. 

4. They found that 177 luxury home sales was an increase of 5% from the same Q2 of 2015, and up a whopping 74% from Q1 of 2016.

5. In the same four-county Sacramento region, 101 luxury homes sold in from January to March of this year (Q1), which represents a 65 percent increase in volume from Q1 of 2015. 

6. During Q1 of 2016 there were 52 single-family luxury home sales that closed this year, compared to only 32 luxury transactions in Q1 of 2015.

7. 34 single family homes sold for between $1 million and $2,499,999 in Q1 of 2016, which was a significantly 80% increase in sales volume compared to Q1 of 2015 when only 19 sold.

8. In the same period this year there were 12 luxury homes that sold for $2.5 million to $4,999,999, close to double the number from the 7 sold in Q1 of 2015.

9. Luxury homes are hitting the market like never before. The current average list price of luxury homes in the Sacramento region during Q1 was a sizable $1,507,000. 

10. Closed sales for luxury homes in that same period averaged $1,212,000, which is well above the $900,000 entry point we set to be considered a luxury home.

11. But that price range dominates the luxury market, with 87% of all luxury homes sales in Q1 sold for $900,000 to $1.5 million. 

12. The uptick in luxury home sales actually started during Q4 of 2015, with a huge spike in high-end real estate transactions at a time of year when home sales are typically very slow.

13. If we set Sacramento County aside for a moment and just look at El Dorado and Placer Counties, what does the luxury home market look like? 

14. El Dorado County saw 344 escrows closed in June, which was a 10.6% increase from June of 2015. The median sale price in El Dorado was $425,000 in June, which was a healthy 11.3% increase from the previous year.

15. In Placer County, 798 real estate sales closed in June, which was almost identical to the number in June 2015, though the median price went up 5.9% to $423,000.

16. Sacramento County reported 2,090 closed escrows in June, a modest 3.1% increase from June of 2015. But home prices saw a big boost, jumping 10.7% year over year to a median price of $310,000.

17. Breaking down the market by zip code, here are the areas that registered a median price increase in the past year of:

More than 25%:

95650

95838

95822

+15% to +25%:

95663

95677

95746

95662

95673

95821

95824

95742

18. In many ways, the data on home sales in the luxury market mirrors trends in home prices in among all homes in Sacramento. For example, current median resale prices in Sacramento County hit an average of $310,000 in June. That’s a change of +$5,000 from only a month earlier in May and a jump of +$30,000 from June of 2015. 

19. Sales volume rose 3% during that same period to 2,090 single-family resale homes closing, which was the highest volume in eight years.

20. The $310,000 benchmark the highest level in almost nine years, since August of 2007 when prices hit $314,000.

21. (For reference, the highest point for Sacramento home prices was $374,000 in August of 2005.)

22. Like we mentioned, rising home prices in the Bay Area are starting to significantly influence luxury home sales in the Sacramento region. With a median sale price of $643,200 as of March of 2016, an inexplicable 5.5% jump from only one month earlier, affordability is beyond reach for many people. And that door is completely closed for a good portion of people in San Francisco where the median sale price in March was $1.13 million, up 5.7 percent from a year earlier.

23. With home prices like that, it makes perfect sense for some Bay Area residents to start buying in Sacramento, whether as an investment, in semi-retirement, or to make the reverse commute. Data shows that the high home prices in the Bay does create “spillover” into the luxury real estate market in Sacramento, Placer, and El Dorado.

24. Not surprisingly, the high-end home sale numbers from North Lake Tahoe/Truckee often represent the top range of home prices in El Dorado and Placer County. 

25. In fact, single-family luxury homes sold at a 62% higher volume in Q1 2016 than a year earlier. Home prices typically go over a million dollars in that region, and the most expensive home sold in the whole region was a $7.18 million six-bedroom home with more than 6,000 square feet!

Defining luxury; what you should look for in a high-end home (Part 2)

How might we define 'luxury?' 

Instead of offering a host of superlatives, let me tell you a story about Rolls Royce. Perhaps the most notable luxury brand in the world, Rolls Royce is known for their art-in-motion automobiles, distinguishable not only be their performance and details but a unique emblem gracing each and every hood – a statue of a woman who appears to be launching into flight. 

But most people don’t know that the women is actually someone named Eleanor Thornton who was the love of Lord Montagu of England’s life.

But when they were sailing on a steam ship from Marseille on Christmas 1916, a torpedo shot from a German U-boat struck the boat. In the chaos that ensued, Lord Montagu tried to hold on to Eleanor, but she was swept away by the sea as the ship sank. Montagu survived only be clinging to a broken lifeboat in the cold seas for 32 hours without food or water. Even though his beloved Eleanor was surely perished, he spent his days and then years looking for her, frail and infirm from the ordeal but unable to let go one more time.

Years earlier, Montagu had taken his Rolls Royce out for drives along with Eleanor and his good friend, who was the managing director for the fine automobile company. So it was Eleanor Thornton who became the inspiration and model for the Rolls Royce hood ornament and logo we still see today, called the “Spirit of Ecstasy.”

Thus, Rolls Royce has become the icon for luxury, not just because if the performance of its cars but because of the unwavering passion, dedication, and timelessness the brand conveys, telling a story about the person driving it that goes far past bravado over a price tag.

Luxury brands always convey a legacy, and that is true for luxury homes as well. But how can we tell if a house holds those same spirited qualities as Rolls Royce, aside from just sharing a sizable price tag and some fancy amenities?

In part one of this blog, we covered the first four ways we can define authentic luxury when buying a home, and here are the next six:

5. Natural light

Homes that can be truly considered luxury are built by accomplished architects that consider every detail – including the dispersion of natural light. There is a big difference between standing in your kitchen in the morning while you sip your first cup of coffee and the soft glow of morning light gently bathes your kitchen, compared to being sun-blinded in a kitchen that’s ten degrees warmer than the rest of the house by 730 am. A home correctly equipped to accept natural light at certain angles and times of day not only looks bigger, but more open, inviting, and is proven to be perceived as more “homey” and boost the mood of the owner. But that’s a more intricate science that it may seem, with varying seasons and the need for shelter from direct sun in hot summer months. The discussion of natural light also brings us to windows in high-end homes, which should always be of the highest quality double-paned low UV glass, which protects against weather, noise, lowers energy bills and maintains safety.

6. Reputation

This may sound like something subjective and inconsequential, but a community, builder, architect, or even whole city that enjoys a sterling reputation will always be desirable, and therefore hold its value. When investing in a luxury or high-end home, it’s equally important to do your due diligence on the architect and the builder as well as survey the actual home. But don’t stop there, as news stories, crime rates, school systems, nearby housing subdivision, and planned commercial projects all factor in to your neighborhood’s reputation.

7. Ceiling height

One thing to check for when you’re touring luxury homes is the ceiling height. In fact, a survey of high-priced homes across the country reveals that ceilings in luxury homes are almost never standard height, and there is a correlation between high ceilings the higher the home’s intrinsic value. It’s interesting to note that this virtue extends only up to about 14 foot high ceilings, after which the price tag sees only diminishing returns.

8. Layout

Distinguished dwellings are always functional AND aesthetically pleasing, and the layout of a home’s floor plan is a huge testament to that. Long gone are the days of calling McMansions “luxury” just because they occupied gaudy amounts of square footage. But true architectural refinement allows you to always FEEL like you’re in a bigger space, specifically designed for its intended purpose but within the flow of the entire blueprint. Some areas like dine-in kitchens and great room living spaces will be purposely open and unobstructed, while offices, dens, master suites, media rooms, and guest rooms are typically segregated and feel cozy, yet still spacious.  

9. Amenities that matter

An immense built-in fish tank, faux balconies with ornate ironwork, and a hexagonal shaped swimming pool with a three-story water slide? Those bells and whistles may seem enticing if you just hit the lottery, but true connoisseurs of the finer things in life are able to discern which amenities really matters in a home. Research shows that luxury homes should focus on fully functional fitness rooms, a distinguished office, fireplaces, innovative and practical use of storage, indoor/outdoor living areas, spa-like master bathrooms (those never go out of vogue!) and green and smart tech.

10. Land

Speaking of McMansions, homes that aspire to be luxury often check the box on square footage but fall comically short on land. Gardens, outdoor living areas, sports amenities like basketball and tennis courts, horse stables and pens, and even acreage reserved for wildlife, streams, lakes and ponds, and unbridled nature are often hallmarks of luxury estates. Even if you live in an area where acreage is at a premium (like many parts of California!), higher-quality homes separate themselves from the pack with relatively ample land.