Study reveals high-ticket home market on upswing nationwide

Feb. 12, 2006

Study reveals high-ticket home market on upswing nationwide

By JAMES M. WOODARD
COPLEY NEWS SERVICE

A new study has revealed where the most opulent luxury homes are located, and what they're selling for in the current market.

As for location, most of the highest upper-tier homes currently for sale are in three states: California, Florida and Colorado, in that order. California has 183 of the multimillion dollar homes on the market, Florida has 174 and Colorado has 92, according to the "1,000 Most-Expensive Homes" study and report by Ultimate Homes Magazine

The price paid for the most expensive home during the past year was $125 million. That is what Donald Trump paid for his Palm Beach mansion. That breaks the previous year's record high price of a paltry $75 million.

The total of all listing prices of these for-sale homes is a mind-boggling $13 billion. New York has the greatest number of super-expensive homes: 333. Most of them are in the Manhattan area.

The report pointed out that there are now a million homes in the nation valued at more than $1 million. The number of agents specializing in the sale of luxury homes is about 700. The smallest state with a significant number of multimillion dollar homes is Connecticut with 38.

"We not only wanted to make the second annual study bigger and better than last year, but also wanted to reflect the recent growth at the highest end of the luxury real estate market," said Rick Goodwin, publisher of Ultimate Homes and its sister publication, Unique Homes. "Demand for these homes is there. The nine-figure price tag for the Trump property is indicative of a new scale of consumption, one where billionaires are concerned with differentiating themselves from mere millionaires."

The magazine's study revealed some other interesting information. The majority of million-dollar-plus buyers, for example, are entrepreneurs (76 percent), who usually pay all cash. Most of them are active collectors of art, cars or antiques.

Spanish - Mediterranean ranked as the most desired style of luxury homes. Preferred locations are those that clearly differentiate an $8 million-plus home from one that is only a few million. Once hot-button amenities now out of favor with luxury buyers include Jacuzzis and hot tubs, marble and granite, and media rooms.

The majority of upper-tier brokers say a home priced above $8 million takes up to 19 months on average to sell. Luxury-home brokers report that when working with married couples, the wife has more say in the decision to purchase.

Q. Is investing in commercial real estate becoming more populará

A. Yes, commercial real estate is becoming the investment of choice for increasing numbers of individuals and families. More than $170 billion in commercial properties was acquired by investors in 2004, up from $120 billion in the previous year, according to the firm of Cushman & Wakefield. That reflects a 41 percent increase in sales volume in one year.

The uncertainties of stock market investments are driving many investors into real estate holdings. Also, with occupancy rates climbing, purchasing investment properties is looking better all the time.

Leasing activity is also on the rise. The increase in leasing commercial properties has led to a decline in the overall vacancy rate in these properties.

"Leasing fundamentals are clearly strengthening, and we expect them to improve in coming months," said Will Marks, a real estate analyst with JMP Securities.

The demand for commercial real estate is hot, with new capital sources popping up every month, it was reported by Real Capital Analytics. Foreign as well as domestic buyers are on the increase.

"Investment in commercial property is up substantially across all groups of buyers, and new sources keep emerging," said Bob White, president of Real Capital. "This capital is far larger in magnitude and less cyclical in nature."

Q. How can land investors generate cash while holding their propertyá

A. Among the growing number of real estate investors are those who acquire land parcels. Many of those landowners are discovering income-producing uses for their land as they wait for its value to appreciate.

Some landowners are leasing their property for recreational uses.

Those recreational uses include hunting, fishing, boating, camping, four-wheeling, bird-watching and more.

"People who lease their land often enhance the property at the same time with such lessee-paid modifications as cabins, deer stands, and wildlife habitat and road improvements," said Lee Vermeer, vice president of real estate operations for Farmers National Co., a farm management company.

"These improvements increase the value of the property at no expense to the landowner. And because of their investment, lessees tend to care for the property as if it was their own and keep trespassers away

The recreational leasing industry generates more than $624 million annually in this country and that figure continues to grow.

Send inquiries to James M. Woodard, Copley News Service, P.O. Box 120190, San Diego, CA 92112-0190. Questions may be used in future columns; personal responses should not be expected.

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