Posted date: 2/8/2010Market Stabilization Brings Renewed Interest in High-End Homes
REAL ESTATE: Building Plans for Upscale Properties Begin to Gain Momentum
The market for high-end homes costing more than $800,000 has slipped since the end of the housing boom, but builders say there are increasing signs of a turnaround.
“The market in my mind has stabilized,” said longtime San Diego builder Bill Davidson, president of Davidson Communities. “It is not falling like it was last year, and that is very important. No one wants to buy a house when they think the market is falling.”
With prices stabilizing, Davidson has begun to prepare for a real estate rebound.
“We are actively trying to buy more land now because we can price our homes profitably,” he said.
His company has upscale production homes under construction in La Costa and Del Sur in North County. They range in price from the $700,000s to more than $1 million. Tight credit has made it more difficult for upper-end buyers to secure loans, however. Conditions were much different just a few years ago, when loan underwriting standards were looser and customers bought big homes “with all of the gadgets and luxuries that we could pile on,” Davidson said. Since the recession hit, high-end buyers have been seeking smaller, simpler dwellings.
At McCullough-Ames Development Inc., Principal Monty McCullough typically builds custom $1 million, estate-style homes on 1-acre lots. Most of the firm’s recent projects are in North County, near the coast and along the state Route 56 corridor, between the Del Mar area and Poway. Even these buyers are looking for ways to stretch a dollar. McCullough presses his subcontractors for the best prices and passes the savings along to customers.
“Everybody has been hit by the recession,” he said. “… I felt my business starting to tail off by the summer and fall of 2004. Since the spring of 2009 we have built 15 homes, under contract or just finished.”
Scaling Back On Size
Like Davidson, McCullough said his customers are downsizing a bit.
“The average home is right at or under 5,000 square feet,” he said. Not long ago, 6,000-square-foot to 9,000-square-foot homes were common in the custom market.
Custom builder Terry Wardell of Wardell Builders Inc. estimates that the size of the upper-end market had declined by about 50 percent from its peak. Wardell builds most of his homes in La Jolla, Del Mar, Rancho Santa Fe, Point Loma and Mission Hills.
“I think 2010 will be stronger than 2009, but it is still going to stay pretty flat,” he said. “Construction prices probably are 25 percent off their peak.”
Analyst Russ Valone, president and CEO of the MarketPointe Realty Advisors research firm, has been tracking $800,000-plus home sales. In 2005, such homes made up 49 percent of the detached housing market here. In 2006, the percentage was 44 percent. Last year, the share was down to just 20 percent.