The road to a full recovery has been a slow one for Luxury Homes. For the purpose of this review as This definition has been overlain on the geographies including Alamo, Blackhawk,
with my last, I have defined Luxury Homes to include homes that are 5000 square feet and larger sitting on a premium lot that is between ½ and 1 full acre, equipped with a pool.
The Luxury Home Market bottomed in 2010 both in terms of average price and dollars paid per square feet. At that time you could have bought a 5,800 square ft. home for an average price of about $1.9 million with a value of $327 per square foot. Those prices were nearly 30% below the current market for a Luxury Home and 14 lucky bargain hunters snagged one.
I’m frequently asked, “Are we in a bubble?” I don’t think so. In order to match the 2007 peak, Luxury Home prices will need to rise another 20% and at the current rate of growth we have some way to go before we even get close.
Although the line of ascent since 2010 has not been perfectly straight, it has for the most part been steady and I believe it is gaining strength. Sales are happening faster. Days on market stand at 42 and are 25% less than 2013 and roughly a third of where they were 2012 at 154. Currently, through June 20, 2014, a total of 7 Luxury homes have sold. The prices are roughly the same as they were for the entire year in 2013, suggesting no great improvement over last year.
Encouraging, however, is there are 3 homes pending sale, hinting that this year will have more Luxury Home sales than last year. The Luxury homes that are pending sale are carrying a list price of $3,055,000 and an average square foot price of $463. If those prices hold, it is likely that 2014 prices will eclipse 2013 prices.
It should be of interest to anyone who follows the market that 15 Luxury homes are currently for sale and they are carrying an average list price of $3,610,905 and a square foot price of $556. That is very aggressive pricing compared to the current market. If these homes were to close at list price, their average price would exceed the 2007 peak by 24%. That, I believe would be unlikely and I think would definitely indicate a bubble. I just don’t think we are there yet.
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