Posted on: Friday, July 4, 2003
Baby boomers drive luxury home sales
By Steve Kerch
CBS MarketWatch
| So do you want a porte-cochère along with garages for 6 cars? So what do today's luxury homes have to contain? These are the hottest amenities, according to a panel of Chicago-area custom home builders: 1. High-tech everything. Whether they need it or not, luxury home-buyers are insisting that their houses be wired for the latest gadgets, from high-speed Internet access to elaborate lighting and security systems. "I'm building a house for myself and I'm not a computer person. But I'm forced to put all this in because it is what people expect to see in these houses," said Charles Page, an architect from Winnetka, Ill. 2. Plasma televisions. One will do nicely on a full wall in the lower-level recreation area. But there probably will be two others in the main family room and master bedroom. 3. His, hers and theirs computer rooms. He needs one for when he brings work home from the office, she needs her own because she runs her business out of the house and the kids have to have a separate one so they don't show up the parents on all the new computer games. 4. Sub-Zero and Viking appliances. They're now considered the luxury standard. You might want to consider a commercial-grade, walk-in refrigerator, said Keith Jacobs, president of Jacobs Homes in Deerfield, Ill. 5. Pot fillers over the range. For pasta lovers, it makes sense. Your kitchen will also have to have a built-in coffee station, a sculptured hood over the cooktop, heated floors, dust ports built into the toe kicks of the counters, three or four ovens, multiple dishwashers, refrigerated and warming drawers, two-temperature water dispensers and copper (or concrete or wood) countertops. 6. In-home theaters. Don't forget the popcorn machine. 7. Wine cellars. But they don't have to actually be in the cellar. Many homeowners are making them into art statements in the main living areas of their homes, Jacobs said. 8. Panic rooms. Despite the difficulties encountered by Jodie Foster's character in the movie of the same name, panic rooms that can hold safe documents and valuable items — not to mention your family in case of a disaster — are a must. 9. An outdoor "room." It will need a kitchen of its own, with fountains, maybe a waterfall, a fireplace (or firepit, as the case may be) and an adjacent pool and spa. 10. A six-car garage. Why stop at four or five? Tim Grogan, executive vice president of Residential Homes of America in Lake Bluff, Ill., said the custom garage isn't just about space for cars, but about functional rooms with built-in auto racks, specialty lighting and epoxy-coated floors. You might consider the design option of a three-car garage that you can drive through to your porte-cochère, where you'll find the other three-car garage. 11. A screened porch. Forget the sunroom. "No room is nicer in the house than the screened porch in nice weather," Page said. |
Across most of the United States, even in a soft economy, there are still a lot of people who don't have to ask.
"In high-end, luxury living, we've found that if you have the right site, the right location, regardless of the economic conditions, you are going to sell that property," said George Page, president of the Tower Division of luxury homebuilder WCI Communities.
The definition of what constitutes a luxury home differs by location.
In Youngstown, Ohio, $550,000 will buy you a four-bedroom, five-bath, 4,500-square-foot home on better than a 100,000-square foot spread. In Yorba Linda, Calif., the same money will get you a four-bedroom, three-bath, 2,300-square-foot house on a 7,500-square-foot lot.
Yet both might be considered luxury housing.
"Luxury is no longer a matter of price, but of choice," said Mark Farrahar, a custom homebuilder in Chicago's suburbs. "Luxury doesn't mean size anymore, either, but luxury appointments. You don't have to have a 5,000-square-foot house to say you live in luxury. A 2,500-square-foot home that's very well appointed will do."
Luxury Homes and Properties insists that upper-bracket listings on its Web site, www.luxuryhomesandproperties.com, be at least twice as expensive as the average home on the market in any given area. But the site is not persnickety about the type of property it considers luxurious. Estates, mansions, castles, villas, log homes, seaside homes and overseas property all qualify.
No matter how you define the market, it is growing. The aging baby boomer generation, in particular, is driving sales of everything from chic downtown condos to custom suburban homes as most of those individuals enter their peak earning years at the same time they cash in on home equity and inheritances.
"Today every boomer either is or shortly will reach the empty-nesting life stage. This life stage marks a dramatic shift in consumer spending, away from needs-driven purchases for home and family and more spending devoted to personal luxuries," said Pam Danziger, president of Stevens, Pa.-based Unity Marketing.
That drive includes not just the houses themselves, but the cars, jewelry and clothes that go in them as well as the gardens, pools and patios outside.
"It's a unique phenomenon — and how long it will last is the question," said David Hoffman, chairman of Red Seal Development Corp. in Northbrook, Ill. "But there is a tremendous reshifting of where people are investing. They're asking, 'Should I invest in the market or something more concrete?' "
Hoffman notes that property in the best locations, which often would define a luxury setting, often proved to be good investments.
"It's not people saying they're going to turn this over in two years and make $200,000. It's people saying, 'Where I place value on my security is in my house.' It's psychological. It's a quality-of-life issue and it's not going to dwindle soon," Hoffman said.
And while price may not be an obstacle, people buying expensive homes are benefiting every bit as much from today's 45-year-low interest rates as other buyers.
"Historically, low interest rates make high-end homes very affordable," said Katherine August-deWilde, chief operating officer of First Republic Bank, which tracks luxury housing in California. "Buyers are attracted to the low carrying costs, realizing that even if prices decline somewhat, increased interest rates could make their desired home much less affordable."
The upper-bracket market in Los Angeles, home base for Hollywood stars and entertainment moguls, has been especially strong, according to the bank's most recent luxury-market index. Prices of homes over $1 million rose more than 11 percent in the first quarter vs. a year ago, and are up 4.5 percent since the start of the year.
"Malibu has gone into the stratosphere... ," said Alan Mark, of Alan and Tony Mark Prudential Malibu Realty. "Our entry-level housing is pushing $1 million, and apartments, condos and beachfront properties are at levels we've never seen before."
The luxury-home market isn't just about those who can afford it, though. Americans like to dream — and, for many, perusing upper-bracket listings feeds those visions.
"Most of the trends in housing show up first in luxury homes and then make their way down," said Joan McCloskey, editorial marketing director for Better Homes and Gardens magazine.
Luxury Home magazine publisher The Ashley Group added four subject categories that showcase high-end homes that convey "the flavor and distinctiveness of their regions," said Ashley Group executive vice president Greg Samios.
