The answer to the question posed in the headline above is: very much so. Over the last five or six years builder/developers have bought as many underdeveloped properties as possible and have built them out with big new houses containing various styles of high-end amenities and are offering them for sale as they are completed.
This new “product” is driving the high-end market as never before because it is in perfect resonance with what high-end buyers want. Record sales in 2013 and 2014 have been in the following categories. Big. New. Glamorous. Traditional white clapboard with a Nantucket, Country or modern vibe. More and more, buyers are responding to a more modern feel, spare and architectural.
Every new, high-end home is presented to today's buyer completely staged. Often the furniture is available to purchase so that the package is complete, instant and perfect. Open houses are a party with music and refreshments. Each showing is carefully prepared with synchronized lighting, music and flat screens.
One of the most striking changes in this type of property is how architects/builders use the lot to maximize living space. There has been tremendous creativity in developing full lower levels, beautiful roof decks, exciting landscape design, infinity pools, elaborate outdoor rooms often with flat screens, fireplaces and heaters.
What are the characteristics that buyers seek today? In the high end, the buyers seek amenities that can be summed up in one word “luxury”. Homes are becoming more and more like “oases” as a respite from the intensity of work and travel.
Here are the must-haves: smart controls (iPads) for heating, air conditioning, lights and music; beautiful kitchens with every possible high-end appliance; garages with parking for multiple cars; security; privacy; a private gym; screening room; master bedroom suites with spa-like baths and enormous closets; high ceilings; many other rooms for guests and children; and home offices.
Who can afford all this? Who are these buyers and where are they coming from?
Four of the five above $10,000,000 sales in Pacific Palisades sold to local move-up buyers. The highest sale of $20,000,000 plus sold to a buyer who lived two blocks away. Overall in the estates market, the buyers come from other parts of California, Oregon and Washington as well as from the East Coast, especially New York City.
Pacific Palisades now attracts international buyers like never before. Helped by currency exchange rates and the high cost of global real estate, Los Angeles real estate is considered a bargain by comparison. Pacific Palisades also has beautiful weather, light, views and ocean proximity, all of which hold great appeal to the international set.
The tech, biotech and media industry industries moving to Santa Monica and other Westside communities have provided a new buyer pool for our high end. The finance industry, hedge fund and wealth managers provide today's buyer superstars, along with celebrities in entertainment and sports.
The appeal of Pacific Palisades is the family-friendly ambience with sports, schools and other community activities centered around children. Traffic patterns and proximity to the airport have also helped Pacific Palisades.
Neighborhoods within the Palisades are changing as well. Record high sales are taking place on streets that had not been considered major estate venues in the past. Some buyers consider the house itself now more than the “prestige” location.
Because some buyers just cannot find what they're looking for, they are turning to underdeveloped properties to remodel or build from scratch. The owner/user builder is a big new player in today's high-end market, and it is my view that we will see more of this in the future.
The notion of the second home is also changing. A desert home, beach house or ski property as a second home is expanding to include homes in other world class cities like Hong Kong, New York, London, even Las Vegas. Many of our high-end buyers over the last year will live in their Pacific Palisades palisades Estates part-time.
What other changes did we see in 2014? In the wake of the recession, the middle-aged “baby boomer” buyer retreated and stayed put. In the last year, buyers in their 50s 60s and 70s have reentered the buyer pool as the recovery has positively impacted stock portfolios, existing homes are selling at record highs and capital gains tax rates are still relatively low.
Moving closer to adult children and grandchildren, downsizing or just having that “dream house” is back in play. Being able to move real estate tax rates from one property to another is also helping this newly invigorated segment. Another trend in the current market is the “buy and hold” buyer who is acquiring houses to keep for the long-term. This trend represents a profound belief in real estate as a long-term investment especially with the possibility of inflation in the future. Some Palisadians are transferring “windfall” financial events into carefully balanced portfolios with high-end residential real estate as a strong component. Wealth transfer from one generation to another is a factor today as some families buy properties now for children and grandchildren to have in the future.
Are there still bargains in this real estate market? Yes, definitely. Especially where the value is intrinsic, such as a prize location, large lot or beautiful view. Right now the best values are in the large beautiful properties owned by families who have lived in them for a long time. Anything that needs updating or remodeling is presenting the best opportunity for acquisition of a trophy property at a price that we will never see again.