No Slowdown in Luxury Home Market

Veteran home builder Bill Silliman has a waiting list for the properties he’s building near Big Sand Lake in southwest Orange County.

“We’re so backed up, if you bought a house from us today, we start it in January,” the builder said last week.

The average sales price for the homes Silliman has under construction in Venezia: $800,000 and up.

Lake Nona Golf & Country Club, in southeast Orlando, had its best month on record in May, with six home purchases. Average price: $2 million-plus.

In Brevard County, JERJEF Homes just introduced its latest gated community, Tralee Bay Estates. The “Tuscan-inspired homes” start at more than $400,000 each.

The home-building business has slashed its workload and its work force in Florida and elsewhere as demand for housing has plummeted in the past year. But many custom builders - the ones who construct homes $1 million or more - are busier than ever as they continue catering to the high-end market.

Even the average sales price for a new home in a Central Florida housing market subdivision has held up better than many have expected, with some production builders averaging $500,000 or more per house.

So, what’s going on?

Wealthier families have always accounted for a higher percentage of new-home sales, but now they are buying an even larger share as prices have escalated and less-well-off buyers have balked, said Ron Kurtz, a South Florida consultant who studies high-net-worth households.

“They’re less sensitive to the market situation,” said Kurtz, a principal with the American Affluence Research Center in the Miami area.

Florida mortgage loan rate increases, rising gasoline prices and other factors that have knocked many families out of the home-buying market can be very easily shrugged off by the wealthiest 10 percent of U.S. households.

Those 11.2 million well-off households average $256,000 a year in income and have a net worth - assets minus debts - of $3.1 million, according to the latest Federal Reserve figures.

By Kurtz’s estimate, the wealthiest 10 percent of households this year could account for as much as 49 percent of all new-home sales.

That would be up from about a third of the new homes purchased last year, said Kurtz, who has been surveying wealthy households since 2002.

High-net-worth households have pared their expectations for new-home and second-home purchases, Kurtz found in his most recent survey, which was conducted earlier this spring.

They’re looking for value as well, Kurtz said, so the pace of their new home acquisitions has slowed as asking prices have soared.

But the rate of decline in the estimated number of new homes to be sold this year has been sharper, tumbling from more than 1 million in 2006 to a projected 864,000 this year, according to industry estimates.

So wealthier families, who pay no mind to Florida home mortgage fluctuations, should account for a higher percentage of homes purchased, as they are steadier consumers of big-ticket items.

Even among the wealthy, the same trend is noticeable: Households with a net worth of at least $6 million were three times more likely in Kurtz’s survey to say they expect to build a new primary residence this year as were those with net worths between $800,000 and $1.49 million.

Wealthier buyers also have continued to fuel existing housing sales in Central Florida, which is catching up to the South Florida mortgage market in terms of expensiveness and a population explosion powering demand.

The number of million-dollar-plus homes resold in the Orlando housing market, for example, continued to rise at a double-digit rate last year, defying the overall slowdown in housing.

The number of super-pricey homes was up nearly 18 percent last year, to 569, according to the Orlando Regional Realtor Association and Attorney’s Title Insurance Fund.

While builders of homes in all price ranges have been hit by the slowdown in sales, the market for moderately priced homes has been hit even harder by a meltdown of bad credit Florida mortgage lenders and the resulting tighter lending standards, said Jeff Fleis, vice president of privately held JERJEF Homes in Brevard County.

“Banks have confirmed that for us,” said Fleis, who, along with his brother Jerry, is building houses in the Capron Ridge community of Viera.

Homes in Tralee Bay Estates, a gated community within gated Capron Ridge, will average about $500,000, Fleis estimated, and even the smaller ones, of about 2,500 square feet, will come standard with tile roofs, stone columns, brick-paver driveways and three-car garages.

But Tralee Bay Estates, with 75 home sites, will still be priced below many of the other new subdivisions in the area, Fleis said, where new-home prices average $700,000 and up.

For Silliman and partner Robert Reiche, custom builders in the Orlando area for nearly 25 years, the marketing of their new Venezia subdivision in the Dr. Phillips area has been low-key but successful.

They sent postcards to higher-income neighborhoods and to previous clients - and quickly got hard contracts for more than one-fourth of the 53-lot subdivision.

Sales so far total about $11.2 million.

One sign, though, that even successful custom home builders are feeling the slowdown: More are taking on remodeling projects.

If the recently high-flying stock market takes a big dip, that could discourage home sales even among wealthy buyers, so builders are diversifying to maintain cash flow.

“We’re looking to get into commercial real estate [construction] and remodeling,” Fleis said.

SOURCE: Orlando Sentinel