There has been an interesting phenomenon in the new homes market over the last few months…the luxury market for new homes seems to be gaining some momentum! Now every market defines “luxury” differently. For Charlotte it would be homes in excess of $500,000. We have seen a steady rise in sales over the last few months from our luxury builders. Now, is this a trend or just a blip on the screen? We would prefer to believe there is a trend developing and when you start digging into the reasons, it makes sense. Even to the point that we may be settling into the “new normal.”

There had been very little building of luxury homes since the market was glutted with foreclosures and short sales.

Now that we are 3 years into our “non-recession” recession, a huge chunk of the inventory has been cleaned out and at bargain basement prices! When bargain hunters cleaned out the inventory they also set the pricing for the luxury home market. With dwindling inventories, sellers being able to sell their existing homes, and a modest pent up demand for new product, builders are starting to gain confidence and restock the shelves.

I don’t want to give you the impression that there is unbridled exuberance on the part of builders to jump head first into the luxury market. However, there is a new breed of luxury builder that is seeing an unmet demand for luxury homes and is willing to fill the void. As a result of the “custom builder” being driven out of the business due to financial constraints, we have a new wave of builders that in the past you would not associate with luxury homes. But this group is now filling the void and delivering a big bang for the buck!

Through their research, it appears as though a few national home builders made it known that there were pockets of opportunities across the county for luxury homes. With that in mind, they felt confident that they could design, build and deliver a luxury product that could rival the custom home builders…and they have! Since then we have a plethora of builders willing to do the same. As a result, the consumer wins big because they have more choices with one builder trying to trump the other to capture the luxury buyer.

So the jury is still out… “is the luxury market making a comeback?”

Here are some things to ponder:

• Supply is down demand is up.
• Existing buyers are able to sell their current homes at modest gains and can buy that new custom home with more bells and whistles and at great prices.
• The buyers feel more confident that they will survive the “non recession” recession and the luxury home buyer has the financial strength to qualify for jumbo loans at historic low interest rates.

We will keep an eye on this segment of the market. Although it is not the biggest slice of the new home market, it is a barometer for where the housing market is headed.

By Mike LaRuffa