Real Estate News

Buyers Prefer Big Lots To Sprawling Layouts

By AMIR EFRATI
Staff Reporter of The Wall Street Journal

From The Wall Street Journal Online

For buyers of high-end real estate this year, pools and waterfronts were big selling points -- and so was taking over ownership from a celebrity. But buyers apparently didn't want so much square footage they risked getting lost in their own home.

These are a few conclusions to be drawn from a follow-up look at the 49 high-end properties featured as Weekend Journal's "House of the Week" in the year ended Oct. 1, 2004. All told, 17 of the mostly million-dollar-plus homes highlighted in these pages have sold, with three more under contract. Among the other patterns we spotted: Houses with asking prices of under $2 million languished on the market to a greater degree than those costing more. And turnover of homes in these pages was blistering through June -- with sales halting almost completely after that.

The homes featured in these pages form a unique slice of the real-estate market, of course, and may not be representative of broader home-sales trends. With asking prices of $670,000 to $30 million, they're among the most expensive homes around. They are also generally chosen for their unusual architectural details, interesting history or celebrity ownership.

So what separated the winners from the losers? The 29 houses that remain unsold -- about 60% of the total -- are among the largest homes we featured. Only three of the 13 featured houses of 10,000 square feet or more found buyers. Many of the unsold houses are landlocked, or lack pools. And while successful sellers in this group often cut prices by $1 million or more, owners of some unsold homes remained firmer on their asking prices.

Many sellers in our survey, however, may have simply suffered from a case of unfortunate market timing: None of the houses featured from mid-June through Oct. 1 have yet sold, suggesting anecdotally that a slowdown in luxury real-estate sales may have kicked in toward fall. (Two of 12 homes featured in the fourth quarter have sold, but these homes weren't included in the survey because of their short time on the market.)

Some agents say this market is doing anything but slowing. The pace of luxury real-estate sales across the U.S. has remained brisk, with markets as diverse as San Francisco, Aspen, Colo., and Nantucket, Mass., reporting record sales in 2004. In Los Angeles, 38 homes sold for more than $10 million through November, up from 11 in all of 2003, says Cecelia Waeschle of Sotheby's International Realty in Malibu. (Indeed, all five featured California properties found buyers, including actress Jenna Elfman's five bedroom Mediterranean-style home designed by early Hollywood architect Wallace Neff.)

Yet others who watch the top of the real-estate market point toward a cooling trend. In Greenwich, Conn., broker Allyson Bernard says she negotiated two deals in the last month of the year compared with five in the same period last year. Rockland County, N.Y., broker David Baxter Sanders says the high-end housing market stalled in many areas as buyers exercised caution before the presidential election and hasn't picked up since. "The over-$3-million market is quiet," says Chicago broker Honore Frumentino.

Among the explanations for a possible weakening at the market's upper end: Many buyers pounced on new or second homes earlier than they had planned to, spurred in part by expectations that interest rates would rise, says John Karevoll, a housing analyst for MDA's DataQuick Information Systems in La Jolla, Calif. A lackluster stock market and the tax advantages of home ownership spurred many people to invest in expensive houses, he says, but by now many serious buyers have already bought. "The prestige market has been due for a leveling," he says.

The luxury-home segment moves independently from the broader housing market, experts say, driven not only by mortgage rates but also by the high-income job market and the stock market.

Overall, housing trends have been uneven in the last quarter. Housing starts and sales of newly built homes are at their lowest levels in more than a decade. But sales of previously owned homes are at a record high pace, according to figures released this week by the National Association of Realtors.

Hot Amenities

In our survey, market forces were only part of the picture. Five of the six properties attached to high-profile names were sold, including those formerly occupied by the late Sen. Daniel Patrick Moynihan and film critic Gene Siskel. (Actor Don Johnson pulled from the market the 17-acre ranch in Aspen, Colo., he had offered this fall for $21 million, one of five homes in our survey to be taken off the market.)

Waterfront property, or houses with pools, also sold at a higher rate: 28 of our 49 properties had those features, and half of those found a buyer. Land -- lots of it -- was another selling point. The three properties in our survey with more than 100 acres changed hands swiftly, including a home with 130 acres in the mountains of Sun Valley, Idaho, which was purchased in October by Jann S. Wenner, editor and publisher of Rolling Stone magazine, for about $11 million.

In the current climate, some sellers say they have work ahead of them to get buyer interest. Houston insurance agent Walter Wilson has pulled his three-bedroom Nantucket, Mass., house -- it was listed at $5.9 million -- off the market after a year. "We think by sprucing it up, the house it will be more attractive," he says. He says he's investing $500,000 to expand a guest cottage and add, among other things, new appliances -- and a swimming pool.