In July, 2013, sales of homes costing more than $1 million were up 46.6 percent from the previous July.
LEESBURG, Va. — Katie Sleep and her husband, Jonathan, lived in the same four-bedroom home in a Washington suburb for 23 years. After Ms. Sleep decided to retire, they began looking for a new house, and, after viewing a model home in a new development, decided to move to Leesburg, about 40 miles from the city.
They saw a chance to create a far larger home catering to their every need by building their home.
In April, 2012, they selected a model costing about $850,000 from a luxury builder and chose a number of standard options for an additional $650,000. Ms. Sleep, who was in the process of selling the software firm she founded nearly two decades earlier, added a wall of windows to the basement and furnished it with a pool table, a media room, a wet bar, a home office, and a suite for their youngest daughter to use when she was home from college.
They added a second master-bedroom suite on the ground level to use when they are older and stairs become tougher to climb. They upgraded floors, carpeting, and molding, added a sunroom and a large deck, and supersized the garage door to fit Ms. Sleep’s Cadillac Escalade. The home’s lighting and temperature, as well as media on any of 14 televisions and the sound system, can be controlled remotely.
This six-bedroom house, which has six full and three half bathrooms, measures about 9,000 square feet, including the basement. The Sleeps expect to spend an additional $250,000 to landscape its three-acre lot.
After the recession, the market for large, expensive homes like theirs slowed sharply. In July, 2008, according to the National Association of Realtors, the number of homes that sold for $750,000 to $1 million dropped by 35.5 percent, compared with the previous July. Those that sold for more than $1 million fell 31.4 percent.
Yet despite the bursting of the housing bubble, the ensuing recession, and the slow recovery, buyers have not abandoned luxury homes — they just took a break. In July, 2013, sales of homes costing more than $1 million were up 46.6 percent from the previous July.
When it comes to new homes, bigger again better. The median size of new homes built for sale peaked in 2007 at 2,295 square feet, then fell to 2,159 two years later, after the housing crisis hit. But the appetite for ever-larger homes has returned: In 2012, new homes reached a new peak of 2,384 square feet and, according to the National Association of Home Builders, some 41 percent of new homes had four or more bedrooms, up from 34 percent in 2009.
“The housing market is being driven by the move-up buyer, the luxury buyer,” said Brad Hunter, chief economist and director of consulting at Metrostudy. “And those who have strong incomes, secure jobs, their stock portfolio is doing well — they are able to buy whatever they want. And what they are buying is larger houses.”
At the same time, the lower end of the market is stalling. Mortgage applications for homes of less than $150,000 fell 0.6 percent in that period. “First-time buyers are having trouble coming up with the down payment and qualifying for mortgages,” Mr. Hunter said. “They are coming out of college with huge amounts of student loan debt, which makes it more difficult to handle significant monthly payments, to save a down payment, and to qualify for a loan based on their debt ratios.”
Toll Brothers, the publicly traded company that built the home for the Sleeps, has benefited more than others from that demand, Mr. Hunter said, because it caters to the luxury market. In December, the company reported that its revenue was up 65 percent in its fiscal fourth quarter, versus the same quarter the previous year. The average sales price for its homes was up 21 percent for the same period.
Affluent buyers have been flocking to real estate, according to the Mortgage Bankers Association, with applications for home loans of $625,000 to $729,000 up 56.7 percent from August, 2012, to August, 2013. Mortgage applications for more than $729,000 were up 41 percent.
Tim Gehman, design director at Toll Brothers, said the homes that sell best today are those with the biggest kitchens and most expansive master suites — much as they were before the recession.
“It’s a matter of how large and impressive those two features are and how much buyers can afford,” Mr. Gehman said.
During the recession, Toll Brothers’ customers spent less on options and upgrades, said Fred Cooper, the company’s senior vice president for finance, international development, and investor relations. Now the company is seeing an uptick. In 2013, Toll buyers spent 20.7 percent above a home’s base price on options, slightly more than they did at the previous peak in 2007 and up 2 percent from 2012.
Guidelines: Please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. Comments that violate these standards, or our privacy statement or visitor's agreement, are subject to being removed and commenters are subject to being banned. To post comments, you must be a registered user on toledoblade.com. To find out more, please visit the FAQ.