by Prashant Gopal
Monday, February 25, 2008provided by
For buyers with good credit and healthy bank accounts, a million dollars buys a lot more home than it did a few years ago
The Karsentis are jumping into South Florida real estate at a risky time: Home prices are down, foreclosures are up, and for-sale signs are as common as palm trees.
But entrepreneur Arnaud Karsenti and his wife, Rebecca, a doctor now pregnant with their first child, are confident that the $1.15 million home they have a contract to buy in the wealthy Miami suburb of Pinecrest, Fla., will prove to be a good investment.
“I see the real estate market declining, so it’s very difficult to stick a fork in the ground and take a position on something that could be overvalued six months down the road,” said Karsenti, a recent graduate of Harvard Business School. “Our decision is long term.”
Bargains in the Luxury Market
Buyers like the Karsentis who can afford million-dollar homes are getting more for their money than they might have during the peak of the housing boom a couple of years ago. These are families with enough income and other assets, as well as good credit. They aren’t worried about making mortgage and car payments, and are able to take advantage of historically low interest rates and falling home prices.
BusinessWeek.com’s survey of million-dollar homes in 20 markets across the country shows that buyers have plenty to choose from, and that their money will get them plenty of space and high-end amenities such as gourmet kitchens, patios, game rooms, and pools. Of course, in some areas a million dollars goes a lot further than in others. Living close to America’s priciest cities comes at a premium. A remodeled 1,757-sq.-ft. house in Belmont, Calif., about a half-hour outside San Francisco, for example, looks pretty modest compared with a stately 5,059-sq.-ft. mansion with a screened-in pool on an acre outside Charleston, S.C. (Both homes are listed for under $1 million.) But it’s not all bad news. In the pretty town of Brewster, N.Y., about 80 minutes from midtown Manhattan, a four-bedroom, clapboard home with an in-ground pool is on the market for $989,000.
Families like the Karsentis, with a net worth of more than $1 million—which includes the value of their homes minus outstanding mortgage liabilities—want to live well but many of them still don’t feel rich. But they know they have made enough money to afford, truly afford, to pay for what they’ve bought. And to many home buyers, being able to afford something with a $1 million price tag is a confirmation of their success, even if there are plenty of nice houses available for less.
A House That Says You’ve Arrived
In less expensive markets, such as Texas, buyers expect more for their $1 million, said Jan Poscovsky of Re/Max Heritage in Sugarland. Doctors, lawyers, and oil executives expect country-club amenities in the communities they move into, she said.
“There’s so much affordable housing here, and it is possible to get a really nice home with a large square footage for $400,000 to $600,000,” Poscovsky said. “They’re spending $1 million because they want something more than space. They’re buying a lifestyle and the prestige that goes with it.”
Homes that cost $1 million or more represent just about 2% of all transactions, according to the National Association of Realtors. And the credit crunch is not hurting only subprime borrowers. It’s been harder for borrowers to get so-called jumbo mortgages, which exceed $417,000. That means the majority of buyers in this category are those who have just a sold a house and are looking to buy again, or have liquid assets of more than half a million dollars.
It’s not just the amenities that home buyers are getting for their money. Often, these homes are located in the best school districts. Of course, potential buyers also need to keep in mind that good schools often translate to higher school taxes so they will need to factor in those, in addition to their mortgage and down payment, when calculating the affordability of a home.
The Sweet Spot for Bargains
Still Celia Chen, director of housing economics at Moody’s Economy.com, said the top 10% of the real estate market in terms of home price is doing better than the lower end of the market, which is impacted more by the credit crisis. Prices can be more sticky on the top end because “owners of very high-end homes can wait longer—they don’t have to accept a lowball price,” Chen said.
JoAnn Roberts of Coldwell Banker Residential Real Estate in Pinecrest, said million-dollar homes in her area are doing much better than both the lower-priced homes and mansions at the top of the market. She said builders created an oversupply of $3 million to $4 million homes. Contracts are falling through on the lower end of the market because buyers are having trouble qualifying for loans, she said.
The Karsentis say they’re buying now because their family is growing, they love the home, and they know it’s impossible to time the real estate market.
“You can’t help but look over your shoulder and think there might be other opportunities down the road,” he said. “But though it’s difficult to sell at the peak, it’s also difficult to buy at the trough.”
Million-Dollar Home Deals 2008
For those with good credit and a solid income, the housing market hasn’t been this good in years for buyers. Here’s a look at what $1 million (or less) can buy you in 20 of the nicest suburbs of the nation’s largest cities.
Arizona
Suburb: Scottsdale
Address: 13839 E. Casey Lane
Price: $950,000
Closest major city: Phoenix
Commute: about 50 minutes
Bed/Baths: 4/3
The 3,970-square-foot home sits on 1.25 acres in the north Scottsdale foothills area. It has a separate guest house with a kitchenette and full bathroom and a 1,500-square-foot brick entry courtyard. The great room has a built-in audio/video center with wood insets, and the kitchen has a solid granite breakfast bar.
California
Suburb: Belmont
Address: 1914 Lyon Ave.
Price: $989,000
Closest major city: San Francisco
Commute: about 30 minutes
Bed/Baths: 3/2
The remodeled 1,757-square-foot house built in 1956 has views of the Santa Cruz mountain range. It has a marble master bathroom, a granite kitchen, crown moldings, central air conditioning, double-pane windows, and a finished basement media room.
ColoradoSuburb:Aurora
Address: 6091 S. Kalispell
Price: $999,000
Closest major city: Denver
Commute: 30 minutes
Bed/Baths: 4/4The 4,990-square-foot house has a two-story foyer with grand columns framing the entrance to the formal dining room. The curved staircase has a wrought-iron railing.
Connecticut
Suburb: Stamford
Address: 85 Harpsichord Turnpike
Price: $1,049,000
Closest major city: New York City
Commute: about 60 minutes
Bed/Baths: 4/2
The 3,000-square-foot colonial has a two-story entry, a country kitchen, family room, a living room with fireplace, and a library with doors to the patio and formal dining room.
Florida
Suburb: Pinecrest
Address: 7820 SW 126 Terrace
Price: $999,000
Closest major city: Miami
Commute: about 20 minutes
Bed/Baths: 4/3
The 3,047-square-foot house has a three-car garage, a guest house, and a resort-style pool. The master bedroom’s French doors open into a pool/patio area.
Georgia
Suburb: Marietta
Address: 3044 Canton Pines Place NE
Price: $999,000
Closest major city: Atlanta
Commute: about 25 minutes
Bed/Baths: 5/4
The house, built in 2006, has a gourmet kitchen, a butler’s pantry and breakfast area, a guest suite on the main level, a banquet-size dining room, a living room with a coffered ceiling, a mud room, a deck, and private backyard.
IllinoisSuburb: Glenview
Address: 3218 Knollwood Lane
Price: $1,049,000
Closest major city: Chicago
Commute: about 35 minutes
Bed/Baths: 5/5The brick-and-stone home has arched openings, a finished basement, a three-car garage, and a cook’s kitchen with stainless-steel appliances and granite countertops.
Indiana
Suburb: Noblesville
Address: 16332 Valhalla Drive
Price: $995,000
Closest major city: Indianapolis
Commute: about 35 minutes
Bed/Baths: 4/4
This 6,162-square-foot home has a large gourmet kitchen with granite countertops, a SubZero fridge, and a walk-out lower level with a theater area. The house, built in 2002, overlooks the second hole at Sagamore Country Club.
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