Luxury homes moving faster; cash seals the deal

Russell Stucki, a licensed Realtor and Certified Luxury Home Marketing Specialist with the RE/MAX Realty Group in Rehoboth Beach, completed his midyear review of the local luxury home market in Sussex County. “According to Sussex County’s Innovia MLS System, as of the end of June 2011, 47 homes in the $1 million dollar-plus price range sold for a total of $83,975,000.

Stucki’s research reveals the number of luxury homes sold from Jan. 1-June 30, 2011, increased approximately 20 percent, compared to 38 luxury homes that sold during this same time frame in 2010. “The most expensive luxury home sold in Sussex County was oceanfront in North Shores,” he said. “It listed for $7,500,000 and sold for $6,700,000 on June 30. The second-highest sale was located in North Bethany in Bayberry Dunes. It listed for $5,790,000 then sold for $5,150,000. The third-highest luxury home sale was also in North Bethany in Breakwater Beach. It listed for $4,990,000 and sold for $4,337,500.

“There are 265 luxury homes listed for sale in Sussex County, with 11 pending sales in the local market as of June 30,” said Stucki. “Currently there are 36 oceanfront homes available on the market from the price point of $1,275,000 to $10,000,000.” This ample inventory of luxury homes means that the market is still strongly a buyers' market, said Stucki. Stucki, whose expertise is in high-end Sussex County properties, maintains a real-time online list of short sales and foreclosures, as well as three free smartphone apps featuring popular real estate deals and rock-solid investment properties available for qualified buyers looking to invest in growing Sussex and Kent counties.

On the move

Upon reviewing numerous factors including recent comparable sales and property locations, Kurt Brown, owner/appraiser at Brown’s Real Estate Services in Milton, agrees with Stucki and notes that, "With 86 closed sales year-to-date (265 active listings compared to 351 active, one year ago), inventory may be down, but there continues to be an over-supply of homes on the market, which is not unusual for a resort area.”

Stucki, commenting on the luxury home sales surge, said, “In the first half of 2011, the Bethany Beach area, including North Bethany, Bethany Beach and South Bethany, showed the strongest sales increase for luxury homes when compared with the same time in 2010."

Based on information provided by the Institute for Luxury Home Marketing, luxury homes are selling faster on the national level than they have in more than a year, moving in an average of 113 days on market, the lowest level in more than 12 months. “We have calculated that our local luxury listings can take three times longer to move than the national average,” said Stucki. Stucki knows the number of days luxury homes remain on the market varies widely with location, view, water access, condition and the owners’ pricing strategy. “Even though many higher-priced listings are second homes, these owners are finally beginning to be more realistic with their listing prices,” he said.

According to Brown, “For many sellers, these are investment properties or second homes. These sellers are known to tolerate long marketing times rather than adjust pricing. The good news is that the median home value has increased from $1,412,500 in the first six months (June 2010 – December 2010) to $1,827,500 in the last three months of this year (April 2010 – June 2011).”

Lending is trending

Stucki agrees with National Association of Realtors' President Ron Phipps, who stated in a July 20 article on Realtor.org, “Even with job creation below expectations, excessively tight loan standards are keeping many buyers from completing deals.” With record high housing affordability conditions thus far in 2011, Stucki said, “We’d normally expect to see stronger home sales including a surge in the luxury homes market.”

Unfortunately, both Stucki and Brown agree lending continues to be tight. The new rules created by the Dodd Frank Bill drastically increase fees and turnaround times and have decreased the availability of money. “While foreclosures and bank-owned properties are declining, active listings are starting to be absorbed by the market,” Brown said. “Nationally, a large number of cash sales are being reported.”

According to Lawrence Yun, NAR chief economist, all-cash transactions accounted for 29 percent of all home sales in June, and they were 30 percent of sales in May, with investors accounting for the bulk of cash purchases. Brown continued, “This is also a good sign that investors who pulled their cash out of the stock market during the 2008 crash are looking to our resort areas as good investments.”

Steve Morgan at Fairfax Mortgage in Bethany Beach said, “In a falling mortgage rate environment like in 2009-11, a trend of increasing refinance applications implied consumers were seeking out lower monthly payments. Some of those consumers were able to reduce their monthly mortgage payment and increase disposable income through refinancing.”

Morgan also sees a positive for the beach economy as baby boomers prepare for retirement by purchasing second homes to become their retirement homes. “With cash on the sidelines from the stock market volatility and banks paying little to no interest, some people get tired of the risk and have started to invest in real estate, which typically doesn’t swing high and low.”

Federal Reserve Chief Ben Bernanke spoke on Aug. 9, saying the reserve will be keeping its benchmark interest rates at a record low at least through mid-2013. “This means people will have the ability to capture in the short term low interest rates allowing them to purchase homes without increased mortgage payments. There are tons of people moving cash from the market to safe places like bonds and CDs. With real estate values so low, this is a great time to use that money to capture luxury homes,” said Morgan.

A breakdown of area luxury home sales in 2011 includes North Bethany Beach, 11 sales, $26,305,000; Bethany Beach, eight sales, $12,191,000; Lewes seven sales, $10,706,000; North Shores, 1 sale, $ 6,700,000; in-town Rehoboth Beach, six sales, $6,651,500; South Bethany Beach, four sales, $5,220,000; Henlopen Acres, two sales, $ 4,750,000; Rehoboth Beach Yacht & Country Club, three sales, $4,212,000; Fenwick Island, one sale, $2,800,000; Dewey Beach, two sales, $2,125,000; Selbyville, 1 sale, $1,200,000; and Canal Corkran, 1 sale, $1,115,000.

For more information, contact Russell Stucki, Realtor at RE/MAX Realty Group, 317 Rehoboth Ave., Rehoboth Beach, DE 19971; cell 302-228-7871, office 302-227-4800, fax 302-227-2115; russellstucki@remax.net; www.BeachRealEstateMarket.com.

Reach Kurt Brown, Brown’s Real Estate Services, 20044 Coolspring Road, Milton, DE 19968; office 302-945-8545, cell 302-381-0788, fax 302-945-8396; virgilbrown@comcast.net; www.virgilbrown.com.

Reach Steve Morgan, Fairfax Mortgage Investments Inc., 34026 Coastal Hwy., Bethany Beach, DE 19930; office 302-541-5363, cell 443-226-5297, fax 302-261-0261; steve@steve-morgan.com; www.bethanybeachlender.com.