RANCHO SANTA FE — Jason Barry stood at the entrance to a massive $16 million home, greeting onlookers and potential buyers.
Barry, a real estate agent who specializes in luxury homes, was encouraged by the amount of foot traffic at the open house, likely more than there would have been a year or two ago. It was another signal in his book that high-end home sales are coming back in Rancho Santa Fe.
Rancho Santa Fe isn’t alone. Across California, million-dollar plus home sales are at their highest level in five years, according to a report from DataQuick released two months ago. Luxury home sales are up 19 percent this year compared with last year. That’s better than the average, as sales across all price points are up 10 percent.
The high-end home trend has played out locally.
“It’s interesting looking at last year compared to now with a community like the (Rancho Santa Fe) Covenant as an example,” Barry said. “Last year, there were 139 homes for sale. This year at the same time, there are 100 homes for sale. You’ve seen inventory decrease as you’ve seen activity increase.”
But Barry said that price per square foot hasn’t jumped yet in Rancho Santa Fe. Indicators show that could be happening soon though, he said.
“It’s the basic rule of supply and demand that’s tied into this increase in activity,” Barry said.
Indeed, state figures show prices inching up as well, according to DataQuick. Buyers of million-dollar plus homes paid on average $632 per square foot, up two percent from last year.
Barry noted that luxury home prices were among the hardest hit of all price points during the downturn, meaning there’s a steeper hill to climb for a market correction. Yet he feels “we turned the corner.”
“We were thinking back in 2009 and 2010 that we were hitting bottom,” Barry said. “When in fact we were continuing to drift a little lower. It looks to us as though we hopefully have been pointed back in a positive direction.”
The reduction in inventory largely explains why less high-end buyers are waiting on the sidelines, Barry said. Another factor is that credit is more accessible than it was during the peak of the economic downturn. He said that’s more likely to benefit buyers at lower price points, but some purchasing luxury homes are taking out loans. Because credit is so cheap right now, some take out loans to free up money that can be in turn invested in the market, earning a higher rate of return than it would sitting in the bank.
When asked whether he predicts the luxury market to slowly increase or shoot up quickly, Barry answered: “I wouldn’t be surprised to see either.”
Jane Foster, a real estate agent who focuses on million-dollar plus homes in North County, said that the market for higher-end homes is slowly improving. Tepid job growth and high rates of foreclosure, however, continue to be challenges for all price points, she said.
And locals might have a more difficult time finding housing due to more investment firms and foreign individuals entering the market.
“There’s some negatives, but reason to be optimistic,” Foster said. “But I don’t expect huge price jumps in the very near future.”
At the open house, San Diego resident Julie Dean said she’s actively searching to buy a home. She noted the $16 million home is outside her price range, but is looking for a home in the million-dollar plus range.
“I haven’t been looking long enough to see an increase in prices or competition myself,” Dean said. “But I hear that it’s getting more common to buy — more people are buying before prices rise.”