Hey guys, Darin Marques with the Darin Marques Group with Huntington & Ellis. I wanted to talk to you real quick because I’m getting a lot of questions right now from sellers wondering what’s going on in the market and what’s going to happen in 2020. So let me just give you a quick little rundown.
Where we are at today in the market is we’re still seeing a very strong luxury market, especially between that one to two and a half million dollar price point. And a lot of that is because those clients that are coming in from California, which we know last year, I think, accounted for over 30% of our buyer base. They are looking to, even though they’re selling those $5 million homes, the price point that they’re typically purchasing in that we’re finding in this market is one to two and a half million.
Now, the other thing that we’re seeing is that there’s finally been some price address adjustments. Obviously, everybody got really excited about the Raiders coming in, and the prices went really high on these homes, and sales were getting crazy. And what we’re now seeing is that people are getting realistic about where the market is at, and they’re making those price adjustments. So we’re now starting to see an uptick in that luxury market.
Now, in 2020, what are we thinking we’re going to see? Here are a couple of things to consider. Number one, every time during an election year, and now I’ve been doing real estate for almost 12 years, and I’ve been a part of two election cycles, I can tell you that regardless of party, regardless of who gets elected, we typically always see a slowdown in the six months prior to the election happening. And again, especially in the luxury market, people pause for a minute because they don’t know what’s going to happen with the market, and those things will affect them in buying.
So, keep in mind that the world’s not coming to an end, that this is typical, and history shows us that there’s typically a slowdown and then it picks back up after the election is over. Now, the other thing to think about as a new construction, we are seeing a bit of a slowdown in new construction, and we started to see that in the third quarter and fourth quarter with luxury homes. And the reason is, is that construction costs have now gotten to a point where even the appraisals are coming in, and where at one point the appraisal would come in and what the construction cost was versus the appraisal. There was instant equity.
And now in the last year, I just spoke to an appraiser that I worked quite a bit with, Gracelyn Nardo, and she does a lot in new construction, and she said, Darren, in the last year, has been the first time that I’m now starting to see the appraisals come in the opposite. Where again, you know, a year and a half ago, two years ago, construction costs would come in, and appraisal would come in, there would be instant equity, now we’re seeing the opposite of that in some of these buyers are having to come out of cash or come out of pocket with cash to build the home. And so now they’re just pausing, and they're waiting. The good and the bad of that is obviously we will see a slowdown in construction.
The positive is going to be is that it’s going to help our market correct a little bit. We are seeing that the construction costs are at an all-time high. And I just talked to a good friend of mine the other day, a general contractor who builds in the Ridges and all the different luxury home communities, and he said, Darren, this is the first time in several years that I’ve now been getting calls from subcontractors again, asking if I had any work coming up. So I think in the first quarter, the second quarter, we’re going to start to see a little bit of a slowdown there, and pricing will come down a little bit. The good news to that is that I think that’ll ramp back up new construction because people will go back out, get new bids, and then they’ll start construction.
So again, we can always look at things pessimistically with what’s coming up in the market. You know, sometimes I see people post different posts that, Oh, the market’s going to take a dip, and this and that. Well, of course, those are corrections. We can’t continue to go up forever. If we did, prices would be so high that nobody could afford a home. So we need those market corrections, and that’s typical, and nobody should be panicked by that. Those make adjustments in the market, and then the market corrects itself, and things pick back up. So 2020, I think, is still going to look really strong for the luxury market.
Again, price adjustments in the luxury market and also in new construction, and then things will ramp back up, and we’ll be back to good. So anyway, if you have any questions, feel free to reach out to me. You can always call me at (702) 485-7755, or you can also message me through Facebook, and I’d be more than happy to hop on the phone and answer your questions. Have a great day.
