California is known for its rich and famous property owners, but could they be getting richer? The number of California homes that sold for $1 million or more jumped to a five-year high in 2012.
Analysts believe a recovering economy, rising home prices and a record number of cash purchases are all driving factors behind this increase.
Taking things a notch higher, the number of homes sold for more than $5 million reached an all-time high.
San Diego-based DataQuick reported that a total of 26,993 homes sold for $1 million or more in 2012, a 26.9% increase from the 21,267 sold in 2011.
It seems that the luxury-home market is outpacing overall sales in California. The 2012 luxury-home increase of 26.9% was significantly higher than the 8.2% increase in overall sales.
“It should go without saying that buyers and sellers in the prestige market tend to respond to different motivations and incentives than the rest of the market,” said John Walsh, DataQuick president. “Job security, down payment sizes and mortgage interest rates don’t play the same role. Returns on investments in a low interest-rate financial environment and safe-haven investing do play a role.”
This shift in sales toward luxury homes has established itself within the past two years.
In the state of California, 697 homes were sold for more than $5 million in 2012, compared to the 491 sold in the Golden State in 2011.
For homes ranging from $4 million to $5 million, a record 460-homes sold, up from the 344 sold in 2011.
DataQuick reported that the most expensive confirmed purchase last year was an 8,930 sq. ft., 4-bedroom, 4.5 bathroom luxury-home in Woodside, Calif., selling for $117,500,000 in November.
Richard Green, director of the USC Lusk Center for Real Estate, says it’s not surprising that luxury homes are flying off the market right now.
“If you look at the 1%, they are doing better than everybody else since the recovery started in 2009,” said Green. “The most recent data I’ve seen shows that benefits of the recovery have gone 93% to the top 1%, so it’s not surprising that their demand for housing is stronger than everybody else.”