Rumors are swirling that the luxury home market in Charlotte is nearing extinction, that it’s barely a whisper of what it once was.
But Charlotte homebuilder Alan Simonini says all the talk about the demise of Charlotte’ luxury home market is just exaggeration.
“We’re building like six houses right now,” Simonini said.
When the Great Recession hit, a lot of luxury home construction came to a grinding halt in Charlotte as in the rest of the country. That has meant few new properties coming on the market. Now, in the Charlotte area, builders like Simonini say the inventory of luxury homes has been depleted.
“There might be a few pockets here and there, but for the most part other companies just stopped building them,” Simonini said. “We know that people still want to see these kinds of homes. One of our homes sold almost as soon as we finished construction, and earlier this year we really had the only house (in the $500,000 to $1 million range) on the market in the Lake Norman peninsula area.”
According to the Carolina Multiple Listing Services of the Charlotte Regional Realtor Association, the number of Charlotte-area sold homes priced from $500,000 on up is down 8 percent so far this year compared with the same time last year, dropping to about 960 from a little more than 1,000.
Still, others in the homebuilding industry, like Mark Baldwin, vice president of the Home Builders Association of Charlotte, aren’t ready to sound the death knell.
“I can assure you the luxury home market is certainly not dead,” Baldwin said. “There are other firms building. I don’t think anybody is going and blowing, but there are a lot of custom builders that have cleared out their inventory they had who are now building contract homes for individuals and families.”
As for tracking luxury home construction, Baldwin said it’s not easy to do.
“We track by number of permits,” he said. “The custom builders out there building three to 10 houses a year are hard to track as they are not into the volume. Many times, these homes don’t make the MLS either, so the Realtors won’t know about them.”
Alan Simonini Homes built about 35 luxury houses in 2010 in the Charlotte area and has sold eight homes in the $500,000 to $1 million range so far this year. The key to getting those buyers these days, Simonini said, is to be one of the only players left in the luxury home game.
“I have seen many companies go out of business or switch to a different kind of construction,” Simonini said. “But we still have plenty of competitors. You just don’t build a lot on spec like you used to back before 2007 or 2008.”
The other secret is to be well-connected and make use of the latest in communication technology, he said.
“We pretty much rely on the Internet, our website and the Realtor community to list our homes in the MLS,” Simonini said. “I think those Realtors are looking for new houses because there is a shortage of new homes not only in our price range but (for homes) in general.”
Simonini said he often hears from prospective buyers about a lot of homes that are being built by other builders for less than $350,000.
“I ran into a guy from Ryan Homes, and they sold about 80 homes in that price point in July,” Simonini said.
The abundance of foreclosures is also affecting the luxury home market, too, with buyers hoping to snatch up good deals on a McMansion.
But “prices have to be compelling and the houses have to be in really good condition,” said Vicky Mitchener, a real estate agent with Charlotte-based Dickens Mitchener Co. “Homeowners don’t want to come in and do a lot of work.”
Buyers think they can get a better value if they buy an existing home, she said. Sometimes, they just can’t find what they want among foreclosed homes offered in the area in the $500,000 to $1 million range.
At higher prices, Mitchener said, real estate agents have a tougher job.
“Above the $2 million price point is much more challenging, and the number of buyers in that price point is much lower,” she said. “If you’re below the $2 million mark, we have somewhere between a 12- and 18-month supply out there in accordance to how many sales are occurring each month. Over that mark, you get to three or four years. There just isn’t the volume of buyers.”
Inventory figures are better than they were in 2008, when they were closer to five years, she said. Others see the decrease in inventory as a sign the market is turning a corner.
Simonini hopes his company can build about 10 homes this year.
“We are currently (building) in four neighborhoods,” he said. “We’re in Sardis Road by Providence Day School, Trinity Point at Lake Wylie, and we’re doing some custom homes in Davidson and other areas and one lot in Cornelius.”
But even the usually optimistic Simonini admits the luxury home market has been punched in the gut by the economic crisis.
“Let’s be honest: The market is 20 percent of what it used to be,” he said. “It has gone from something like 25,000 permits a year to 5,000 permits in Charlotte. But it is not dead. We are just adjusting to a lower number of permits and then sales.”
Baldwin says luxury custom-built homes don’t seem to be going anywhere.
“As long as we still have such a strong market in Charlotte around the lakes, and there is still infill going on in Myers Park and Dilworth, we’ll always have a custom home market,” Baldwin said.
“But we might not have a speculative custom home market much anymore,” he said. “In the past, builders could build pretty much anything they wanted and people would buy it, but those days have changed.”
Simonini, and luxury homebuilders like him who are still in the game, look to the future with a mix of bravado and hope.
“The fall is a very busy time for our price point of homes, and we’re looking forward to the fall and lots of sales,” Simonini said.
Baughman can be reached at [email protected].