In The News

Jeff Schween for The Press Democrat – The Bespoke Signature Of Real Estate

The Bespoke Signature Of Real Estate

More of a British origin this descriptive adjective is gaining use around the globe, none more so than on our very shores. As we have worn out and watered down the meaning of the words particular, special, specialized, custom-built, handcrafted, handmade and even made-to-measure. Bespoke, at present, seems to mean even more than Webster’s dictionary cites. It connotes, effectively, the highest degree of personalized finish. You will often see it within very refined brands like Rolls Royce, Bugatti, Saville Row tailors, Ferretti Yachts and so forth. When it comes to real estate, especially at the loftiest price point, we are becoming more familiar with its use as well.

As global borders dissipate and the economies of the world have created concentrated wealth like never before, purchases of multimillion dollar estates are growing. Buyers no longer feel restricted to making purchases within their own countries. They have become compelled, even with language and cultural barriers, to acquire real estate in treasured markets around the world. The most stable of countries are seeing the benefits of this by attracting the most interest in fixed asset purchases – real estate. Affluent buyers demanding more personalized and unique properties are purchasing prestigious estates, ranches and luxury homes – properties valued in excess of $3 million – for investment, secondary and even tertiary residences.

Sonoma County has historically seen very few single-family home transactions at this price point, averaging 1.5 per month since the turn of the modern century. Although, according to BAREIS MLS data, as 2015 came to a close this average has climbed to 2.75 homes per month – an 83 percent spike.

In 2015, Sonoma County recorded sales of 33 luxurious estates at an average value of $4,629,500 – though significant; it is 11 percent less than the prior year. To put a period on December there were 185 bespoke properties remaining available in this niche’ of the market – the only housing segment to be blessed with more sellers than buyers within this county – leaving the absorption rate at four percent thereby indicating a market completely in favor of buyers at this supreme stratus point. Keep in mind, with generally small sample amounts of data it is important to note the absorption rate fluctuated between 3-6 percent during the course of this past year – a stark contrast to the sub-million dollar market which closed December with a frothy absorption rate of 96 percent – clearly favoring sellers.

The absorption rate is calculated by dividing the total number of homes sold in a month by the total number of homes available for sale at the end of the same month. A high absorption rate – 20 percent and above – indicates that the supply of available homes will shrink rapidly, thereby increasing the odds that an owner will sell a property in a shorter period of time. Conversely, an absorption rate below 15 percent is indicative of a buyer’s market, meaning homes are selling more slowly.

High-end buyers typically pay a greater price per square foot than those in any other market segment. These prized properties tend to feature amenities like pools with waterfalls, large yards or acreage with vineyards or equestrian influences, helicopter pads, lakes, theatre rooms, multiple garages, guest homes, sweeping views, plus more desirable and expensive interior finishes while being in the most preferred locales.

In Sonoma County, those in pursuit of these bespoke properties spent an average of $1,183 per square foot (/sf) over the prior 12 months, compared with $326/sf countywide for homes under $1 million – a whopping 263 percent premium to break into to the market’s most exclusive segment.

With Marin’s geographic advantages, affluent population and historically slow growth in new housing construction the bespoke level of the markets typically showcase an extraordinary cost difference to acquire these posh properties when compared to the submillion dollar market niche’.

Over the course of the prior 12 months, eager wellheeled buyers completed purchases on 168 estates with an average value of $4,866,750. Marin closed out 2015 with 163 luxurious estates available to buyers and with an absorption rate resting at 25 percent it is suggestive of sellers gaining control over this tier of the markets as well. Whereas favorable control has returned to bespoke property owners – maybe only temporarily – homes priced under $1 million in Marin closed the month indicating overwhelming market control in favor of the sellers with a stratospheric absorption rate of 173 percent. Over the course of 2015, Marin’s most wealthy buyers were dishing out an average of $1,121/sf – that’s a staggering 144 percent more than buyer’s countywide paying $460/sf for the average home under a million dollars.

In Napa County, affluent buyers acquired 34 prominent properties with an average value of $5,830,250 during the course of 2015 – just 17 percent above the quantity sold in 2014. Similar to Sonoma County, the absorption rate in Napa County has varied from 4-7 percent throughout the year. Napa homes priced under $1 million had a decidedly different year as seller’s reined supreme – clearly indicated by a 69 percent absorption rate. Bespoke buyers paid an average of $1,300/sf during this period while accumulating ultra-premium real estate – 302 percent more than the $323/sf average being paid in the submillion dollar market.

Eye catching comes to mind when you get to this market segment. Buyers value the unique and highly personalized as it speaks to their sense of accomplishment as they enjoy the ability to entertain and show people what they have is creative and special, while considering they will be spoken highly of from those they have shared it with.

By Jeff Schween, of Pacific Union International’s Santa Rosa office.