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UNDERSTANDING CALIFORNIA LUXURY CLIENTS February 27, 2014 Oscar Wei, Senior Research Analyst


Sales of Existing Detached Homes • California, Jan. 2014 Sales: 363,640 Units, -13.8%YTD, -13.8%YTY 700,000 600,000 500,000 400,000 300,000 200,000 100,000 -

SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

*Sales are seasonally adjusted and annualized


Median Price of Existing Detached Homes • California, January 2014: $410,990, Up 22.1%YTY $700,000

P: May-07 $594,530

$600,000 $500,000 $400,000 $300,000 $200,000 $100,000 $-

SERIES: Median Price of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

T: Feb-09 $245,230 -59% from peak


Sales of Existing Detached Homes • California 2013 Sales: 413,870 Units, Down 5.9%YTY 700,000

ANNUALLY

600,000 500,000 400,000 300,000 200,000 100,000 0

SERIES: Sales of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

*Sales are seasonally adjusted and annualized


Sales: Luxury home vs. the Rest of the Market Sales of $1M and Up 25,000

Sales Under $1M 225,000

2013 : Up 35.5%

2013 : Down 8.4%

220,000 20,000 215,000 15,000

210,000 205,000

10,000

200,000 5,000

195,000 190,000

0 2011

2012

2013

SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

2011

2012

2013


Change in Sales by Price Range • (Year-to-Year)

Jan-14

50%

43.9%

40% 30%

23.7%

20% 8.0%

10% 0% -10%

-6.4%

-20% -30% -40%

-35.1% $0 - $300k

$300 - $500k

SERIES: Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

$500 - $750k

$750 - $1000k

$1000k+


Sales Share by Price Range Jan-13

Jan-14

60% 50% 40%

48% 37% 28%

30%

30%

20%

14%

18%

10%

5%

7%

5%

9%

0% $0 - $300k

$300 - $500k

SERIES: Sales of Existing Detached Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速

$500 - $750k

$750 - $1000k

$1000k+


Unsold Inventory Index • California, January 2014: 4.3 Months 18 16 14 12 10 8 6 4 2 0

Note: “Unsold Inventory Index” represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were “Active”, “Pending”, and “Contingent” (when available) and divide the sum by the number of “Sold” properties for the month in question.

SERIES: Unsold Inventory Index of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®


Unsold Inventory Index By Price Range • California , Jan 2013 vs. Jan 2014 Last Year

This Year 8.9

$1,000K+

6.9 5.0

$750-1000K

5.1 3.4

$500-750K

4.1 3.1

$300-500K

4.0 3.0

$0-300K

4.0 0

1

2

3

4

5

6

7

8

9

Note: “Unsold Inventory Index” represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were “Active”, “Pending”, and “Contingent” (when available) and divide the sum by the number of “Sold” properties for the month in question.

SERIES: Unsold Inventory Index of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

10


Unsold Inventory Index By Price Range • California , Dec 2013 vs. Jan 2014 Dec-13

Jan-14 4.3

$1,000K+

6.9 3.2

$750-1000K

5.1 2.7

$500-750K

4.1 2.8

$300-500K

4.0 3.0

$0-300K

4.0 0

1

2

3

4

5

6

7

Note: “Unsold Inventory Index” represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were “Active”, “Pending”, and “Contingent” (when available) and divide the sum by the number of “Sold” properties for the month in question.

SERIES: Unsold Inventory Index of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

8


Unsold Inventory Index (Months) Price Range (Thousand)

Jan-14

Dec-13

Jan-13

$1,000K+

6.9

4.3

8.9

$750-1000K

5.1

3.2

5.0

$500-750K

4.1

2.7

3.4

$300-500K

4.0

2.8

3.1

$0-300K

4.0

3.0

3.0

Note: “Unsold Inventory Index” represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were “Active”, “Pending”, and “Contingent” (when available) and divide the sum by the number of “Sold” properties for the month in question.

SERIES: Unsold Inventory Index of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®


Unsold Inventory Index (Months) Price Range (Thousand)

2013

2012

$1,000K+

5.6

7.4

$750-1000K

3.6

4.9

$500-750K

3.1

3.9

$300-500K

2.9

3.6

$0-300K

2.8

3.3

Note: “Unsold Inventory Index” represents the number of months it would take to sell the remaining inventory for the month in question. The remaining inventory for the month is defined as the number of properties that were “Active”, “Pending”, and “Contingent” (when available) and divide the sum by the number of “Sold” properties for the month in question.

SERIES: Unsold Inventory Index of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®


Change in Inventory by Price Range • (Year-to-Year) Jan-14 40% 30.9%

30%

24.3%

21.9% 20%

11.1%

10% 0% -10% -13.4% -20% $0 - $300k

$300 - $500k

SERIES: Inventory of Existing Single Family Homes SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

$500 - $750k

$750 - $1000k

$1000k+


Survey Methodology • 730 online surveys were received in November 2013. • Respondents are Luxury clients who purchase/sell a

home for over one million dollars.

• Maximum sampling error: ±3.5 percent at two

standard deviations (a 95% confidence level).


PROFILE OF LUXURY CLIENTS


Type of Client Represented Buyer

Seller

Both

18% 41%

40%

Q: Who did you represent in your last transaction?


TheTypical Luxury Client

74% College Educated

92% permanently reside in the United States

48% Single

71% Caucasian

53Years Old

$350K Median Income


AboutThree-Quarters of LuxuryClients had a PostSecondary Education 2.4%

Some High School

8.1%

High School 32.5%

13.0%

Some College 2.4%

Vocational/Technical School Four-Year College

41.5%

Graduate School

Q. What is the highest level of education your client had completed at the time of your last luxury transaction?


Singles made up 48% of LuxuryClients in 2013 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Married

Single

Other


Over 70% of Luxury Clients wereWhite Buyers 80% 70% 60% 50% 40% 30% 20% 10% 0%

Sellers

74% 73%

16% 2% 2%

7%

7%

2%

7% 5%

2% 3%


Client Profiles Luxury Buyers

Traditional Buyers

Luxury Sellers

Traditional Sellers

Age

46Years

38 Years

60Years

46Years

Median Household Income

$350K

$125K

$275K

$140K

Marital Status

Single (57%); Married (24%)

Single (37%); Married (63%)

Single (44%); Married (30%)

Single (32%); Married (48%)


Over 70% of Luxury Buyers wereWhite Luxury Buyers 80% 70% 60% 50% 40% 30% 20% 10% 0%

Traditional Buyers

74%

37% 28%

2%

8%

7%

26% 7%

7%

1%

2% 0%


Over 70% of Luxury Sellers wereWhite Luxury Sellers 80% 70% 60% 50% 40% 30% 20% 10% 0%

Traditional Sellers

73%

36% 26%

25% 12% 2%

16% 2%

5%

0%

3%

0%


Majority of Luxury HomeTransactions are not the Client’s First Home Purchase Luxury Homes First-Time Buyer

All Homes

Repeat Buyer

% First-Time Home Buyers Long Run Average 50%

15%

40% 28%

30% 20% 85%

10% 0% 2005 2006 2007 2008 2009 2010 2011 2012 2013

Q. Was your last luxury transaction the client's first home purchase? SERIES: 2013 Annual Housing Market Survey and 2013 Luxury Clients Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®


More than four of five luxury repeat buyers owned more than one property

40.0%

38%

35.0% 30.0%

Mean: 2.4 properties

25.0% 20.0% 15.0%

21% 17%

10.0%

9%

9%

5.0%

5%

0.0% 0

1

2

Q. How many other properties does your last luxury client own?

3

4

5+


International BuyersAre Purchasing Properties in California 9%

8%

8% 7% 6% 5%

5%

4% 3% 2% 1% 0% Luxury Homes

All Homes

SERIES: 2013 Housing Market Survey and 2013 Luxury Clients Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS速


PROFILE OF LUXURY PROPERTIES!


Majority of LuxuryTransactions wereTraditional Sales 3.9%

Other

3.0%

Short Sale

Foreclosure

0.1%

2.7%

REO/bank-owned

90.3%

Regular/Tradtional/Equity Sale

0%

10%

20%

30%

40%

50%

60%

70%

80%

90% 100%


PropertyType Luxury Homes SFH

Condo/Townhomes

All Homes Others

SFH

6.3%

Condo/Townhomes

6.0%

7.6% 16.3%

86.1%

77.7%

Others


Luxury properties often had a hilltop or ocean view Hilltop

41%

Ocean view

28%

Golf course

16%

Mountain area

12%

Oceanfront

10%

Resort area

9%

Lakefront

4%

Ski resort

1% 0%

5%

10%

15%

20%

25%

30%

35%

40%

45%


Luxury Buyers intended Largely to use their Luxury Homes as their Primary Residence

90%

80%

79%

70% 60% 50% 40% 30% 20% 10%

10%

9% 2%

0% Primary Residence Vacation/Second Investment/Rental Home Property

Other


PropertyValue Breakdown 80%

76%

70% 60%

Median Price: $1,375,000

50% 40% 30% 20%

13%

10%

6%

3%

3%

$5M - $10M

$10M+

0% $1M - $2M

$2M - $3M

$3M - $5M


BUYING AND SELLING PROCESS


BUYING


Main Reasons for Purchasing a Home Traditional Buyers

Luxury Home Buyers 25%

Desired Larger Home

20%

Desired Better/Other Location Change in Family Status

11%

Changed Jobs/Relocated

11%

Investment/Tax Advantages

5%

Desired Smaller Home

5%

To Rent it Out

2%

Affordable Price

2%

0%

15%

Desired Better Location Change in Family Status

4%

Desired Smaller Home

4%

Changed Jobs

4%

Retirement/Move to Retirement Community

3% 2%

Foreclosure/Short Sale/Default

10%

9%

Other

11%

Other

17%

Desired Larger Home

3%

To Flip it for a Profit

21%

Investment/ Tax Considerations

6%

Tired of Renting

23%

Tired of Renting

20%

30%

Q. What primarily motivated the client in your last luxury transaction to buy within the past year?

0%

10%

20%

30%


Reasons for Buying –All Homes FirstTime HomebuyersVs. Repeat Homebuyers First-Time Buyers 0%

10%

Repeat Buyers 20%

30%

Tired of Renting Desired Larger Home Investment/ Tax Considerations Desired Better Location Change in Family Status Changed Jobs Foreclosure/Short Sale/Default Desired Smaller Home Retirement/Move to Retirement Community Other Q. What was the single most important reason for selling/buying the property? SERIES: 2013 Housing Market Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORSÂŽ

40%

50%

60%


The Median Number ofYears that Luxury Buyers Intended to Keep the Property was 10. 6

Traditional

10

Luxury

0

2

4

6

8

10

Q. How many years does the client in your last luxury transaction intend to keep the property?


One –Third of Luxury Buyers Paid withAllCash 40% 35%

% of All Cash Sales 35%

30%

27%

25% 20% 15%

• More than a third of luxury buyers paid with all cash • The share of all cash buyers had been on the rise for overall sales until this year

10% 5% 0%

SERIES: 2013 Housing Market Survey and 2013 Luxury Clients Survey SOURCE: CALIFORNIA ASSOCIATION OF REALTORS®

Luxury Buyers

Traditional Buyers


Luxury BuyersTypically Pay More Down Payment thanTraditional Buyers

The average down payment for luxury buyers is 30 percent of the sale price

Down Payment

The average down payment for traditional home buyers is 25 percent of the sale price


Majority of Luxury HomeClients used their Personal Savings as the source of their down payment 8.0% 1.4%

7.1% 27.8%

Proceeds from a Previous Investment Personal Savings 1031 Exchange Other Don't Know/Unsure

55.7%

What was the source of the down payment in your last luxury transaction?


Source of Down Payment Breakdown by Buyer Type First-Time Buyers

Repeat Buyers

Luxury Buyers

Personal Savings

70.5%

55.7%

55.7%

Proceeds from a Previous Investment/Residence

0.0%

24.6%

27.8%

Other

29.5%

19.7%

16.5%


Differences in Financing 65 percent of luxury buyers obtained financing to purchase their luxury home

Approximately 73 percent of traditional homebuyers obtained financing These results are not surprising given that luxury clients tend to be in higher income brackets and more able to pay all cash for a house


Difficulty inObtaining Financing (1=Very Easy to 10=Very Difficult)

9

Traditional Buyer

4

Luxury Buyers

-

1

2

3

4

5

6

7

8

9

Q. Please rate how difficult it was for the client in your last luxury transaction to obtain financing.


Luxury clients utilized their personal contacts to find their agents. 100% 90% 80% 70%

Other

60%

Internet

50% 40%

Advertising

30%

Relationships/Contacts /Referrals

20% 10% 0% Tradtional Buyer

Tradtional Seller

Luxury Client

Q. How did you find the client in your last luxury transaction?


How Agents Find Luxury Clients Client is a friend

18%

Referral from a friend

15%

Referral from a previous buyer

12%

Referral from another agent

9%

Prior dealings with my brokerage

8%

Previous Client

8%

Open House

7%

Client found me online

7%

Client is a relative

4%

Client responded to my ad

3%

For Sale Sign

2%

Other

10% 0%

5%

Q. How did you find your client in your last luxury transaction?

10%

15%

20%


Agents spent about 5 weeks on average looking for properties with their luxury buyers 12

10

10

•

Weeks

8 6

5

•

4 2

A luxurybuyer typically viewed 10 properties with his/her agent before making a home purchase. A traditional buyer viewed 10 properties with his/her agent before making a home purchase

0 Luxury Buyers

Traditional Buyers

Q. How many weeks did you spend looking for a property with your client in your last luxury transaction? Q. How many properties did you view with your client prior to the client making a purchase in your last transaction?


Luxury Home Buyer Made FewerOffersThan a Typical Home Buyer # of Offers Made on Other Properties Luxury Buyers

35%

Median # of Offers

Traditional Buyers

30%

3

Traditional Buyers

25% 20% 15% 10%

1

Luxury Buyers

5% 0% 0

1

2

3

4

5

6+

Q. How many offers did your last client make on other properties?

0

1

2

3

4


SELLING


Main Reasons for Selling Luxury Home Change in Family Status

18%

Desired Smaller Home

18%

Changed Jobs/Relocated

13%

Desired Better/Other Location

12%

Desired Larger Home

9%

To Flip it for a Profit

5%

No Longer Wanted/Needed a Vacation Property

4%

Investment/Tax Advantages

4%

Affordable Price

2%

Other

15% 0%

2%

4%

6%

8% 10% 12% 14% 16% 18% 20%

Q. What primarily motivated the client in your last luxury transaction to sell within the past year?


Traditional Sellers - Reasons for Selling Foreclosure/Short Sale/Default

16%

Desired Larger Home

13%

Change in Family Status

12%

Desired Better Location

11%

Investment/ Tax Considerations

11%

Retirement/Move to Retirement Community

10%

Changed Jobs

6%

Desired Smaller Home

6.0%

Other

17% 0%

2%

4%

6%

Q. What was the single most important reason for selling the property?

8%

10%

12%

14%

16%

18%


Luxury SellersTypically KeepTheir Properties Longer thanTraditionalSellers

8 Traditional Sellers

10 Luxury Sellers

0

2

4

How many years did the seller own the property in your last luxury transaction?

6

8

10


Luxury Home Sellers Received FewerOffersThan Traditional Home Sellers # of Offers Made on Other Properties Luxury Sellers 35%

Median # of Days on Market

Traditional Sellers

Median # of offers received by luxury sellers: 2 Median # of offers received by traditional sellers: 3

30%

11

Traditional Sellers

25% 20% 15% 10%

30

Luxury Sellers

5% 0% 1

2

3

4

5

Q. How many offers did your last client received?

6 or more

0

10

20

30

40


Over aQuarter of Luxury Homes SoldAboveAsking Price 60%

Luxury Homes

All Homes

50%

50%

•

A luxuryhome typically sold with 1 percent discount below its asking price in 2013

•

A traditional home typically sold with 0 percent discount below its asking price in 2013.

40% 30%

27%

20% 10% 0% % of Sales Above Asking Price Q. What was the initial/listing price of your last transaction? Q. What was the final sales price of your last transaction?


Over 9 out of 10 Properties were marketed through an MLS MLS

91%

Open House

37%

Advertisement

35%

Private Listing

10%

Builder/Developer

4%

Other

10% 0%

20%

40%

60%

Q. How was the property in your last luxury transaction marketed? Select all that apply.

80%

100%


Marketing through the MLS was still the most effective way to sell a Luxury property. MLS Open House Private Listing Advertisement Builder/Developer Other 0%

10%

20%

30%

40%

50%

60%

Q. Which of these marketing techniques was most effective in your last luxury transaction?

70%


The MedianAmount spent on marketing a luxury property was $1,000. 14% Photographer 11% 47% 1%

Videographer Designer Architect Other None

14%

13% Q. Which of the following professionals did you hire to help assist you market the property in your last luxury transaction? Select all that apply.


Marketing Breakdown • The median amount that sellers spent on a

photographer was 300 dollars. • The median amount that sellers spent on a videographer was 250 dollars. • The median amount that sellers spent on a designer was 500 dollars.


Luxury Home PricesAre Expected to Increase Luxury Buyer

Traditional Buyer

Luxury Seller

Traditional Seller

Up

71%

36%

67%

43%

Down

1%

20%

2%

21%

Flat/Unsure

27%

44%

31%

36%

Up

79%

60%

76%

58%

Down

3%

17%

3%

23%

Flat/Unsure

18%

23%

21%

19%

1Year

5Years

Q Do you think home prices in the neighborhood where you purchased will go up, down, or stay flat ‌ in one year, in five years?


What LuxuryClients Needed the MostAssistance with?


CONCLUDING REMARKS


TheTakeaway • Sales of luxury properties will grow steadily

as the economy continues to improve • International buyers are purchasing high-end properties in California • Luxury clients need help, especially in the negotiation process • Keep in touch with your clients


Join us for our next webinar…

•“Understanding International

Clients”

• Thursday, March 27, 2014 • 2:00 PM - 3:00 PM • To register: http://tinyurl.com/IntlWeb


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