Luxury Living: Real Estate Trends

This green home, developed by R.E.A. Homes, features energy-efficient windows and bamboo floors. Photo courtesy of Dielmann Sotheby’s International Realty. Photo by William Hutton Jr.

Spring is here and the flowers are blooming, and so is the real estate market. “We’ve turned the corner and we’re on the way up,” says a jubilant-sounding Andy Dielmann, president of Dielmann Sotheby’s International Reality. “It may be a combination of springtime, the stock market and the stimulus, but people are more optimistic. We’re fielding an increase in calls, showings and sales.”

    But the bursting of the real estate bubble has left its mark. “For a while, you’d see a lot of clients tearing down an existing house in a well-established neighborhood and building a new one on the property,” he says. “Now teardowns, so popular during the boom, have slowed. Once the market gains speed, they’ll be back.”

    The teardown trend has lost steam with both buyers and developers, adds Ted Thornhill, president of Janet McAfee Real Estate. “Buyers are finding that the cost of new construction is rising and resale rates are lower, so if they start building a new home and can’t sell their old one at a good price, they lose money,” he says. “Meanwhile, developers aren’t in a speculative mood, due to the uncertainty of the resale market. They’re no longer confident that a buyer is out there.” The high price of property, combined with the fact that many older homes have environmental issues that make them expensive to tear down, creates a danger that new construction might outprice the neighborhood, he explains.  “Also, a teardown requires financing and a high degree of risk for the builder, especially in a slow market where houses aren’t being snapped up as quickly as they used to be,” Thornhill says. “The longer the house sits on the market, the more money the developer owes the lender. So teardowns aren’t the best deal for anyone, at least not at the moment.”

        According to Dielmann, condos are still popular. “They’re holding their own, especially with first-time buyers, empty nesters, and anyone else who’s had a change in their lives,” he says. Thornhill disagrees. “The tremendous amount of inventory out there, especially at the high end of the market, confuses prospective buyers, who have a hard time establishing a value in their heads,” he explains. “They figure if a condo isn’t selling, it may not be worth the asking price. So the condo sits unsold.” The same holds true for single-family homes, he adds, but considerably more condos were built or converted during the bubble. “The combination of a sluggish market and large inventory makes buyers hesitant. Supply is high, but demand is moderate. I think condos are in for a greater price correction than single-family homes.”

    One thing that is in demand, Dielmann and Thornhill concur, is the energy-efficient house. “We’re getting more requests for green homes,” Dielmann says. “In fact, we sold a house not long ago in Creve Coeur specifically because it offered energy-efficient features. At every price point, people are more interested than ever before in saving money, and that’s not going to change.”

    But Thornhill cautions green builders to keep the current economy in mind. “Yes, people are extremely interested, and energy efficiency is an awesome concept and an attractive feature, but only if the price is competitive,” he says. “Green-certified construction doesn’t have to be a lot more expensive than conventional building if it’s done correctly.”

    This is a good time to be a buyer, Thornhill says. “We’ve got great rates, fabulous inventory, and sellers who finally recognize you as someone to talk to. The refinance market is on fire.” All that’s missing, he adds, is employment security. “Lenders have cheap money, but they can’t offer it to someone who doesn’t have a job, and anyone who’s worried about losing their job is not going to buy a home. So the situation is improving, but we’re not out of the woods yet.” 

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