HOW’S THE “LUXURY” REAL ESTATE MARKET?

LAURIE MOORE-MOORE, CEO

The Institute for Luxury Home Marketing

www.luxuryhomemarketing.com

SCOTT SAMBUCCI, COO

Altos Researchwww.altosresearch.com

What we’ll cover

• How’s the “luxury” market?• What’s driving relative demand?• Data, charts, and data… Miami, Las Vegas,

Boston, New York, Los Angeles• Market effects of the Conforming Loan Limit

change• Equities & Homebuilders

Las Vegas & Miami: Luxury Segment vs. Market

Las Vegas: Lower price volatility in the Luxury segment since the crash

Miami: Luxury segment showing positive year-over-year gains!

ILHM Luxury Index vs. Altos 20-City Composite

Prices are down year-over-year, but in better shape than the national market…

…due to more constrained inventory and relatively strong demand in this price segment.

Why?

S&P 500 vs. TIF & JWN

There were about 9.2 million millionaires in U.S. in 2007 Based on total net worth including home equity

2008: millionaire count fell 27% to 6.7 million

2009: count rose 16% to 7.8 million2010: count rose 8% to 8.4 million2011: count back to 9+ million*

Source: Spectrem Group, March 2011Some sources say the count now exceeds 10 million

Before the financial crunch:

The “very rich”

Even the very rich have not been immune.

U.S. households worth $5 million or more,

excluding primary residence, fell 28% to 840,000

by the end of 2008, as compared to 1.16 million

households in 2007.

In 2009, this number rose 17% to 980,000

By 2010, rose another 8% to 1,100,000

March 2011, Spectrem Group

Count of HNWI’s on the upswing• Globally, HNWIs’ financial wealth grew 9.7% in 2010 to

reach $42.7 trillion, surpassing the 2007 pre-crisis peak.

• The global population of HNWIs grew 8.3% to 10.9 million

• 3.1 million are in U.S

SOURCE: Merrill Lynch CapGemni World Wealth Report, 2011HNWIs are defined as those having investable assets of US$1 million or more, excluding primary

residence, collectibles, consumables, and consumer durables.

The “strained affluents” aren’t back

• Ultra consumers spending to maximize lifestyle (without corresponding net worth)

• They were driving mass luxury, fueling entry level luxury home purchases (often with creative loans)

• They may be today’s short sales and foreclosures.

Good News for Luxury

The number of million dollar home sales in 20 top markets

jumped 18.6% in 2010*(California million dollar home sales were up 21%)

NAR reported the over $500,000 market segments outperformed others in 2010

*Source: DataQuick

30% of the uber rich plan to invest in real estate during 201180% of those surveyed have assets of $50 million or more

--Institute for Private Investors survey, WSJ, January 2011

The luxury consumer has a new set of attitudes

Bling is now limited to “Flamboyants” and the “Strained Affluents”

Luxury residential real estateis a portfolio play

as well as a lifestyle choice

International buyers and sellers: A key component of luxury demand

• Trophy properties (It’s a competition!)• Education related demand (Chinese especially!)• Investment• U.S. is “on sale” (currency issues)• Perception of stability • Desire for personal safety• Escape from geopolitical turmoil• Lifestyle• Tax concerns

Market specifics: Trophy Sales

• Los Altos $100 million sale to Russian billionaire Yuri Milner

• LA $85 million sale to 22 year old daughter of sports entrepreneur Bernie Ecclestone

• Other big sales:--Bel Air, $50 million--Rancho Mirage, $42.9 million--Greenwich, $35 million--Corona del Mar, $34.1 million--Manhattan, $24.5 million--Lots of local record sales around the country

Market Specifics: Miami

• First 7 months of the year 517 properties sold for $2 million+ (up 15.7% year-over-year)

• In July, 62.8% of the 78 properties sold at $2 million+ were cash transactions

• 5.5% foreign buyers (mostly Canadians)

Market specifics: Dallas

• 2006 – 4.6% Dallas homes sold for $500,000+• 2010 – 5.4% Dallas homes sold for $500,000+

High end market share has increasedChinese are driving sales in the newest luxury

condo in the Arts District.

Market specifics: Denver

• June sales of $1 million homes up about 6% over last June

• Top sale - $6.18 million in Littleton• List to sale ratio, 92.6%

Market specifics: Boston• The Boston Globe reported that the city saw

a double digit price increase in its condo market in the second quarter of 2011. Median prices rose 10.2 % to $487,000 compared to the same period last year.

New York City Condos & Co-ops

Market Specifics: Aspen

Fewer price reductions in the top price quartile

But even “cheap” homes in Aspen are $500k+ (i.e. bottom quartile)

Miami Beach Condos

New listings bounced higher this Spring, and fewer price reductions in the top quartile…

Top 3 Most Expensive Miami Beach Homes sold in July 2011: www.miamism.com

…along with tight inventory means steady DOM.

CA Coastal Markets

Prices down in San Francisco but activity is higher lower DOM

La Jolla prices up and DOM is lower

Beach towns: LA & Orange County:

Prices showing resilience to increasing inventory

Days-on-market: Higher priced sellers exhibit more patience

• HAURIN (1998), “The Duration of Marketing Time of Residential Housing Donald Haurin,” Real Estate Economics

• GLOWER, HAURIN & HENDERSHOTT (1995), “Selling Price and Selling Time: The Impact of Seller Motivation,” NBER Working Paper No. 5071

• ARNOLD (1999), “Search, Bargaining and Optimal Asking Price,” Real Estate Economics

“The Diminimis Impact of Conforming Loan Limit Changes”

DISCERN Analytics: Brett Kornfield & David Bugajski http://www.discern.com/

June 2011

Matching Local Conforming Loan Limits to Community Locations

S&P 500 vs TOL, RYL, MTH

CONTACT:THE INSTITUTE FOR LUXURY HOME

MARKETING & ALTOS RESEARCH

Laurie Moore-Moore, CEOThe Institute for Luxury Home

Marketing214-485-3000 | @ilhm

Laurie@LuxuryHomeMarketing.comwww.luxuryhomemarketing.comblog.luxuryhomemarketing.com

Scott Sambucci, COOAltos Research

(415) 931 7942 | @scottsambucciscott@altosresearch.comwww.altosresearch.com blog.altosresearch.com