Topping sales in the Los Angeles area was Oracle Corp. head Larry Ellison's… (Nick Springett )
California's luxury housing market is booming.
In activity reminiscent of real estate's bubble years, the number of homes statewide selling at more than $5 million reached an all-time high last year, while those selling at $1 million or more rose to the highest level since 2007, a real estate information service has reported.
Sales are up because well-heeled U.S. and international buyers, confident that the housing recovery is solid, are looking for places to park their cash, real estate experts said. Also playing a role was a rush among the very wealthy to take advantage of lower capital gains taxes by selling before year end.
"Last year was gangbusters," said Dave Fratello, an agent with the Real Group in Manhattan Beach, the busiest Southern California community for $1-million-plus sales in 2012. "We flipped very quickly from a buyer's market to a seller's market."
Across California, 697 homes sold for more than $5 million, beating the previous high of 491 in 2011, according to San Diego-based DataQuick. The 2012 sales mark was the highest since DataQuick began tracking such sales in 1988.
The 26,993 homes sold at $1-million-plus represented a 26.9% jump from 2011, DataQuick said. In comparison, 42,502 home sales exceeded the million-dollar mark in 2007, before the mortgage meltdown dragged down prices across the housing market.
The record was set in 2005, when 54,773 homes sold for $1 million or more. The luxury market outpaced overall sales, which were up 8.2% statewide.
"The very top, it is a record level — well beyond what it was in the bubble period," said John Karevoll, analyst for DataQuick.
Hillsborough, in the San Francisco Bay Area, claimed the top spot with 422 sales at $1 million-plus. Like many neighborhoods in Silicon Valley and environs, Hillsborough's sales growth was driven by a wave of buyers from the technology sector.
Southern California communities with the most $1-million-plus sales included Manhattan Beach, Newport Beach, La Jolla, Brentwood, Beverly Hills and Laguna Beach.
"We're hitting that perfect storm of buyer demand, low inventory and attractive housing prices," said Paul Habibi, who teaches real estate at the UCLA Anderson School of Management.
Gary Painter, director of research and an economist with the USC Lusk Center for Real Estate, said the high-end niche is more likely to be driven by the international economy rather than what is going on in the U.S. — which suffered an unexpected economic contraction during the last three months of the year, the Commerce Department said Wednesday.
As a result, the luxury market is benefiting from a continued influx of wealthy international buyers who are betting on the potential of prime housing to appreciate and view luxury home prices in the U.S. as bargains versus other parts of the world.
Foreign buyers spent 24% more on U.S. real estate last year than in 2011, according to an annual survey by the National Assn. of Realtors. These buyers represented 8.9% of all housing spending. Asian shoppers are particularly interested in California homes, the study said.
Sandra Miller of Engel & Volkers, a broker who specializes in international buyers and luxury properties, said that "the money is really coming from everywhere."
While her office is dealing with an onslaught of Italians, buyers are coming from London and Germany. Chinese buyers are snapping up homes in the $1-million to $5-million range for their children, she said, but not ultra-luxurious estates.
"The very, very large sales last year were done with Russian money," Miller said.
DataQuick's Karevoll cautioned that the boom at the luxury level doesn't automatically translate to continued sales and price improvement for all homes.
"As a bellwether for a market as a whole, however, it is really hard to read what it means," he said. "The broader market and what we call the 'prestige' market — homes from about $2 million to $3 million and up — seem to dance to two different tunes."
In Manhattan Beach, most homes are priced at more than $1 million, said Fratello, who is also a housing market blogger at MB Confidential. "The days of little cottages for under $1 million are mostly behind us."
A low supply of homes for sale kept a lid on sales in the sought-after beach community, Fratello added. Bidding wars returned.
"With another 10% in sales our volume would have matched all the bubble years," he said, referring to 2004 to 2006.
A tear-down in the so-called Tree Section of Manhattan Beach drew 20 offers in March, selling for $1.352 million — $250,000 above the asking price. A 2,600-square-foot Midcentury-style house in need of work in the same block attracted 15 bidders. Listed at $1.6 million, it sold for $1.88 million.
"Everybody is shaking their heads," Fratello said. "This is crazy."