Local luxury real estate market seeing high interest for $1 million-plus homes
May 17-23, 2021
By Wesley Brown
In the global market of luxury home buying, Central Arkansas has never been a hotspot for wealthy investors and affluent homeowners looking for the best deal.
However, recent forecasts from the National Realtors Association, real estate analytics giant Redfin, and internationally luxury real estate broker Sotheby’s International shows that the current housing market tide is lifting all real estate industry boats, including the high-ending housing stock in Central Arkansas.
And just as the broader economy started to bounce back from the pandemic-induced recession last summer, the luxury segment has seen a promising uptick in entry prices, demand and inventory over the past year, according to a report by Realtor.com, the listing website for NAR and its 1.3 million real estate industry members across the U.S.
Defined as the top 5% of homes listed, the upscale housing sector saw the listing price entry point across the nation grow 6.1% year-over-year to $2.97 million. As more luxury residences hit the market in May 2020 compared to April, higher prices led the overall housing market’s median price gain of 1.6% last month from a year ago, Realtor.com reported almost exactly a year ago.
“The COVID-19 pandemic has reinforced the resilience of the housing market and unlike prior downturns, the luxury market is leading the recovery,” Realtor.com’s chief economist Danielle Hale said at the time.
Fast forward today, sales of luxury homes in the U.S. rose 41.6% year over year in the first quarter of 2021, far outpacing sales growth in every other segment of the housing market, according to a new April 26 report from Redfin.com, the Seattle-based real estate data analytics firm. By comparison, sales of affordable homes increased 7% and sales of mid-priced homes climbed 5.9%.
Redfin analysis divides all U.S. residential properties into five price tiers – luxury, expensive, mid-priced, affordable and most affordable – based on the estimates of local home market values. In the past, sales growth has historically been similar across price tiers, but has diverged as the coronavirus pandemic has exacerbated economic inequality.
Both locally and nationally, affluent Americans with the flexibility to work from anywhere are taking advantage of low mortgage rates and buying up high-end houses, particularly in popular vacation destinations and markets like Central Arkansas where more home is available for the same buck, according to Susan Desselle, owner and principal broker for Capital Sotheby’s International Realty of Little Rock.
“Suddenly, more is more office space, square footage and land,” Desselle told the Daily Record in a wide-ranging interview on the hot local housing market where the average listing prices have jumped more than 20% year-over-year. “People are returning to tried and true homes that provide lifestyles where families can gather and spend time together.”
More house, “more better”
However, in highlighting the difference between the national and local luxury home market, Desselle noted these key differences: the entry-point price, the quantity of high-end inventory, and how much home can be purchased for over $1 million.
While the value of what defines the luxury residence can vary widely across the globe, the general accepted benchmark in Pulaski County is $1 million or more, she said. By comparison, the most expensive home sold in the U.S. in 2020 was a $165 million mansion purchased in Beverly Hills by Amazon Chairman and CEO Jeff Bezos.
According to data compiled by the Daily Record, there were 44 homes sold across the county that topped the $1 million price tag. Among those homes, 40 sold between $1 million and $2 million mark and four exceeded the $2 million mark. At the publication deadline of this edition of the Daily Record, there were 47 homes on the market in the state most populous county over $1 million and four topping $2 million.
Among the $1 million-plus housing stock, Sotheby’s data shows the highest record sales prices was $3.35 million for a 7,500 square home built in 2016 in the Little Rock’s Cliffewood neighborhood. By comparison, the average 2021 residential listings in Arkansas through March jumped 22% from $292,000 compared to $239,000 in the same period a year ago.
Before 2020, Desselle and April Findlay, a real estate agent with The Charlotte John Company and incoming 2022 president of the Little Rock Realtors Association (LRRA), said the average number of homes sales over $1 million was between 10 and 15 per year. Prior to the Great Recession in 2008, it was rare to see more than one or two sales per year that topped the $1 million mark, they said.
Findlay said coming out of the last downturn, which was precipitated by the subprime mortgage crisis, most middle-class and affluent home buyers and sellers were holding fast until the broader economy rebounded. Once the pandemic hit, low interest rates, remote work, and altered living spaces gave rise to the need for bigger and better homes, she said.
“What I’ve seen is that we were just started to come out of that 2007, 2008 period when people had their lives on hold for so long, not living or doing anything. And we were starting to see people come out of that … they were like ‘you are free to move around the cabin again,’” said Findlay, a former Alltel Corp. manager. “Then interest rates kept helping that (trend), and people realized I could buy more house than I thought I could.”
For the wealthier homeowners, both local real estate agents agreed there has been a stark change in home buying habits due to local shelter-in-place orders, social distancing habits, and remote and at-home school and working arrangements. Before the pandemic, for example, even well-to-do buyers were not seeking homes much larger than 5,000 square foot in the past decade.
Today, however, must-have upgrades for well-heeled buyers include more office space for at least two wage-earners, technology enhancements, and bigger family rooms. Outdoors, affluent buyers are also insisting on top-shelf amenities such as covered backyard decks, great rooms, and larger patio and entertainment space. Even, the once out-of-favor backyard pool is now back in vogue, said Desselle.
“People want to adapt their lifestyles where there are two income earners working in the own offices from home, and the kids can have a homeschooling situation not necessary being taught by the parents but a place they can do school-at-home. And that takes square footage and larger (space),” emphasized Desselle.
In addition, the two well-respected real estate executives also stated there has also been a noticeable uptick in interest from buyers outside of Arkansas seeking to purchase a high-end home as a primary residence or investment.
For example, Desselle described one affluent family living in a small Central Park flat in New York City seeking to move back to a southern state like Arkansas. Eventually, that buyer bought a historic brick home in the city for cash well over the asking price. Another wealthy East Coast buyer also recently offered to all cash and $50,000 over the list price for a $1 million-plus home nearby but was outbid by a local buyer.
“This is not something I would’ve bet the farm that these conversations would have happened in my lifetime, so that was wild. So, we are clearly drawing in people from more highly populated areas who are completely re-designing how they are living. And they are looking for states and regions of state that are sparsely (populated),” said Desselle, an urban Texas transplant who moved to Arkansas well over a decade ago.
Still, Findlay said interest in the luxury housing market in Central Arkansas is not as great as other states where the entry-point for high-end homes averages $3 million or more.
“In Arkansas, the million dollar-plus to $4 million houses are not flying off the shelf like you see in California and other states,” said the Charlotte John’s agent. “And that’s because we don’t have a ton of those (buyers). But we are getting more of those people, who are realizing they can buy more house here. And you are probably able to buy more house at a younger age.”
From the Charlotte John’s offices located at 5813 Kavanaugh, Findlay said her firm is also seeing strong buyer interest in luxury homes among local buyers. She said savvier millennials are also purchasing larger and more expensive homes, joining older wealthier buyers in the Heights and Chenal areas looking to upgrade to more spacious digs.
“Some people downsized when they bought their last home, but the pandemic changed the dynamics of how we live. I think we are all realizing now that more space is not the worst thing in the world,” joked Findlay.
Sotheby’s grand entrance
For Desselle and her fast-growing local real estate firm, which includes 12 associates, the timing has been almost perfect to take advantage of the recent uptick in the Central Arkansas luxury housing market. Last month, Capital Sotheby’s in Little Rock held a grand opening reception for the firm’s new office & gallery space also in the Heights at 5020 Kavanaugh Blvd.
Just two years ago, internationally recognized Sotheby’s International Realty Affiliates LLC launched its first affiliate in Northwest Arkansas, home to three Fortune 500 companies in Walmart, Tyson Foods and J.B. Hunt Transport. Owned and operated by Kristen Boozman, Portfolio Sotheby’s of Rogers now serves the luxury residential real estate markets in Northwest Arkansas, including the Bentonville, Fayetteville, and the Springdale areas.
“Once a rural community, Northwest Arkansas has transformed into a national center for culture, commerce and entrepreneurism,” Philip White, president and CEO of Sotheby’s International Realty, said during the July 2019 launch. “Kristen and her team have served the Northwest Arkansas market for more than a decade and we are proud to welcome Portfolio Sotheby’s International Realty to the brand’s vast network. The addition not only marks the Sotheby’s International Realty brand’s expansion into a new market, it enables us to service one of the fastest growing metropolitan areas and top 10 best places to live in the country.”
At the time of the Northwest Arkansas announcement, Desselle said Sotheby’s did not consider the Central Arkansas market because of the perception there was not enough luxury housing stock, or interest and demand for exceptional, high-end properties. However, that changed in October when the Madison, N.J.-based real estate network with 1,000 locations across the globe announced it was adding Capital Sotheby’s as its second Arkansas affiliate.
“What Sotheby’s being in town has done is has put Little Rock on the global map,” said Desselle, noting that local listings from her firm over $500,000 are spotlighted to over 17 million unique visitors each year at SothebysRealty.com.
Desselle also forecasted that luxury market in Central Arkansas will peak in 2021. She thinks the hot luxury housing market will ebb in the post-pandemic years in 2022 and 2023 because there is a smaller group of buyers and sellers for homes above $1 million. However, she said she still believes the luxury housing market in Central Arkansas will remain viable for years to come, while the rest of the industry will continue to see a “seller’s market” well into the foreseeable future.
“(We) just don’t get the same percentage at the very high-end just because of number of people that are even are available to even consider looking at a $2.5 million or even a $1.5 million house. That is a very, very small percentage of the total buyer pool compared to the people at $250,000,” said the Sotheby’s broker. “So, those people are going to be in the driver’s seat on their price, on their concession, and on the terms of their contract for a long time to come.”
PHOTO CAPTION: (Photo by Chase Ertzberger)
This luxurious new home at 42 Chenal Circle is positioned between the 17th green and the 18th hole of the Founders Course at The Chenal Country Club. The Jack Hartsell-built home is over 11,000 square feet and includes custom one-of-a-kind detail from local Arkansas artists and craftsmen. They range from hand wrought iron throughout the home and grounds, to the custom handmade 3-story free-standing foyer staircase, to the 200 linear foot, 80,000+ gallon pool. The property is offered for sale with Capital Sotheby's International Realty.