The Luxury Home Marketplace

We commonly refer to markets in their entirety when reviewing the conditions prevalent and often forget there are segments of the markets that function differently than the whole. We are experiencing expansive growth in the frequency of sales for homes priced above $1,000,000. Sonoma County’s real estate markets have a distinctly different mood in the higher end than the balance of the marketplace.

Today’s million-dollar homes, at least in California, are not filled with movie stars and wall street millionaires, nor are they adorned with gold plated chandeliers or flanked by tennis courts and Bentley filled garages. They are occupied by hardworking people trying to enjoy life and looking to have a more enhanced environment for themselves when being able to relax at home with family and friends. Taking a look at the niche known as affordable-luxury – homes valued in the $1,000,000 - $3,000,000 range – we discover a marketplace that is much different than homes priced below this threshold.

Sonoma County, the largest in the North Bay by population, witnessed October close with 19% greater inventory of homes in this niche’ than just a year earlier while the sub million-dollar market experienced inventory levels 28% above year ago levels. According to BAREIS MLS, Sonoma County finished the month with 340 homes in the $1,000,000 - $3,000,000 range available for sale. During the period, buyers negotiated to purchase 84 new properties while just 61 estates were newly introduced to the market – 23% fewer than in 2023.

Sellers were able to wrap up another 95 deals in October thereby giving rise to an absorption rate of 28%. This affordable-luxury segment of the market has seen this rate fluctuate between 25-46% over the prior two years - meaning the markets are more controlled by sellers than buyers and have not even sniffed a balanced reading at any point over the last two years.

The absorption rate is calculated by dividing the total number of homes sold in a month by the total number of homes available for sale at the end of the same month. A high absorption rate – 20 percent and above – indicates that the supply of available homes will shrink rapidly, thereby increasing the odds that an owner will sell a property in a shorter period of time. Conversely, an absorption rate below 15 percent is indicative of a buyer’s market, meaning homes are selling more slowly.

This segment of the market typically sees a higher price paid per square foot(psf) of home than the sub million-dollar market as the properties tend to be more embellished with features like designer pools, larger manicured yards, views and uniformly more desirable, custom finishes while being located in the most preferred neighborhoods in the county. In Sonoma County, at October’s closing, the average sale took place at $615psf versus the entire county reporting at $462psf – that’s a 33 percent premium that buyers are paying to gain access to the accoutrements found in this echelon of the marketplace.

As of this writing, the median price in this segment of the market was $1,325,000 while the average price paid was $1,428,000. Quite a difference from the sub million-dollar market where the median stood at $727,000 while the average home sold for $703,000.

Trying to find more home in the house you are looking for? This niche of the market requires you to understand and notice the simplest of details in order to be more capable of valuing what is truly before your eyes – notice these details and you will realize why there is such a difference in price per square foot between these segments of our marketplace.

This article originally appeared on PressDemocrat.com, where Jeff writes a weekly real estate column.