The "luxury" market: holding up or hanging on?

As the Bend area real estate market began its long descent for a time it appeared  “luxury” homes might buck the trend. That possibility appears to have dissipated although there are signs that cash capable buyers are poised to act for the right product at a realistic price.

Picking a price range for the luxury market has also become more challenging. A Bend home that might have sold in 2007 for more than $1 million most likely today would be listed for 25-30% less. And there are considerably fewer listings for more than $1 million as of January 2010.

In eight key submarkets of Central Oregon in 2010 there were 20 residential sales of more than $1 million each, with  two of these closing at more than $2 million. The most expensive sale was in the Highlands at Broken Top, a 6,383 square foot home with five bedrooms and six baths on nearly 11 acres. The small Sisters sub-market logged four of the 20 sales.

The sales volume was $28,315,555, off by nearly 49% from the $55,389,550 volume in 2009. In the property categories of single family homes, single family homes on more than an acre and condominiums-townhomes, the luxury sales volume was a thin slice of 3.23% of the total $877,141,019.

(Note: elsewhere on this site market summaries focus on single family homes on less than one acre and include only seven submarket areas).

As with the broader market, sales of properties priced at  $1 million or more also tended to peak in 2006 and 2007—at 136 units in 2007 on volume of $191,286,666 and slightly higher volume of $198,791,876 in 2006 on lower unit  sales of 128.

To further illustrate the rise and fall of premium upmarket properties, in 2003 there were only 13 MLS recorded sales of more than $1 million on total volume of $19,447,300.

A closer look at 2010 shows that expensive sales tended to be recently built custom homes with special characteristics such as their design and spectacular views on larger acreage. One example was a 3,600 square foot home on a private 190 acres just north of Sisters.  After being listed by a local broker for $4,850,000 in May the property was turned over to a premium national auction broker several months later. In late August it sold for $2,365,000 in an all cash, no financing transaction.

The three properties with the highest closing prices were all on 10 acres or more and 15 of the 20 were on an acre or more.  Those on smaller lots had features such as riverfront and river or mountain views.

High visibility (and priced) projects hit a downdraft

 Some of the region’s most prominent luxury projects have faced major challenges during the recession. Among the most visible are Ranch at the Canyons north of Redmond along the Crooked River; Tetherow adjacent to the mature Broken Top community on Bend’s southwest perimeter and Pronghorn Resort east of Highway 97 between Bend and Redmond.

The new clubhouse at Ranch at the Canyons

Ranch at the Canyons might arguably be the top of the market among developments that materialized in the early part of the decade and which peaked before the economy faltered. A gated enclave of 60 landholdings of about 10 acres each, Canyons was positioned as an agriculture-preserve which would maintain such activities as hay production, vineyards and winery, an equestrian area and well-stocked lakes for fly fishing.

Initial sales were promising with 25 recorded landholdings closed starting at $333,333 in late 2003 and topping out at $1,350,000 in October of 2007. Several land buyers built custom homes for their own use and two others were built “on spec” and sold by a California contractor.

But there have been no recorded land sales since 2007 and there are several short sale or bank owned listings. One of these, which sold for $720,000 in 2005 was listed as a pending sale in late January 2010 at $269,000.

Yet, the developer has been reluctant to lower prices . Of the 24 active listings in early February, there were 20 priced at effectively pre-recession levels near or above $1,000,000.

The founding development managers also left the project in 2010 after arbitration proceedings with the primary equity partner, which has now assumed management and marketing.

Tetherow was planned as a resort on the edge of Bend city limits that would revolve around a links-style golf course designed by Robert McLay Kidd, well-know for creating Bandon Dunes on the Oregon coast. In addition to individual homesites Tetherow was to include a 100 plus room hotel, townhomes, a spa and a clubhouse with dining room.



The Tetherow clubhouse from a links-style fairway

Now the original developer has moved aside but retained some of the lots, while new financing has been provided by investors from Eugene and a Midwest company. The golf course and club house have been sold to a golf pro backed by a Dutch investor with substantial oil holdings and the hotel, townhomes and spa are on hold. There are occasional lot sales, a few homes are occupied and the private golf course is now open to the public.

Pronghorn Resort also came to market when investment capital was abundant and lenders more receptive to new golf-oriented communities. The California developer attracted two of the world’s best know golf course designers, Jack Nicklaus and Tom Fazio, to collaborate for first time with side-by-side courses in the same development.

Lot sales were brisk in the early stages with many sales of more than $500,000 and a few above $1,000,000, including the top price in August of 2008 of $1,100,000 for a one acre lot on the No. 1 hole of the Fazio course. The high mark on a home sale was reached with the June 2008 closing at $3,000,000 of a 5,600 square foot four bedroom, six bath home on the 2^nd hole of the Nicklaus-designed course.

But in 2009 there was a wave of distressed sales that drove down prices, including a bulk sale of 10 lots at prices in the $100,000 to $120,000 range—including membership in the Pronghorn Club with dining and golf membership. By early 2010 there were 30 active lot listings priced from $9,900 to $995,000. Among these were 15 short sale or bank owned properties priced from $22,700 to $220,000, depending on whether a club membership, valued at one time at $115,000, would be included in the sale.

Pronghorn has begun promoting nightly lodging specials including golf and ski packages after initially being marketed as a mostly private and gated community. Deschutes County has several times delayed requirements that Pronghorn provide a specified number of rooms open to the public, citing economic factors that have weighed on the project.