“Five or six years ago, any house costing more than $500,000 could be called a luxury home, two years ago it would be anything more than $1 million, but today, when a tract home on a golf course costs more than $1 million, the luxury custom home market starts at $1.5 million to $2 million,” said Ken Lowman, broker/owner of Luxury Homes of Las Vegas. Apparently, the upper end of the market is only limited by home buyers’ imagination.
At the end of 2005, 173 homes in the Las Vegas area were listed on the MLS for more than $2 million, with seven homes priced at more than $10 million. Last year, 85 homes priced at more than $2 million were sold. The most expensive home on the Las Vegas market at year-end 2005 was a $17 million, 22,000-square-foot estate in Queensridge owned by strip-club owner Michael Galardi.
In Northern Nevada, the most expensive custom homes are found in the communities surrounding Lake Tahoe, including one home in Incline Village listed for $15.95 million and another in Glenbrook for $14.5 million. However, many high-end custom homes are being built in the Reno, Sparks and Carson areas as well. According to the Northern Nevada Regional MLS, which includes information on most of Northern Nevada but not all of Lake Tahoe, 42 homes listed for $2 million or more were sold in 2005, with an average sales price of nearly $3,277,000. The regional MLS recently showed 105 listings for homes costing more than $2 million.
Steve Arrington is so confident about the strength of the Southern Nevada market that he’s building a 19,800-square-foot house at Lake Las Vegas – not for a client, but on spec. Located in the private enclave of South Shore overlooking Celine Dion’s home, it is listed for $12.9 million. Arrington envisions the house will be used as a family compound or a corporate retreat. It has 10 bedroom suites, each with its own bath. The home features plumbing in 28 locations, including baths, kitchens and bars.
“We originally planned to build 9,000 square feet on one level, but we realized that for a little more money we could add a lower walk-out level and capture spectacular views,” said Arrington. The resulting house now contains 26,000 square feet under roof, which includes patios and decks. Working with architect Robert De Leon, Arrington raised the building pad a full seven feet to get uninterrupted vistas on three sides, which involved putting in 1,200 feet of retaining walls.
According to Lowman, the base budget for a home in the $2 million-plus price range is about $300 per square foot, in addition to the cost of the lot. “The majority of buyers want a big home, and the lot must be big in order to accommodate the house,” he noted. “Some lots are 1/2 acre, some are now 2/3 acre. Five or six years ago, a golf course lot with a view cost $300,000. Now that same lot would cost $750,000.”
Although some people want the prestige of showing off huge homes, which are often used for business purposes as well as for living quarters, most buyers in the luxury home market are more concerned with quality than size. James Beasley, president and CEO of Beasley and DeVarreau Sotheby’s International Realty in Las Vegas, noted, “Location, quality of construction and amenities are more important in today’s market than size. We have some huge estates listed, but a buyer may be just as happy with a luxury penthouse.”
The quality of homes has gone up in the last six or seven years, according to the real estate experts interviewed. “It used to be that size was all that mattered,” said Lowman. “Now quality and amenities are more important than size. This trend helps explain the popularity of high-rise luxury condos, which can cost upwards of $500 to $600 a square foot at prime locations.”
George Trowbridge of George K. Trowbridge, Architect in Reno said many of the custom homes he designs are in the 3,000-square-foot to 3,500-square-foot range, although his firm designed one home that was 13,000 square feet. “The average custom home we design is about 5,000 square feet,” he said. “People are looking for low maintenance, not a big castle they have to clean and heat.”
Most of the high-end custom homes being built today are in guard-gated communities, usually featuring a golf course. Jack Raftery, owner of Raftery and Associates, a Southern Nevada builder specializing in high-end custom homes, noted that fewer golf courses are being built because of escalating land prices and water restrictions, so communities anchored by golf courses will become more rare as time goes by.
In Northern Nevada, the majority of multi-million-dollar custom homes outside Lake Tahoe are in master-planned communities such as Montreux, ArrowCreek, Caughlin Ranch and Somersett. In Southern Nevada, popular areas include Spanish Trail and Spanish Hills in southwest Las Vegas, Seven Hills, Anthem and MacDonald Highlands in Henderson, and several communities in western Las Vegas and Summerlin, including Canyon Gate, Red Rock Country Club, TPC Summerlin, The Ridges and The Promontory. Lake Las Vegas, a resort community located 17 miles east of Las Vegas, is becoming increasingly popular.
Who’s Buying?
Beasley said his company’s demographic is baby boomers with disposable income. “They don’t see these places as trophy homes to show off,” he said. “They justify paying the high price by looking at the home as an investment. People are spending more and more time at home and they want value and security for their family, as well as convenience.”
Many buyers of luxury homes have residences in other places. Beasley said, “Once they see the tax advantages of owning real estate in Nevada, their Nevada home almost always becomes their primary residence. There has been a lot of interest from Florida buyers in the last half of 2005 because of the hurricane danger there.”
Although most of his clients are locals, Robert Gurnea, president of Gurnea Construction in Reno, said some high-end homes are being built for refugees from the East Coast, Texas and the Midwest, who come to Northern Nevada for the mild weather and outdoor activities such as boating and skiing. Troy Means, a partner in HomeCrafters, which has built more than 25 multi-million dollar homes in the Reno area, said the vast majority of his clients are empty-nesters or retirees, mostly from California, although he does see an increasing number of younger professionals building homes for their families.
Trowbridge said about half the homes he designs are for clients moving here from outside Nevada, mainly from northern California. Because they anticipate visits from friends and family, they often ask for guest quarters or bedroom suites. In addition to a bedroom and attached bath, these suites may have a kitchenette and a sitting room with a fireplace.
Lowman agreed that the average buyer of high-end custom homes is a baby boomer who is either a successful business owner or very top-level executive. “Some have owned their own business for more than 30 years, and have bought and sold seven or eight homes previously,” he noted.
Another category of buyer for Southern Nevada luxury homes is the celebrity, either in entertainment or sports. Considerable interest also comes from foreigners who are attracted to the worldwide mystique of Las Vegas. Arrington said he started receiving inquiries from both celebrities and foreigners since word got out about his űber-mansion, and building plans have been sent to six different countries.
A buyer of a multi-million dollar home will often pay cash for it rather than getting a mortgage. Gurnea said, “I can think of only three clients who’ve had to go to the bank to get a mortgage. Everybody else paid cash.” Means added that interest rates and loan packages have enabled some people who may not have qualified before to build a luxury home.
Features: The Sky’s the Limit
“At this level of wealth, people are very particular,” said Rick Sellers of Carpenter Sellers Architects in Las Vegas. “They know exactly what they want and are willing to pay for it.” This often involves custom features. One man who was an avid hunter constructed a separate 4,000-square-foot structure to hold all his stuffed and mounted hunting trophies, with special lighting and climate controls. “It was almost like building a natural history museum,” Sellers remarked. Other unique features his firm has designed include a bowling alley and an underground shooting range.
Chuck Kelley of Carlin Williams Architect in Reno said clients have requested full-sized gymnasiums, oversized garages for their RVs and extravagant home theaters.
“If somebody wants it and can afford it, more power to them. We’ll make it happen,” he said.
More often than not, buyers in this price range will choose a unique configuration for their home, he said, with the site often dictating the layout of the house. Many high-end Reno homes are located in the foothills, Kelley noted, not only because land in the valley is getting scarcer, but also to take advantage of city views. A steeply sloped lot may require special grading to make a flat building pad, but it may also make sense to build the house on several levels or to put in a walk-out basement. This lessens the expense of leveling the lot and also allows the homeowner to take advantage of views.
“Custom homes today are very different from 10 years ago,” said Raftery, who has built more than 25 houses in Southern Nevada costing in excess of $1.5 million each. “They take longer to build because they’re more complicated. There are more high-tech features. The finish packages are more intricate and require more time to install. The homeowner may want a copper roof, real stone finishes on the outside of the home and stone or marble finishes inside as well. Smooth drywall finish is popular now, and it takes longer to do that than the standard treatment.”
Sellers pointed out that wealthy people often use their homes for entertaining clients or business associates. This necessitates large dining areas, furniture that can be arranged and re-arranged for large gatherings, and catering kitchens located next to the garage so outside caterers can take food out of their trucks and prepare it without having to access the main kitchen.
Gurnea said, “People used to budget $10,000 for kitchen appliances, now it’s more like $30,000 or $40,000. Home buyers will pay $110 each for decorative tiles to put in their backsplashes.” To accommodate large dinner parties, kitchens have warming trays, refrigerated drawers, wine storage areas and multiple food-preparation areas.
Most luxury homes would be considered “smart houses.” Electronics are playing a larger role every year, said Sellers, who pointed out that four or five years ago, “smart house” technology wasn’t very user-friendly, but now it’s much easier to use. The homeowner can control the system from a touch-screen panel, and in some cases it can be accessed remotely through the Internet.
High-tech features include computerized, programmable lighting, high-end audio/visual equipment, customized climate controls and surveillance technology, which may include security cameras both inside and outside the house. Security is especially important because wealthy people are often traveling, either on business or to their other homes. While no one is home, surveillance and security cameras help protect the house and its contents. According to Sellers, one of the challenges architects face is designing a home that is secure without making it look like a fortress.
Other popular features are wine cellars, home theaters, steam showers and large (sometimes two-story) walk-in closets. The smallest details can be upgraded and customized – everything from faucets and doorknobs to light switches and bathroom fixtures. “Many buyers request upgraded windows – wood with aluminum cladding – which cost five times as much as ordinary windows,” said Gurnea. Natural materials, such as travertine, limestone, exotic woods, glass and metal finishes are popular, as well as nano-walls – floor-to-ceiling glass partition walls that disappear when they slide open.
A seamless indoor/outdoor environment makes a large home seem even larger, and buyers of custom homes are not hesitant about spending money on landscaping and pools. “People coming here from other places often want to re-create what they had at home,” said Sellers. “By substituting plants and trees that look similar to what they had at home, but that can survive in our climate, we can create almost any customized outside environment, from pine forest to jungle.”
Means said the climate in Northern Nevada has made certain amenities especially popular there. Hydronic heat, which circulates hot water through pipes in concrete floors, can keep interior floors warm enough for bare feet in winter and can melt snow on patios and outside courtyards. To take advantage of the mild weather, many high-end homes in the Reno area are centered around an exterior courtyard with a built-in barbeque, lush landscaping and water features.
“Spas have always been popular [in Northern Nevada],” said Gurnea, “but with the influx of Californians moving here, we see more requests for swimming pools, since these people grew up in houses with pools.” Other amenities include outdoor kitchens and firepits, which can allow people to spend more time outside on cool spring and fall evenings.
Rising Prices Affect Construction Costs
“Your million dollars just doesn’t go as far as it used to,” remarked Sellers. “For $225 per square foot, you could get a ‘serious house’ not so long ago. Now it’s between $400 and $500 per square foot, and some luxury homes may run more than $1,000 per square foot, depending on the owners’ choices for upgrades.” In Reno, Trowbridge said, “I haven’t built anything under $200 per square foot recently, and costs can easily run into the $400-per-square-foot range.”
Costs for materials have been rising throughout all segments of the construction market, especially in such staple commodities as steel, concrete and lumber. Raftery noted that the rising cost of petroleum bumped up the prices of most goods, even if they aren’t petroleum-based, because shipping costs are affected by the price of gasoline.
“Costs for lumber, iron and concrete have increased the cost of building a custom home between $5 and $10 per square foot over the last couple of years,” noted Means. “Insurance costs are also a factor.”
Arrington, who started building his Lake Las Vegas custom home almost two years ago, said, “Some of the trades have honored their pricing agreements with us, but others haven’t. If subcontractors didn’t lock in prices from their suppliers, they’re paying a lot more, especially for concrete. Plumbing supplies and electrical wire have also been high. Quality stone and marble have risen as well. The good news is that the market is still strong and is allowing builders a reasonable profit margin.”
Gurnea remarked, “Cement has gone up 30 percent in the last two years, drywall has increased 250 percent and steel posts and I-beams have gone up 300 percent. In January of this year, stucco went up another 7 percent, and the price of insulation and cement also increased. Labor costs over the past year have been increasing due to the shortage of skilled workers in all the building trades. People are demanding more money, and they’re getting it.”
Prices for custom home lots are also rising, due to a scarcity of land. The Lake Las Vegas lot on which Arrington is building sold for $525,000 in 1995. It’s now valued between $1.5 million and $2 million. A half-acre custom home lot in one of Reno’s master-planned communities will now cost at least $350,000 and can reach $500,000.
Market Expected to Remain Strong
Luxury custom homes don’t appreciate as fast as other properties, percentage-wise, but they are also not prone to sudden drops in value, according to Beasley, who said the market for these high-end homes remains relatively stable from year to year with no wild swings, either up or down. “Right now, I would say it’s a borderline seller’s market,” he said.
Although predictions of a “housing bubble” have made headlines recently, it doesn’t seem likely this market segment will be affected. “I haven’t felt any slowdown,” said Raftery. “Interest rates are still relatively low nationally. They haven’t risen enough to throw water on the fire.”
Gurnea agreed. “I don’t see any slowdown,” he said. “In fact, I’m doing my first spec home since 1992. It’s a 5,200-square-foot home in the gated community of Lakeridge Shores on a 1/2-acre island in a manmade lake.”
Means noted, “The market in high-end custom homes [in Reno] is strong. Due to rising land costs, you might see a little downsizing in lot sizes, and there has been movement out into outlying areas.” Trowbridge agreed, “We haven’t seen a slowdown. There will be a premium on custom lots because we’re running out of room and some people are starting to build out in the Verdi area. There is a lot of pressure from people wanting to move here, especially from northern California.”
Land prices are also a factor in Southern Nevada. “Builders of production homes are running out of ground, so they’re going vertical,” said Raftery, “but Southern Nevada has enough luxury lots to last several years yet.”
