Mueller Homes reviews local and national trends to stay in touch with supply and demand issues in the construction industry, building trades, and real estate markets. One of our go-to resources is the in-depth report on the latest trends in the luxury home market, prepared by The Institute for Luxury Home Marketing. While the report covers the entire nation, we dissect those national trends and compare how they are playing out here in Maryland. Here are some of the highlights we think are particularly appropriate for those who are considering building a luxury home in the Maryland region.
Real Estate Market
As the latest report shows, some markets are beginning to move towards a more balanced or buyer’s market, as opposed to the lucrative seller’s market of the last two years. The trend towards aggressive sales price increases and cash offers has abated. Many sellers are now facing offers with contract contingencies or requirements for appraisals and inspections. This means that if you own a property that you want to sell, now is probably the time to do so. While we agree with the report’s overall assessment, we think that here in Maryland in particular, the affluent luxury home market continues to be largely a sellers market. Our Realtor partners, however, have indicated that there are some signs that the sellers market is slowing down a bit. It’s also interesting to note that luxury homes in the 3,000-3,500 square feet range are in the greatest demand. For our clients, we have continued to see a trend towards the 5,000-6,000 square foot range. This is largely impacted by whether the home is a primary residence or second home.
It’s also interesting to note that the report shows the highest sales ratios in the United States and Canada. Sales ratio, as defined in the report, is the market speed and market type with consideration for sales from previous month’s inventory. Notably, both Anne Arundel County and Howard County are among the highest sales ratios in the country.
Vacation & Second Homes
As noted in the report, “Vacation and second home properties are expected to continue to increase in popularity, especially for those who need escape options from their primary property. The affluent are continuing to seek diversity in their lifestyle, and owning multiple properties, whether in the city, mountains, or beach locations, is an important facet in meeting that requirement.” We have seen a lot of clients from Pennsylvania, New York, and New Jersey, opting for second homes in Maryland.
What Does it Cost?
The supply of construction materials has improved in the last 3-6 months which has been good news for availability and inventory. While we still insulate our construction schedules to allow for longer lead times, we are finding more stability in our supply chains coupled with less fervent demand. Costs, however, remain steady. We have seen a roughly 25% increase in the average cost per square foot, over our previous ten year average. We believe this can be attributed to a variety of factors (increased labor & healthcare costs, increased minimum wage, etc.). Due to these factors, we do not believe construction costs will revert to previous levels.
To Build or Not to Build
For many people, the decision to build or not to build may be driven by the economy, interest rates, or the overall global outlook. Some of our clients move forward because they believe that things are only going to continue to rise, while other clients err on the side of caution with a wait and see approach. The one thing we have seen consistent over the past five years is the incredible shortage of land. And this is not a problem that is going to get any better. So, we encourage our clients to continue to search and secure your lot, even if you decide to hold off on building, for the time-being.
If you are considering building your once-in-a-lifetime dream home, give us a call. We will share with you our experience, over the past 30 years, to help you understand the Maryland Luxury Homes market and whatever direction you decide to take. Schedule a call or consultation today.
Source:
The Luxury Market Report – May 2022 is prepared by the Institute for Luxury Home Marketing
