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Glitzy Places, Echoing Spaces The News & Observer May 4, 2001 The News & Observer
May 4, 2001
Glitzy places, echoing spaces
RALEIGH -- Walt Steen is putting the finishing touches on a $1.3 million mansion in northern Wake County. Steen hasn't found a buyer yet, so the custom-home builder is responsible for the construction loan payments. He's left holding the house until it sells - but says he isn't losing any sleep. "I keep a line of credit," Steen said. "That's how I sleep." Steen isn't the only local home builder dodging a major case of heartburn.
Record numbers of houses costing $1 million or more are going up in the Triangle. But a greater percentage of them than ever are "spec" homes - mansions built without buyers lined up, which builders bet they can sell during or soon after construction.
Last year, about 30 spec mansions costing more than $1 million were sold in Wake County, the main spec market in the Triangle, said Lance Youngquist, a Cary custom builder who tracks the market. Twenty-five to 30 spec homes costing $1 million or more are under construction. In 1992, there were only five homes that cost $1 million or more in Wake County. The phenomenon stands out amid a slowing economy, which has already caused sales of less pricey homes to drop.
But now even well-to-do potential buyers are feeling the effects of Wall Street's swoon - the Nasdaq has lost 57 percent of its value since reaching a record high in March 2000. Builders are losing customers, and the already risky spec-home business is getting riskier.
"There isn't any way demand will keep up with supply in the spec homes," said Phil Miller, who is building two homes priced at more than $1 million and recently lost a client whose stock portfolio had tanked.
Cindy Baldwin, wife of Raleigh custom-home builder John Baldwin, said builders are worried. "They may not look stressed out, but they all are," she said. Consider her husband's situation: He built a $3 million spec home in Wakefield and is offering some unusual perks - a 1999 Ferrari Spider and $500,000 - to anyone who buys it. The catch is the buyer can't live in the home for three years so that Baldwin can use it for a model home. So far, there have been no takers.
Nonetheless, demand for expensive homes has surprised even longtime builders. Three years ago, for example, Youngquist built only three homes costing more than $1 million. Now he builds 20 homes annually costing from $600,000 to $3 million, and at least half of them are spec homes.
Last year, Youngquist sold the most expensive house ever entered in the Parade of Homes, a fully furnished, $2.5 million spec mansion in Cary, which a buyer quickly snapped up. "I was a bit surprised at how ready the market was for million-dollar homes," Youngquist said. A few million-dollar homes have gone up in Chatham and Orange counties, but nearly all of the spec market is in Wake County.
Builders in Wake have tapped into a national trend. Last month, an article in The New Yorker chronicled tract developments with multimillion-dollar spec "McMansions" springing up in California. And Youngquist knows a builder in Tampa, Fla., who builds 20 furnished spec homes a year that he sells at prices ranging from $2 million to $8 million.
The builders are targeting newly wealthy buyers, generally in their late 40s or early 50s, who don't want to make decisions about all the details, from cabinets to shingles, that go into building a house. "The newly rich are working very hard and value their time more than anything else," Youngquist said. "Spec homes save the buyers' time.
"Instead of spending eight to 10 months to decide what goes in a house, they have time to go to the beach, go to their son's ballgame, their daughter's recital," Youngquist said. "One customer commented that it's a good thing she didn't have a full-time job because it's a full-time job building the house."
Unlike basic houses, which take about four months to build, a million-dollar-plus mansion can take as long as two years to finish. Jon Rufty, a Cary-based custom homebuilder, said door hardware, for example, might cost $700 in an average home, while he once had a customer who spent $18,000 on knobs and locks.
The 7,500-square-foot, three-story home that Steen has built in Devon, a mansion development going up in northern Wake County, has five bedrooms, five full baths and two half-baths, a library, a sun room, a breakfast room and a dining room. Just walking downstairs from the third-floor recreation room with a wet bar takes the better part of a minute.
Steen is confident he'll sell the home at his $1.3 million asking price. "If you build a nice house in the right area, people will buy it," said Steen, 53, who has been building houses for 20 years. But if he had finished the house before the bottom fell out of Wall Street, it would already be occupied, he said. "A year and a half ago, it would have been sold."
Staff photos by Jim Bounds Record Number: gctf7s89 « Back |