Executive homes selling in the Corridor, but pace slowing

The market for existing executive homes, those selling for $500,000 or more, continues to be reasonably strong in the Cedar Rapids-Iowa City Corridor. But there is growing competition from new construction.

Statistics provided by the Cedar Rapids Area Association of Realtors show 21 homes in Linn County sold for $500,000 or more in 2010 - up slightly from 19 in 2009, but off the pace of 26 sold in 2008. While no existing Linn County homes have sold in that price range so far this year, there were 32 homes in the association's multiple listing service on Feb. 24 with a listing price in excess of $500,000.

In Johnson County, the Iowa City Area Association of Realtors recorded sales of 29 homes in 2010 with a listing price of $500,000 or greater. That's down sharply from 43 executive homes sold in 2009 and off slightly from 33 sold in 2008.

Four Johnson County homes have sold for $500,000 or more so far this year.

Fifty-nine homes were on the Iowa City Area Association of Realtors multiple listing service as of Feb. 24 with a listing price in excess of $500,000.

“There's probably more homes on the market for more than $1 million than there used to be, but I'm also seeing homes in that range move,” said Melinda Muller, a certified luxury home marketing specialist with Skogman Realty in Cedar Rapids. “Many homes are taking a little longer to sell because there's competition from new construction.”

Buyers who can afford homes selling for around $1 million want to customize their purchase, Muller said.

“They want to buy a lot and build, even though you have to discount the resale price,” she said. “They don't want to buy someone else's dream home when they can build the home they have always wanted to own.

“It's not just about the square footage anymore. They want their home to look the way they want it to be.”

And with 30-year fixed-rate mortgages hovering just below 5 percent, and homebuilders, subcontractors and suppliers hungry for business, building becomes very attractive. That's even more of a consideration when the layout of an existing home does not allow for creation of additional bedrooms.

“I recently showed a 7,500-square-foot home on almost 5 acres in Diamondwood (off 30th Street Drive SE, Cedar Rapids) that listed at $1,550,000 to a couple with two girls,” Muller said. “It's a beautiful, distinctive home with large bedrooms that looks like a million-dollar home - but it only has three bedrooms.

“What do they do when they have guests? There was nowhere in that 7,500 square feet that it was obvious to put a guest bedroom.

“The pool of potential buyers willing to pay $1.5 million for a home in a market this size is not that large to begin with, but you further limit yourself when your home has three bedrooms.”

Muller said some new houses listed on this year's Parade of Homes did not sell for anywhere near their listing price.

“Builders were forced to discount those homes because people can get a lot for a good price and build the house they want, rather than settle for something that already exists,” she said.

“The flip side is an area like Diamondwood, which is very exclusive and offers lots that are unlike anything you could probably find elsewhere in Cedar Rapids. Buyers are willing to settle for an existing home that they can personalize.”

The area of the executive home market that's getting squeezed, Muller contended, includes homes for midlevel managers.

“When I look at homes in the range of $400,000 to $750,000, there are no buyers,” she said. “It seems like those people are saying, ‘Let's just wait and see what happens with the economy.' They're just not comfortable making any kind of move right now.”

Terri Larson, president of the Iowa City Area Association of Realtors, noted the decline in sales of higher-priced Johnson County homes in remarks last month at the organization's annual media briefing. The recession, Larson said, has affected home sales in the southern end of the Corridor, but not to the degree experienced nationally.

Larson said Iowa City is projected to be in the top 10 best housing markets in 2011, with sales growth of 3.2 percent.

“After what we've seen in recent years, we would be very pleased to see growth of 3.2 percent,” Larson said.