This time last year, luxury homebuilder Jamie Duncan said her homes were selling steadily. Interest rates at the time were 3% and rising, and customers were shifting their focus from square footage to amenities.
Now with interest rates above 7%, Duncan, the co-owner of Build Nashville, said the luxury market is still going steady, albeit slower business, but buyers want to make sure they’re getting the most for their money.
“[Luxury] buyers are expecting more, if anything, at this point. Your house has to stand out from the competition of the rest of the new construction on the market,” Duncan said.
Standing out means more than just high-end kitchen appliances and lighting fixtures, however.
“We built two homes in West Meade about a year ago, and we chose to pull down a bit on the square footage and not put a pool in, which had been our standard. Both of those homes would have already sold if they had pools in them. One of those homes is about to hit the market, one has been listed for about 35 days, and every single person I’ve shown them to has wanted a pool. So now I’m having to deal with deciding whether or not to build a pool for someone, and it’s not normally my business strategy, we just focus on the homes.”
Duncan said many of Build Nashville’s homes sold before they even hit the market, but now they spend between 30 and 45 days on the market. The company’s products range from $1.8 million to $3 million and are around 4,500 square feet on average.
“Buyers aren’t as anxious to write a contract. Things are moving a little slower as far as making a decision, so there’s additional inventory on the market,” Duncan said. “Builders like myself are coming up with creative solutions. We’re offering a temporary buy-down rate for the first few years, because that’s going to be a substantial discount on a monthly mortgage over just dropping the purchase price by $30,000 or something.”
Buyers in the luxury space typically have more cash to pay for their home, but even so, Duncan said, they’re having to weigh their budget against borrowing money to build their dream house.
Build Nashville is working with 13 different clients to design and build custom homes. Duncan said in some cases the client has chosen to hold off on adding a pool or other feature and opting to wait a few years until they can pay for it in cash.
She said her company’s properties have always had high-end finishes and features, so she hasn’t had to pivot to keep products competitive, but she has made one change.
“On a few of our recent homes I put a refrigerator in, which I wouldn’t normally have done. A lot of new construction doesn’t come with a refrigerator, but just so that the customer can walk in a feel that’s a turn-key deal for them, I went ahead and added one,” Duncan said. “That’s probably the main change we’ve made as far as what we spend on a home.”
Despite increased construction costs and interest rates, Duncan said she thinks buyers – luxury or not – are making a mistake by not getting into the market now.
Nashville’s growth shows no signs of stopping and home values will continue to appreciate as a result, she said.
“Don’t leave the equity on the table. [It’s estimated] housing prices across the country will still be up by 7% next year. If you didn’t get in the market in 2022 because you were worried, and you’re just sitting on the sidelines at this point, every year you’re giving up probably an average of 7% with appreciation,” Duncan said. “When you do the numbers that just doesn’t make sense, especially if you can get creative financing.”