Luxury in flux: The million-dollar market

By Jodi Schwan

Something interesting happened in recent weeks as The Wall Street Journal reporters started looking into Sioux Falls.

Lured by an economic development-funded public relations pitch, the newspaper delivered a piece in March with this headline: As many Midwest cities slump, Sioux Falls soars.

It went on to tout the city’s diverse economic base centered on health care and financial services, and how the population growth has outpaced many regional cities.

Housing also caught the Journal’s attention, and in the coming weeks the Sioux Falls luxury home market is expected to be featured in a weekly real estate section.

“The upper market seems to be pretty strong, especially above $1 million,” said Jay Zea, a Realtor with Re/Max.

But while the national media was surprised to learn the city has much of a million-dollar market at all, those who follow it daily say it’s a segment in transition.

“It’s been very interesting the last two years,” said Liz Lloyd, owner of Lloyd Residential. “The supply has stayed about the same, but we’ve seen a lot of activity.”

This home in the Old Orchard area is on the market for just under $1.1 million.

Sioux Falls ended March with 21 pending sales of homes at $1 million or above, more than double the 10 pending at the same time last year, according to the Realtor Association of the Sioux Empire Inc.

The average $1 million house spent 98 days on the market before selling 45 percent faster than a year ago.

While the supply of million-dollar homes – there are 20 on the market – is the same as last year, the inventory has dropped to an 8.6-month supply because of the rate of absorption.

This home south of Sioux Falls is more than 9,000 square feet and is listed for $1.15 million.

“I think that high end has been sluggish the last three or four years, and I think there’s a little more confidence going on,” Zea said.

“People are confident in what the markets are doing and the business activity and the possibility of tax reduction. There’s just a more-positive attitude going on.”

New approach

To be clear, though, the market is not so robust that million-dollar homes sell within days of hitting the Multiple Listing Service.

Million-dollar buyers exist in a small pool, and convincing them to invest in an existing home versus customizing one through new construction can be challenging.

Lee Harding and Tony Ratchford are trying a new approach.

They have spent the past two years developing Grandeur, a program they say is unique to the luxury market.

“It’s a hybrid,” said Ratchford, who brought Keller Williams Realty to Sioux Falls a few years ago. “If you were to marry an auction and the MLS together, this is what you’d end up with.”

While luxury homes are selling faster than in recent years, it’s not uncommon for only one to sell every month or two. For sellers who can’t wait months, or even a year, Grandeur could be a solution, Ratchford said.

“That’s why we developed this program, to get more buyers involved in the existing market than in the new-construction market,” he said. “We think we can do it in three to four months. The idea is how do you get as much money as you possibly can in the shortest period of time?”

Harding, who has spent decades in the auction industry, said this concept is different. Homes start with private marketing to brokers and then are placed on the MLS and finally moved to a private auction when a sale can be guaranteed.

“I don’t want people to get the misconception when they hear ‘auction.’ Some things will immediately pop into people’s minds, things like distressed or high risk,” he said. “This is absolutely not that situation. This is geared for specific properties and sellers willing to try a different avenue.”

Grandeur started with a house in the Grand Prairie neighborhood in southern Sioux Falls. It had been on and off the market for multiple years.

Harding dubbed it “Colina Verde” and embarked on an ambitious marketing plan to highlight the almost 6,600-square-foot home.

A video shows luxury cars in the driveway and highlights the home’s Romanesque entrance, spa-like master suite and grand staircase.

“We sold it before it hit auction,” he said. “The owner received enough interest and offers that he elected to accept an offer.”

Agents and sellers still are learning about the approach, but Harding is encouraged by the early results.

“We’re not leaving all the traditional methods behind,” he said. “We’re adding to it. Sellers in the market need to see their luxury agent is giving them value, and I’m finding they’re willing to pay for that, but they need to see it in action and need to see it work.”

Case-by-case

The million-dollar market is anything but cookie-cutter.

While the homes on it have distinctive features that can help them sell, they also face the challenge of competing with new construction.

And like any price range, the longer houses sit the more prices tend to come down.

A house at 300 E. Twin Oaks Road.

That’s the case with a 6,600-square-foot ranch walkout Zea just relisted near Tomar Park for just under $1.3 million. While it sits on almost eight acres and sports a four-stall garage, in-floor heating and a 1,000-square-foot master suite, finding the right buyer hasn’t been easy.

“It’s got all the bells and whistles and still languished on the market for no apparent reason,” Zea said. “There’s nothing wrong with it. It just hasn’t caught anyone’s eye, and in this price range everything has to fit. They will move on because it’s not perfect.”

Lloyd, who just listed a house in southeast Sioux Falls for $1,425,000, said it’s too early to gauge how it will perform.

A house for sale at 713 E. Silver Pond Place.

“It’s basically on a private lake,” she said of the two-year-old home with its own beach.

Lloyd has a lot to talk about with the listing though, from a chef-designed kitchen to cedar beams and hand-scraped hickory floors.

In the million-dollar market, though, no sale is a given.

Look through requests submitted to the Realtor Association and that becomes apparent, Lloyd said.

“There are at least three requests for homes in that $900,000-to-$1.5 million range and they’re not finding things,” she said. “I’m working with one buyer looking for something (in that range), and it’s not on the market.”

Luxury in flux: The million-dollar market

Million-dollar homes in Sioux Falls are selling 45 percent faster than last year — but that’s only part of the story.

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