Shopping for million-dollar homes comes with perks

Jack Cotton, a realtor in Cape Cod, Mass., will take potential buyers out on his powerboat. He works with properties on the high end, which he defines as the top 10% of the market.

"That's kind of our secret weapon," he said of his boat. His clients enjoy cruises of the nearby inland waterways to "experience the lifestyle of being here."

He mentioned his counterparts in Colorado will take their clients out skiing, and Manhattan realtors take potential buyers out in limos.

Ken DeLeon, a realtor in Atherton, Calif., the highest-earning zip code in California, recently took delivery of his own private plane. He uses it to give buyers -- particularly overseas investors -- aerial views of what could essentially be their next backyard.

California real estate agent Ken DeLeon speaks to clients in front of his new private plane.

But a plane isn't the only way to give clients a birds-eye view of a property.

Realtors are now using drones, and drone technology, as a way to stay on top.

"The high-end market is very competitive," said Colette Harron, a real estate agent in Essex, Conn. "So whatever it takes." Her company recently used photographs taken by a drone to showcase a large, multimillion-dollar home in Connecticut. The drone was able to capture the stunning water views of nearby Long Island Sound.

Related: World's coolest superyachts

Buyers in the well-heeled River Oaks neighborhood of Houston are offered something new from builder Al Ross, who's putting up several large houses in the $4 million to $5 million range.

He includes a personal concierge service with each home. Good for one year, the service includes seasonal flower and plant renewal, cleaning of the home's exterior and gutters, touch-ups to walls that are scuffed or scraped, and other services.

Clients "want to know that you are there for them when they need you," Ross said.

Each home also comes with a three-year warranty on its construction. If anything breaks, he'll fix it, no questions asked. "It's no different than buying a very luxurious car," he said. "You expect everything to function properly."

Picnic, anyone? Realtor Jack Cotton said boating is part of the lifestyle in Cape Cod, Mass.

For others, selling a high-end property is about creating an experience, and making a buyer understand the lifestyle that comes with a certain property.

Los Angeles realtor Eric Lavey used to produce sleek, narrative-driven videos with professional actors that gave potential homeowners the ability to see what life might look like in the properties he markets, which usually go from $10 million and up.

Now, he says, the market is so hot he doesn't have the time to create videos, and instead focuses on getting his clients properties with the two must-haves for his area: views, and a substantial master bathroom.

Related: America's top-earning zip codes

But wooing the potential buyer may take more than that.

Michael Meier at the Meier Group in New York City goes truly over the top when it comes to imagining a certain lifestyle. In a recent shoot for a downtown loft, he added a scantily-clad lingerie model to the scene. In one shot, she relaxed in bed with two male models.

"People dress themselves in jewelry to make them look good. I dress homes in beautiful people to make them look good," Meier said of the shoot, in a recent video on his website.

Related: Crazy requests for the luxury concierge

Meanwhile, Cape Cod realtor Jack Cotton said he doesn't believe in staging for the high-end buyer because "it's not real, it's contrived, it's pretend ... people in the high end don't want to be played," he said. "They want the truth." He doesn't even believe in the old trick of baking cookies before a home's showing.

He contends that it all comes down to knowing the buyer.

"You have to adapt to the market that you're in," he said. 

Home prices jump nearly 11% in April

Home prices jumped nearly 11% in April , and are now up more than 22% from the bottom three years ago.

Still, they are 18% below the peak set in July 2006, according to S&P/Case-Shiller. And price gains are slowing.

"Although home prices rose in April, the annual gains weakened," says David Blitzer of S&P Dow Jones Indices. "Last year some Sunbelt cities were seeing year-over-year numbers close to 30%, now all are below 20%."

Low mortgage rates, which the Federal Reserve is expected to keep reined in through mid-2015, and gains in the job market should continue to help the housing market, according to Blitzer.

But don't get too comfortable.

Home sales are being supported by all-cash buys and low supply, said Blitzer. And he says qualifying for a mortgage is still a problem.

"First time home buyers are not back in force," he said.

More homeowners becoming landlords

Low mortgage rates and soaring rents have convinced a growing number of homeowners to hang onto their former homes and become landlords instead.

"Clients tell us all the time, 'We're never going to sell our home, even after we buy a new one,'" said Glenn Kelman, CEO of the brokerage, Redfin.

Susan Young of Lawrence, Kan., refinanced the mortgage on her house in 2013, landing a 3.25% rate on a 30-year fixed loan. She bought another house but has not put her old home on the market.

"If the interest rate was high, I'd sell," she said. "But this is such a perfect loan package, I just can't bring myself to give it up."

She gets $1,100 a month in rent, several hundred dollars more than her expenses, and is using the profits to pay off her mortgage.

Related: Buy vs rent: What you'll pay in 10 biggest cities

Redfin reports that 19% of current homeowners either purchased or refinanced homes between 2011 and 2013 -- when rates were historically low falling just below 3.4%.

Chris Cannon and his wife currently live in Mt. Lebanon, Pa. and plan to move to start a family. But he will a hard time letting go of his home.

"It would be incredibly hard to give up the 3% mortgage we have," he said. "When we bought in November 2012, rates were at the bottom -- about 3.4% for a 30-year -- and we paid a couple of points to get ours down to 3%."

He figures he can rent his home in Mt. Lebanon for $1,400 to $1,500 a month, easily covering his mortgage payment and taxes which total $1,100 a month.

The math works in most landlords' favor these days. Rents have risen by about 20% nationwide since mid-2006, the housing bubble peak, while home prices are still about 21% below what they were at that time.

For people who are still underwater on their mortgages and unable to profit from a sale, renting helps soften the blow.

Related: Millennials squeezed out of buying a home

Juliana Ruiz and her husband Mauricio Jimenez bought their three-bedroom Pembroke Pines, Fla., home for $362,000 in June, 2005 when the market was red hot.

They opted for an adjustable rate mortgage, which turned out to be a great deal: rates have plunged, as have their mortgage payments. Now, they pay a 2.75% rate and owe $250,000 on the home, which is worth about $300,000 thanks to a recent surge in home values.

But since they now have three children and both Juliana and Mauricio work mostly from home, they needed more room.

They bought a six-bedroom home nearby and have been renting their old place out for a year.

"The local real estate market allows me to cover the mortgage and small incidentals with the rent collected," said Ruiz. "At the same time, my property value is increasing."

If the mortgage rate starts to climb, they'll consider selling. By then, they hope they will be able to sell for a profit.

Of course, there are downsides to becoming a landlord. Owners have to make repairs, deal with tenants and cover expenses, even when the property is vacant.

"[Being a landlord is] definitely not for someone who hates spending money on plumbing repairs and new locks," said Young.

Related: How to win a bidding war on a home

And some tenants can be demanding, say if the water isn't hot enough or the air conditioning not cold enough.

"Tenant happiness is important to me and I try to give them whatever they ask for -- within reason," she said.

The surge in landlords is working out well for most owners, but it is taking a toll on the housing market, according to Kelman. Every home converted into a rental property is one less that goes on the market. And in hot real estate markets these days, very few homes are up for sale.

"It's a major reason we have low inventory and limited sales growth," said Kelman. 

America's homes are bigger than ever

NEW YORK (CNNMoney)

America's biggest homes are getting even bigger.

The average size of homes built last year hit 2,600 square feet, an all-time high that surpassed even the housing bubble years, when homes averaged around 2,400 square feet, according to the Census Bureau.

But there is a clear difference between the days when everyone was building McMansions and what's happening post-housing crash.

First of all, the rich have gotten richer.

"If you had a lot of money in the stock market, it has doubled since 2009," said Stephen Melman, director of Economic Services for the National Association of Home Builders.

And many have used those riches to buy even bigger places, he said.

At the same time, relatively few first-time homebuyers -- the biggest market for smaller homes -- are able to buy homes, said Melman. Many young buyers are having trouble getting mortgages or are heavily in debt with student loans.

Related: Priced out: 'I can't afford a home in my town'

As a result, the market for smaller homes, of 1,400 square-feet and less, has shrunk to just 4% of homes built. That compares with 9% in 2005.

 

Why millennials love apartments

Meanwhile, extremely large houses -- 4,000 square feet and up -- have been making up a much larger slice of the new homes built.

Last year, these mega homes accounted for more than 9% of new homes. In 2005, they represented 6.6% of homes built.

Houses that are a little smaller but still verging on mansion territory, those between 3,000 and 4,000 square feet, made up 21.7% of new homes in 2013, up from 15.6% in 2005.

Related: America's growing affordability gap

Not only are the homes bigger, they have more rooms as well. There's the obligatory playroom, the home office, the den and the FROG, or family room over the garage.

And, of course, few children have to bunk up in an older siblings' room these days. Only 59,000 homes built last year came with less than two bedrooms, compared with more than a quarter million with four bedrooms or more.

"It's like growth is accelerating," said Melman. 

Millennials squeezed out of buying a home

Bailey Cato and Josh Czupryk are unusual for Millennials: They were able to buy a home, but not without a lot of disappointment first.

NEW YORK (CNNMoney)

The Millennial generation is great at many things: texting, social media, selfies. But buying a home? Not so much.

Just 36% of Americans under the age of 35 own a home, according to the Census Bureau. That's down from 42% in 2007 and the lowest level since 1982, when the agency began tracking homeownership by age.

It's not all their fault. Millennials want to buy homes -- 90% prefer owning over renting, according to a recent survey from Fannie Mae.

But student loan debt, tight lending standards and stiff competition have made it next to impossible for many of these younger Americans to make the leap.

"When we surveyed Millennials they cited several barriers to homeownership, especially access to financing," said Steve Deggendorf, a senior director for Fannie Mae.

Many Millennials simply can't come up with the hefty 20% down payments. Others don't have good enough credit to qualify for loans.

Related: Priced out: 'I can't afford a home in my town'

Making it even more difficult are the heavy student loan burdens many college grads carry.

"Our problem is an obvious one -- debt," said Mike Kennedy, a 32-year-old marketing director who lives in Northboro, Mass. "My wife just graduated with her master's and I'm still paying off mine."

Even without the $50,000 in student loan debt they owe, affording a home in their town is difficult, he said. Single-family homes there cost $300,000 and up.

Russell Cragun, an online marketing manager, and his wife, Chalay, are both 25. They are looking at homes in the Orem, Utah, area, where the median home price is more than $230,000.

Lured by tax incentives, tech companies have been relocating to the area and creating many high-paying jobs. That has heated up demand -- and home prices.

Related: Buy vs. rent: What you'll pay in 10 biggest cities

But with $15,000 in student loan debt to pay, it's hard to save enough for a downpayment, said Russell.

Tech and other high paying industries have had the same impact on home prices in many of the cities where young adults most prefer to live. Places like San Francisco, New York and Los Angeles are unaffordable to most residents seeking to buy a home, but even more so for those who have not hit their high earning years.

 

Why millennials love apartments

Competition is so stiff in these markets that young buyers can't compete with older, deep-pocketed buyers who are often able to pay for homes in all-cash.

Thomas Bright of Richmond, Va., lost out on two purchases that way.

"When you are a first-time buyer, you aren't poised to compete with all-cash buyers," he said.

Related: Tech workers squeezing out renters

Just finding a property can be a challenge. Even though the housing bust has shaved about 20% off home prices, the number of homes available for sale has dropped significantly in many markets.

Usually, the good homes go quickly, according to Richard Ernsberger, 34, an attorney who lives in Pittsburgh.

"I have been in the market for a one- or two-bedroom townhome or condo for several months," he said. "It seems as though a good number of homes go within days of being listed."

Josh Czupryk, 29, who works as an education coach, and his wife, Bailey Cato, 28, a teacher, wanted to live in a safe Memphis, Tenn., neighborhood with good schools and nice older houses.

"Every one we looked at had a fatal flaw," he said. One house had a blighted one next door. Another had a completely paved backyard.

Eventually, Czupryk and Cato found a four-bedroom for $295,000. Working in their favor was the fact that neither had built up any student loan debt.

Related: Can you afford a home in these 27 cities?

There is a ray of hope for young wanna be homeowners, said Fannie Mae's Deggendorf. "Mortgage lending is getting a little less tight, with lenders approving buyers with a little lower credit score and who have less of a downpayment," he said.

If that trend continues, young buyers just might be able to buy homes again.