A volatile stock market, high unemployment, foreclosures and short sales, low interest rates, and global uncertainty all contributed to a challenging 2011. So how did San Diego County’s luxury real estate market fare? Andrew E. Nelson, President and CEO of Willis Allen Real Estate, has been at the helm of La Jolla-based Willis Allen Real Estate since 1981. Here, he breaks down the year in review for the luxury real estate market.

Collection: Do you think foreclosures and short sales affected the luxury market?
AN: The luxury market was directly impacted in only a minimal way. However, these sales affected the attitude of all buyers in the luxury world, as they anticipated the climate that led to short sales and foreclosures at lower price points could ultimately affect upper end values. Perception of a future market is a key ingredient for astute buyers.

Collection: So do you think that will happen?
AN:  As stated above, the luxury market is based on the perception that tomorrow will be better, not that foreclosures or short sales are driving the market.

Collection: What is the luxury market threshold?
AN: Different neighborhoods have different thresholds, based on many factors, but $2 million is a good starting point.

Collection: Was 2011 better or worse for the luxury market than you expected?
AN: It was about the same as what I expected. It was stronger in the spring, but then began to slow in late summer. Typically confidence drops off before an election, which can slow the market – and this coming election is dominating the airwaves, creating uncertainty.

Collection: Was there an influx of cash buyers in 2011?
AN: In the luxury world you typically see a majority of cash buyers. But, even so they only pursue well-priced properties. Luxury buyers tend to be very value conscious.

Collection: In the luxury market spectrum where did you see the most sales take place?
AN: There was increasing activity for the $2-$3 million range, as sellers more realistically priced their properties to reflect lower market conditions, and savvy buyers took advantage. In many cases sales prices were less than construction costs, proving that you can find a good value in the luxury market. 

Collection: Were there any notable or particularly interesting sales in 2011?
AN: Upper-end, ocean front sales were dominant in 2011. The limited supply of quality oceanfront locations is a significant contributing factor. These coastal properties were where we saw the highest sales prices in 2011.

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