Who Actually Buys a Luxury Home in the Treasure Valley?

Lightly edited for clarity — filler words and false starts removed; the substance of the conversation is unchanged.

Jerod Lee: Thanks for joining us today, everyone. We are continuing our Luxury Listing series — this is episode two. We talked about pricing in the prior episode: things to think about, comps, and a number of considerations along those lines. Today we're going to talk about who's actually buying luxury homes in the Treasure Valley, how they're purchasing these homes, appraisals, where the folks are coming from, and knowing your buyer before the pricing. And we're going to have this discussion with our co-host, Chase Hodgson. How are you doing today, Chase?

Chase Hodgson: I'm doing good, Jerod. Good to see you again.

Jerod: Good to see you. I paused because I'm so used to Summit Funding — I have to remind myself: CrossCountry. A relatively new relationship, but it sounds like it's been very positive on a number of fronts.

Chase: Super positive. I'm still working through it too — seven years at one company is a long time — but the opportunity with CrossCountry is just phenomenal: the breadth of product, the help, and the technology is pretty incredible.

Jerod: That's great. I know it always takes a little time to make the shift and integrate with the culture and learn the platform. I imagine you're on the tail end of that and settling in.

Chase: Fortunately for me, the culture is staying the same, because our whole Summit team came with us — my direct leadership is the same leadership I had. That part of the transition has been smooth as ever.

Jerod: For new listeners: Chase has been in the lending industry for quite some time, and we talked in our last episode about his former career on the appraisal side for the better part of a decade, which brought a lot of value to how to price luxury listings. This is a six-episode series, so for those who want all the ins and outs of luxury listings, please subscribe and follow. Let's jump into the meat here. There was one item I didn't put on the outline that I wanted to focus on up front, and that's the overall approach to luxury properties: the dynamic just shifts, on a lot of different fronts. The buyers buy different, we need to sell different, where buyers find these luxury properties is different — it's a different dynamic on pretty much every front. So who do we see buying? I think the biggest influx we've seen over the last few years is those high-equity owners who were able to come up here and purchase in the luxury market — which, to them, looked significantly different than the luxury market they moved from. Would you say that's the bulk of what you saw the last ten years?

Chase: I think it's a lot of it, yeah. We've had such a big influx from out of state, from multiple states and different areas. The whole COVID thing and working from home changed how everybody works — people can work remotely a lot more, and companies are more flexible with it. Everybody talks about the Californians moving to Idaho, but it's California, Oregon, Washington, Arizona, Texas, back east — New York, Boston. I've helped folks from all over the country, just because of that change. And to your point, in a lot of those markets the value of their homes is a lot higher than what we're used to seeing here. I think that's a vast majority of what the luxury home market here has turned into.

Jerod: And they've really changed the dynamic of what we've classified as luxury. Traditionally — I've been here since '96, and you even longer — a lot of our price-tagged luxury properties were equestrian, ranch, that genre. Now we're getting into different luxury markets and product that people are bringing from other markets, which makes the diversity interesting to watch.

Chase: It's fun. It's been a crazy transition. In 2008, right before the crash, we were just hitting a million dollars here — and the fact that there were so many million-dollar homes on the market during the crash was jaw-dropping at the time. Now we're into the multi-millions. It's been pretty interesting to see. It's brought different builders out, different subcontractors — because that's typically not a crossover. If you're used to production building, it takes a different tradesman to complete luxury-style homes.

Jerod: A totally different approach — materials, craftsmanship, knowledge, experience. That changes the dynamic a lot. And to give some insight: not only has our product changed in the luxury space, but there's a corridor, for lack of a better word. We have some luxury out in Kuna and south, but mainly what we deal with runs all the way up Highway 55 into the Donnelly–McCall area — and obviously those products are different again, more the wilderness-cabin kind of thing. So you'll see a pretty wide selection of luxury product in the southwest Idaho area. But the other group is the fair number of people who bought well, have had their home a long time, have a good chunk of equity, and are excited to capitalize on some of this new product coming online. Do you see on the lending side quite a few of those transitions — from a really nice house to "I've got a lot of equity and I'm feeling good about life"?

Chase: We're seeing a lot of that. Back through the COVID years the market really pushed that appreciation — it's settled back a little since — but folks who have had their home for a while have a ton of equity. The question for them is leaving that two-and-a-half, three-percent interest rate for something new, how much equity they have, and what that looks like. But no matter where they're coming from, it's typically quite a bit of equity and money to put down. And I also see them taking that equity not just into a bigger or nicer-amenity home, but into smaller luxury second homes — something up north. "I've got a nice home down here, I've done well, and I'm done taking my RV up north every year — I want something fixed and consistent." The proof's in the pudding with the way Tamarack's grown the last few years — you've seen that firsthand with the luxury going on up there.

Jerod: So those are our typical buyers: people relocating with equity, people moving up, or people buying that second home.

Chase: Sorry to interrupt — it just popped into my head: with the expansion of Micron there's been new job opportunity, and with the way online business has taken off, we're seeing successful online business owners and more CEOs come to town — those higher positions and good-paying jobs coming to the valley more than we've seen in a long time.

Jerod: That subset of relocation coming in — we're very tech-heavy, with a per-capita tech presence here that I think would surprise people. So let's get onto your side — the lending and financing side. The national average goes up quite a bit from non-luxury homes, meaning roughly a quarter to a third of buyers paying cash, to more like half for luxury home buyers. Would you say that's the same in our market?

Chase: I don't know if it's 50-50 here. It's definitely higher than the overall market, but you're dealing with a couple of different segments — there's that break from luxury to ultra-luxury, where folks have money they need to do something with, and there's a point where the tax advantages of spending that cash are probably more beneficial than keeping it. But for where our market is at, I still think we see more than fifty percent lending on luxury homes. There's a whole bunch of different avenues to get there, but ultimately how much they put down — or whether they pay cash — is typically an opportunity-cost decision.

Jerod: Do I put my money here or there — does it make more sense to be in my house or in some other investment?

Chase: Right. Take a CEO with a good investment portfolio, or someone investing in real estate: where is your money? Because typically, as you move up that ladder, your money doesn't just sit in an account. It's that economic question of opportunity cost — the interest rate you're paying versus what you're earning depending on where the money sits, plus the tax advantages of where it's at, versus putting cash down and using it up. There's more that goes into the decision. But I think for the most part, our local price range is still one where it's a decision about down payment size versus paying cash.

Jerod: We're spending a fair bit of time on this — we touched on it in the last episode — to give sellers an understanding of the likelihood of a cash buyer versus a financed buyer. Because once there's financing involved, there's an appraisal that needs to take place and we've got to find value there. That can really change how deep we dig into finding that potential appraised value — versus a home at a caliber and price point where a cash buyer who isn't going to ask for the appraisal is more likely.

Chase: From what I've seen with the clients I work with, it leans more toward the how-much-down question — because if an appraisal comes in low, do they have the cash to make up the difference? In the luxury space they typically do. I do think we're getting more and more people paying cash at that level — but I don't think it's quite the 50-50 that the national average suggests.

Jerod: Cash purchases and appraisals — we've touched on it, but let's go a little deeper.

Chase: Speaking as a former appraiser: if you're buying a luxury home with cash, these homes are more difficult to quantify for the appraisal — how many comparables there are, how far away they are, all of those things. But I still think it's a good idea to have an appraisal done even when it's not required for the transaction — for your own knowledge. You want to see what else is out there, and in any price range you want to make sure you're not significantly overpaying. Is the price based in reality, yes or no? The appraisal gives you that. Now, if a property is super nuanced and niche and exactly what you need and you can buy it — that happens a lot in the luxury space. But if you're thinking "I really like it, but I don't want to significantly overpay," that's the occasion you'd order one.

Jerod: And sellers should know that if that's what a buyer wants, they may have to contend with it — because you can be back to a negotiating process if it doesn't come in at value.

Chase: Well, not necessarily — it depends on how the contract is written and what's stipulated in it. Look, I'm just that guy: I like information. I like to know what I'm dealing with and that I'm making the right kind of investment. Maybe somebody has so much money they don't care — but I'm a little biased, because I used to be an appraiser.

Jerod: The other thing we wanted to share is equity and relocation. It's not just monitoring what's going on in our own market — we've got to see what's going on in the markets luxury buyers typically relocate from. If those markets are doing well, those owners are more likely to relocate here. And those markets can improve or struggle months in advance of where we're at — we could see a California market starting to soften, days on market extending, price reductions spreading. We've got to watch that in the major markets that traditionally relocate here, because if they're doing well there's a higher likelihood they purchase your property — versus a buyer pool that's already small getting smaller.

Chase: That goes for all types of real estate — watching the national markets, because there are always trends that affect us locally. Growing up, Idaho was always kind of on an island: until '08 we were pretty recession-resistant. My family were small business owners and we went through the downturn in the early '80s, which was really tough, but after that there were fluctuations the bigger markets felt that we never did. I think now we're a little more susceptible, because so much of our business is relocation. I'd have to defer to you on the stats — but reading the markets your buyers come from is part of the job now.

Jerod: What I wanted to communicate is that as luxury home listing agents, we've got to be aware of where these folks are coming from. Are they excited to be here? Are they capable of coming here? Or are things shifting in their market — and we adjust accordingly. One of the things we'll talk about next episode is niching down the marketing to specific areas and channels — and we've got to know where the buyer's head is at. Do they feel bullish, or are they getting concerned and going to put things on pause for a couple of months? In the luxury space they have resources other folks don't have, but that doesn't mean they never pause.

Chase: There's a certain level where it stops mattering — I've got a cousin who builds ultra-luxury; a project he's working on right now is a twenty-plus-million-dollar custom single-family home, and at that level it's "whatever." But for most of us it does matter — retirement money, maintaining those levels. They talk about this in commercial real estate too: how a lot of lenders decide whether to finance a project is what's going on nationally in that market. Reading those things for your clients — someone doing that research for you and on your behalf, whether you're a buyer or a seller — that's what you want in your corner. Jerod's going to be educated on the things he needs to know to make your transaction successful.

Jerod: And that's what I was leaning to — at what price points, in what areas, where are those buyers' heads at. At a certain price point they're generally not going to care; at other price points they'll pause slightly; and others will push out to the next buying season or the next school year. So that's the list: where these folks are coming from, what to consider about where they're coming from, and where their head's at. Your contributions, as always, are really appreciated. For those who have specific questions about their luxury listing and want a no-obligation consultation, we'd love to have that call and see if we can help.

Chase: Absolutely.

Jerod: All right — I think that's a good place to land. Thanks again, Chase, for your time and your help on this. And we'll wish everybody a blessed one.

Chase: Thanks — take care.