Buyers wanted: $1 million-plus homes

As the longtime owner of Stuart Kingston Jewelers in Wilmington, James Stein knows the luxury market – and he knows Delaware. So when he put his Centreville house on the market recently for $1.175 million, he went into it with his eyes open.

"I know it's not easy to sell," Stein said of his house at 37 Selborne Drive. "But I hope someone will love it as much as me."

Stein is not alone. Sellers of houses priced $1 million and up now are faced with a drooping mansion market in New Castle County as the number of expensive offerings has ballooned to more than two years' worth of supply, according to data compiled by Trend, the region's multiple-listing service.

"The $1 million-plus is a severely hit market, no question about it," said Stephen Mottola of the Mottola Group at Long & Foster Real Estate Inc. in Greenville.

Real estate agents blame the shrinking pool of buyers on the loss of high-paying jobs in Delaware as employers have cut back or disappeared. But other factors, such as increased job insecurity, shifts in younger buyers' housing preferences and the aging of the baby boomers, might play a larger role, experts say.

For the few who do aspire to own the biggest house in town, the choice is plentiful, with 45 houses priced $1 million-plus currently on the market in New Castle County, Trend reports.

The upshot: Buyers have the upper hand.

"It's a wonderful time to be a high-end buyer," said Judy Levy of Levy Wilson at Long & Foster Real Estate in Greenville.

Unfortunately, buyers in that price range are "gun-shy" in the wake of the economic meltdown of the last decade, said Gene Millman, board chairman of Trend.

"They're very cautious about their decisions," Millman said.

Dismal data

If Stein needed any proof of the soft market, he only has to look across the Selborne Drive to the medieval mansion built in 1928. Ten years ago, the house was listed for sale for nearly $6 million. After languishing on the market for years, the 10,650-square-foot house on nearly 6 acres sold for $1.5 million in March.

Compare that with the height of the housing bubble from September 2005 to August 2006. Houses priced $1 million and up in New Castle County were flying off the market in 17 days at 96.7 percent of the original list price, according to Trend. During that time period, a total of 51 houses in the million-plus market sold for a median price of $1.45 million, Trend reports.

In the past 12-month period, from September 2014 to August 2015, only 19 houses priced above $1 million in New Castle County were sold at a rate of 1.6 a month, according to Trend. Houses now are sitting on the market 73 days, and the median price has been $1.317 million.

When it comes to houses priced above $2 million, the picture is even less sunny. Not one house priced above $2 million in 2015 had sold by the end of August, Trend reported.

Currently, there are 11 homes in New Castle Country for sale that are priced more than $2 million, said Dave Davis, corporate relations executive at Trend. A few of the highest-priced offerings are du Pont family estates, including one on Walnut Green Road in Greenville, priced at $7 million.

Victor and Toni Battaglia recently landed a buyer for their house in L'Hermitage near Centreville after having it listed for about eight months. The house had been priced at $1.5 million, and it is under contract for $1.125 million.

"The fact of the matter is our community is changing," Victor Battaglia said.

Building Chateau Country

Once one of the richest cities per capita in the country, Wilmington was noted for having an abundance of elegant colonial stone and brick houses. The du Pont country estates in Greenville and Centreville areas led to the area being called "Chateau Country."

Chateau Country is a physical manifestation of the enormous wealth created by the DuPont Co. in the last century. In 1902, DuPont began to emerge as a global industrial powerhouse. In the late 1930s, the company invented nylon, the first completely man-made fiber. During World War II, it supplied 40 percent of the smokeless powder and TNT to the Allied forces. After the war, DuPont launched a major expansion adding 10,000 jobs in five years. Housing development in the Wilmington suburbs boomed.

Even as late as 1985, DuPont had 26,600 employees in Delaware. No other employer came close to employing that many people in Delaware.

"The DuPont Co. made the difference between us being who we were or another Chester [Pennsylvania] or Camden [New Jersey]," Battaglia said.

When DuPont began cutting back in the 1990s, another company stepped into the breach. MBNA credit card bank, a homegrown institution that resulted from the state's passage of the Financial Center Development Act in 1981, became the top private employer in Delaware. MBNA was generous with its employees, and executives bought expensive houses in Westover Hills and Chateau Country. They invested large sums in renovations.

"It was La Land," said Wendy Bunch, an owner of Brandywine Fine Properties Sotheby's International Realty in Centreville.

Changing times

The fizz began going out of the champagne when MBNA's larger-than-life founder Charles Cawley left the bank in 2003. Three years later, the bank was sold to Bank of America.

DuPont, meanwhile, continued to shed businesses. General Motors and Chrysler shut down their assembly plants. AstraZeneca, which one time had upward of 5,000 employees, trimmed its workforce to about 2,000 today, experts say.

With each corporate cutback or consolidation, many high-paying managerial and executive jobs were lost or moved to other cities, according to some experts.

"As a result of the net job losses in high-paying sectors, the state has seen a significant decline in per-capita income relative to the nation," according to a study released in August for the Delaware Business Roundtable.

In 2002, per-capita income was about 10 percent above the national average, but "has since seen all that margin erode away," the Roundtable analysis says. Looking ahead, Delaware's annual average personal income is expected to lag behind the nation long term, the Roundtable's study shows.

The Roundtable's economic forecast expects employment and income growth to slow next year and trail the nation over the next decade.

But economist George Sharpley, chief of the Office of Occupational and Labor Market Information at the Delaware Department of Labor, said occupational wage data tells another story.

Wages for the top 10 percent of earners climbed from $78,975 and up in 2007 to $93,230 and up in 2014.

The $1 million-plus market is "much more exclusive than just the top 10 percent," Sharpley said.

"But with income concentrating at the very top in the United States, there is no reason to believe that somehow that group is hollowing out in Delaware. Every single piece of data available shows that any slowdown in high-end home purchases is not due to a lack of earners at the top of the scale in Delaware," Sharpley said. "Quite the contrary.

Sharpley and others believes there are other factors involved in the slowdown of high-end sales.

Appreciation declines

For decades, Delaware was protected from the nation's economic ups and downs because of the stability of DuPont and other employers. Homeowners could count on a steady appreciation over time, with some cycles seeing double-digit increases in price.

"We never saw house prices fall," Mottola said.

The financial crisis of 2008 and the bursting of the housing bubble ended that dream.

Like the rest of the nation, Delaware went through the worst housing downturn since the Great Depression. Some homeowners suddenly found themselves owing more than their houses were worth. For the first time in recent memory, some sellers took a loss on their properties.

Some young people who saw their parents struggle to carry a big house don't want that burden, real estate agents say.

"They grew up in McMansions. The younger generation doesn't want all the pomp and circumstance," Mottola said. "They have different aspirations. They want to travel, see what the world has to offer."

Following the Great Recession, even buyers who can afford a more than $1 million home question whether it makes financial sense, some say.

"They ask themselves: Will I get the return on my investment if my circumstances change or I no longer want or need this home?" said Kevin Kelly, the past chairman of National Association of Home Builders and president of Leon N. Weiner & Associates in Wilmington.

Job cutbacks also have created insecurity among buyers, said Millman of Trend, who is also a broker with Emory Hill Residential Real Estate.

"They think: I might have a good job now, but will I have it in two or three years?" Millman said.

Upkeep of a big property is also an issue, said Chris Patterson, an owner of Patterson-Schwartz Real Estate.

"Younger people don't really want the maintenance of an estate," he said. "They want to be able to go to their beach houses or their kids' soccer matches."

Another factor influencing the high inventory of high-end homes relates to the increased number built in the last 20 years in Chateau Country, experts say.

What's more, New Castle County's population is aging. As baby boomers move into their retirement years, some decide to downsize, creating more supply.

"You have the aging population going to the over 55-communities," said Mary Beth Adelman, a real estate agent with Re/Max Associates in Wilmington. "A lot of people in New Castle County are retiring to Sussex County. It might be either a second home or they're building a retirement home."

That's the case with Tamara and Kim Holm, who have for sale a $1.399 million house in Westover Hills. After Kim Holm retired, they decided to move to their home on the Peninsula on Indian River Bay.

"It's too big for us. We have no children living at home," Holm recently said of her 5,375-square-foot house in Wilmington.

Bright spots

But others say it's not all doom and gloom.

The state's overall employment picture has been strong with job growth in 2014 the highest since 1999, Sharpley said.

New Castle County still has a vibrant legal and medical community with high-paying jobs. If people aren't buying the $1 million-plus homes, it's not because there are not good-paying jobs, Sharpley said.

"That's the common perception – that all the jobs are burgerr flippers. That's not true," Sharpley said.

In 2013, 6.6 percent of households in New Castle County fell into the highest income bracket of more than $200,000, up from the previous two years by several thousand households, Sharpley said.

In another piece of good news, sales in the overall housing market have been up in 2015, rising 18 percent from January to July from the same period in 2014, Trend reports. The median sale price has also risen by 7.1 percent in the same period.

As for the high-end housing market, the picture could change dramatically if the stock market starts to look less attractive or New Castle County becomes home to a major, high-growth employer, Adelman and others said.

"We've seen it happen before," Adelman said.

Contact Maureen Milford at (302) 324-2881 or mmilford@delawareonline.com.