Here Comes The Luxury Market!
Just when we thought home sales were shifting toward downsizing we get NAR’s news release that reports sales of existing homes prices above $1M jumped over 16% in October from a year ago, outperformed every other price segment. The next strongest was the $750k-1M range, up over 12%. Sales of homes prices under $100k fell 6%.
As the U.S. stock market raises, so do sales of million-dollar homes, a relationship not lost on the nation’s Realtors.
“There is little volatility in the stock market. It is whoppingly higher, so people in the top 10% of wealth are really feeling confident now,” said Lawrence Yun, chief economist for the National Association of Realtors.
For a point of reference, the median price of a U.S. home sold in October was $208,300. Luxury homes make up just 2.2% of the housing market. Lower-end, distressed homes had been making up the bulk of sales over the past two years, but there are now fewer of those on the market. Just 9% October sales were either foreclosures or short sales.
As expected, much of the growth in the luxury segment is fueled by international interest: Miami, Los Angeles, Riverside, and New York. The majority of these buyers are from China, Canada, Europe, Russia and South America and they are making cash purchases.
The ultra prices homes of $5M+ were up 18% in Q3, according to Redfin real estate brokerage.
Where is the luxury market heading?
“…I think the bull market is about to run its course,” said Nela Richardson, chief economist for Redfin. “If you look at the markets where there has been a lot of international investor activity, you’ll see that the participation has actually dropped quite a bit.”
While the international market cools there are healthily pockets of luxury within otherwise affordable areas. Houston, for example, where the median home price is well below the national average, is number six on a Redfin survey of markets with the most million-dollar sales. It beat out Boston, Washington, D.C., and Seattle.
“It’s the new economy of the energy boom and other industries moving inland and taking dollars with them. Our agents are going crazy in Houston,” Richardson said.
Condominium developers in Manhattan also point to this American-made surge in luxury buyers.
Excerpts from 11/20/14 report by Diana Olick.