Coldwell Banker | 2019

LUXURY — A GROWING NICHE IN AN UNCERTAIN MARKET

True direction and intensity of trends can be obscured by noise in the data when sample sizes or time frames under consideration are too small. Month-to-month comparisons could lead you to reach faulty conclusions, so it’s important to keep a long-term perspective, which is the only proper context in which to view real estate investment and home purchase trends. Under scrutiny, the current luxury market may appear to be hitting a slowdown, but viewed through a broader lens, the picture is one of stability, as home prices decline marginally, or rise at more sustainable rates than they did coming out of the Great Recession. In looking at North American luxury market data, single-family luxury home prices have fallen as much as 5% from one month to the next, but over the last 18 months, the median sold price has remained right around $1.4 million, illustrating a steady stabilization of the market. Attached luxury homes faced as much as an 8% drop month-over-month, yet the median sales price is consistently around $915,000

INTEREST RATES, AFFORDABILITY INJECT UNCERTAINTY

To jumpstart the global economy coming out of the financial crisis ten years ago, central banks around the world initiated extraordinary monetary policies and slashed short-term interest rates to zero. These policies reinvigorated an appetite for risk taking and boosted returns from assets like stocks and real estate, but monetary authorities are now unwinding the emergency measures. The Federal Reserve began hiking short-term rates in December 2015. Globally, home values have seen substantial appreciation since the depths of the recession in 2009 and the feverish gains in prices seem to be acting as a natural brake on the market as elevated home prices have already impacted affordability for first-time buyers. Higher mortgage rates would further crimp affordability. Price stabilization, in turn, will naturally cool the appetite of real estate investors, as will the situation of having long-time homeowners not moving in the volumes expected.

URGENCY ON THE FRONT LINES OF LUXURY

Luxury Realtors in markets all around the world have observed that increasing inventory levels for high-end homes do not automatically mean it’s a buyer’s market. Instead, new listings with appropriate pricing are wooing back potential buyers previously frustrated by a lack of inventory, especially among homes for sale above $1 million. Properties in this category continue to flourish not only in North America but globally.