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September 2, 2014

What's Driving the Luxury Housing Rebound?

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What's Driving the Luxury Housing Rebound?

The biggest drivers behind the rebound in luxury home sales: Low mortgage rates, rising consumer confidence, cash buyers, and international buyers, according to real estate professionals and brokers who spoke at the recent National Association of Real Estate Editors conference. 

In 2012, there were 697 home sales over $5 million in California—a record high. Up to 20 percent of luxury home buyers in the Los Angeles area are from overseas, and the majority are making all-cash purchases, says Kofi Nartey, a real estate professional with The Agency in LA. 

However, with low mortgage rates, some luxury home buyers are financing their home purchases. For example, some buyers who traditionally would pay cash are instead securing 2.25 percent interest rates and 10-year loan terms, says Jack Cotton, a real estate professional with Sotheby’s International Realty in Cape Cod. 

Among the features that are luring luxury home buyers are outdoor kitchens boasting spacious patios and home spas. These buyers are also drawn to “properties with a story—say, a famous former owner or a renowned architect,” The Wall Street Journal reports. 

With home prices gaining momentum in the luxury market, Nartey says he believes the U.S. will soon see a record-breaking $200 million listing. The record currently is believed to be a $190 million listing in Greenwich, Conn. However, Nartey notes that many of the highest priced listings tend to be more for attention sake, and often end up selling for 50 percent or 60 percent of the original list price. 

Source: “Luxury Sales Continue to Bounce Back, Brokers Say,” The Wall Street Journal (June 6, 2013)

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Highest Priced Listing in U.S.: $190M Conn. Estate