Triangle Area Real Estate News & Information

Have you been thinking about moving up to a more luxurious home? Have you been watching the luxury home market wonder if now might be the time to buy? Let’s take a look at the luxury home market.

When the housing market crashed in 2008, all home values suffered, even the luxury home market. Since then, the housing market has been slowly recovering. However, some homeowners are still under water. They still owe more on their mortgage than their home is worth. As housing prices increase, this situation will continue to improve.

The luxury home market, however, has been improving markedly in the last several years. In the last couple of years, sales of luxury homes have been hitting record levels. And the prices for these homes have been rising dramatically.

Just what is a luxury home? That depends on the local market. In Manhattan, it might be homes with a price tag in excess of $15 million. In smaller cities and towns, luxury homes might be priced at $500,000 to $1 million. Many consider luxury homes to be those priced in the top 5% or 10% of the local housing market.

Why is the luxury market improving so much when the homes are so expensive? There are several reasons:

• There is a limited supply of luxury homes. Luxury home builders stopped building new homes when the crash occurred and are just now starting to build again. The lack of new supply created a shortage of luxury homes, which caused the price of luxury homes to increase. It will take several years for the supply of new luxury homes to fulfill the need.
• The salaries and incomes of people in the top 5% of income earners did not decline in 2008, or if they did decline, the reduction did not significantly affect their lifestyles. The salaries of top executives generally increased while those of middle class workers dropped. As the economy has been improving, jobs at the top have been increasing, leading to more well-paid employees. Those employees are seeking nicer homes.
• The stock market is near all-time highs, even though our economy is just sputtering along. Those who have invested in the stock market have seen their portfolios rise significantly, giving them more money for a luxury home.
• The US housing market is relatively underpriced in the international marketplace for real estate. Foreigners have increased their investments in US real estate, which has helped drive up prices, especially in large US cities and those near top colleges (where they purchase homes for their children attending our colleges). Also, many foreign buyers pay cash, forcing buyers who need to finance their home purchase to offer more for a home to entice a seller who is likely to take the all-cash offer.
• Jumbo mortgages are relatively inexpensive. Jumbo mortgages used to require higher interest rates and better credit ratings than did conforming mortgages. That is no longer the case, making it easier to qualify and pay for a jumbo mortgage.
• Those homeowners who are not underwater on their mortgages can now sell their homes for a profit and trade up to a new, nicer, more luxurious home. They can use the profit from the sale to make the down payment on their new luxury home.Grand Morning Room|Luxury Home Market|My NC Homes

The luxury home market will probably continue to rise for the next several years. Interest rates are near historical lows, so even some increases in the rates will not dampen the demand for luxury homes. As long as there is demand for luxury homes, the prices will rise. Since demand is likely to continue growing for the foreseeable future, now might be a good time to invest in that luxury home.

If you are interested in moving up to a luxury home, send us a message or give us a call. My partner, Andrew Palumbo, and I both have extensive real estate and construction experience. We will help you find the right home for your needs.