The luxury home market’s ‘meteoric’ rebound
Wednesday, June 06, 2018
In what may foreshadow a boost in demand for interior design services late this spring and through the summer, sales of luxury homes soared during the first quarter of this year. Declining sales last year had caused prices to drop and properties to linger on the market for months.
With economic conditions more favorable and supply starting to dwindle, that trend has reversed itself. Both sales and prices have soared in recent months.
Although the market in the U.S. and Canada remained soft in January and February, it experienced a "meteoric" rise in the number of luxury home sales in March, according to The Institute for Luxury Home Marketing’s "Luxury Market Report" for May 2018.
The pace of growth in both sales and prices slowed in April, leveling off at more expected seasonal norms. Still, sales of single-family luxury homes were up 13.2 percent for the month, and the number of days a home stayed on the market decreased from 43 to 31, the shortest period in 13 months.
Homes were selling for slightly more than the asking price, at an average sales price of $1,657,500. Sales of condos and co-ops also were up, although prices declined somewhat from the previous month.
In a recent press release, real estate website Redfin states luxury home prices in the U.S. rose 7.9 percent in the first quarter compared to the same time last year. It was the strongest price appreciation in four years, according to Refin.
With homes selling faster and inventories down by more than 20 percent from a year ago, competition has escalated, notes Redfin, especially in areas where high prices and lack of inventory have constrained the market. Redfin lists the average price of a luxury home during the first quarter at $1.8 million.
Based on data from 80 real estate brokerages around the world, Christie’s International Real Estate, in its report "Luxury Defined 2018," finds luxury residential sales increased 11 percent in 2017 compared to 2016.
It attributes the resurgence of interest in luxury homes to rising consumer confidence, low (by historical standards) interest rates, a robust stock market, and a stable global economy.
Hong Kong ranked first among luxurious housing markets, and Victoria, British Columbia, topped the list of "hottest" luxury home markets for the year. However, Santa Fe, New Mexico, took first place as the hottest market for secondary luxury home sales.
Another factor driving up sales and prices is the entrance of well-to-do millennials into the luxury home market.
"The younger generation can afford luxury homes," observes Kristen Carbine, a realtor for Carbine & Associates home building company in Franklin, Tennessee, who was interviewed for an article in The Tennessean.
Carbine says the size and shape of luxury homes is changing as members of the millennial generation join their parents in the market for houses that cost $700,000 to well above $1 million. Their tastes, preferences and lifestyles are influencing the trends in luxury home design today.
As with the housing market in general, a shortage of available inventory and rapidly escalating prices may put a damper on the luxury home market in the months ahead. For now, though, the properties that are available are being snatched up, including many existing homes.
That should translate into more work for interior designers as the new owners begin to remodel to adapt the homes to their own needs and desires.
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