Million Dollar Housing Market Headed Towards a Slump
The luxury home market is defined by 5 percent of the most expensive homes sold in a quarter. And in just the first quarter of 2016, the U.S. luxury housing market is already seeing a 1.1% decline in average sale prices compared to last year.
This came as no surprise though, considering the weakening price of luxury homes in just the past year. But as the prices of luxury homes slowly decrease, the bottom 95 percent of the market increased by 4.7% over the years.
Stock prices dropping, market fluctuations, and the global economy taking a hit all contributed to the decline of luxury home prices. Even with the U.S. dollar remaining strong, the devaluation of foreign currency is enough to discourage foreign buyers from entering our market. This would have a huge effect on our luxury market, considering overseas buyers accounted for more than $100 billion in U.S. real estate sales last year.
And because there are more properties to choose from, buyers now have more choices and therefore have more a larger opportunity to negotiate on pricing. “It’s common to see a big gap between the asking price and the ultimate sale price for luxury homes,” said Tonya Nelson, a Redfin agent in Northern Virginia. “I tell my high-end home sellers to build in flexibility to negotiate because there are fewer qualified buyers at that price point.”
According to Nela Richardson, a chief economist at Redfin, “Luxury buyers are out of step with the rest of the market because their wealth is at stake…[l]uxury demand, especially for vacation and investment properties, has been more fragile this year, causing prices to slump.” Now that luxury buyers are retreating from the market, high demand is now at the middle and lower price range of housing.
Information and statistics provided by Redfin