As I drive the area, high-end homes that are in the $800K+ price range sit vacant for years at a time. Where is the market? Isn’t housing inventory at an all time low?
Well, not for the high-end and as the have and have not continue to distance themselves from each other this segment will only shrink in the future.
The wealthy are typically risk averse and need an investment to show promise of a return long-term. “Sales of homes listed at $2 million and above fell 16% in the first quarter, the sharpest annual decline since 2010, according to Redfin, a real estate brokerage.” “This as supply of those homes rose 14%, making four straight quarters of annual increases in inventory. The average price of a “luxury” home, which Redfin defines as the top 5% in each of the 1,000 cities it tracks, fell 1.6% to $1.55 million. Nonluxury homes saw their average price increase 2.7% annually to $300,000.” (Olick, Diana. Luxury home sales see biggest slump in nearly a decade.
The old saying of get it while you can seems appropriate in this segment. I predict going forward these type homes in our lifetime will be viewed as too gaudy, too far from the city, and become the next mall.
The youth are already showing their interest in a minimalized lifestyle. One that focuses on a career with passion (lower earnings), environmental awareness, a cleaner diet, and values that are opposite of the luxury home lifestyle.
While there will always be a small percent that can and will play in this space, it is making less and less sense financially.
“John Zogby, author, founder of the Zogby International Poll and fellow Forbes.com contributor, predicted homes for the next generation will be “leaner, smaller, more personal and personalized, as millennials will aim for a lifestyle where they live within limits. Affluent millennials don’t buy the idea that bigger is better when considering a home. They don’t want the McMansions that boomers and GenXers favored.” Danziger, Pamela N. Real Estate Market Is Hot, Except At the High-End: Disruption Coming In Luxury Home Market.
If your focus is in this segment and sales are off YTD pat yourself on the back and realize that the wind of change in this category is just beginning.