It’s always best to buy when there’s not much competition.
So if you’re looking for a luxury, mega mansion, now’s your time! You could save millions of dollars on your purchase, thanks to a slump this year in high end real estate.
According to Redfin, the average sale price of luxury homes fell 1.1% during the first quarter of this year compared to last year, even though the number of sales was up 6%.
Redfin defines the luxury market as the most expensive 5% of homes sold during the quarter.
The number of homes for sale over $1 million increased 3.3% from last year, and the number of homes for sale priced over $5 million was up 13.2%.
This increase in unsold inventory on the upper-end marks a big shift in the economy, since luxury housing bounced back quickly after the financial crisis when the stock market recovered and padded the pockets of the wealthy. Now that the stock market has been up and down and all over the place, not to mention energy stocks crashing hard, the top of the market has become the weakest housing sector.
Plus, voracious foreign demand appears to be backing off.
Nela Richardson, chief economist at Redfin said, “For years, the high end was driving sales and price. Now, the demand is at the middle and lower price range.”
She added that, “There was so much stability in asset growth that the wealthy felt comfortable making a large purchase, but that stability is over.”
Redfin’s report, which measures sales in most major metro markets in the U.S. (excluding New York), shows there were 16,061 homes sold in the first quarter for $1 million. That’s down from 19,583 in the 4th quarter.
Rising supply in high-end, luxury housing has created some big price cuts for mansions and penthouses.
An $18.8 million home in Los Angeles sold for just $10 million in the first quarter, while a $14 million home in The Woodlands, Texas, took a 50% cut and sold for just $7 million.
Someone got a steal in North Laguna, California. A 2.2 acre estate with sweeping ocean views listed for $75 million but sold for $30 million less. That’s what I call a bad day or a good day, depending if you’re the buyer or the seller.
In the super-hot markets of Austin, Texas and Boston, Massachusetts, intense competition for moderately-priced homes is driving prices up in the bottom 95% of the market. However prices at the top of the market fell nearly 12%.
In San Francisco, luxury home prices dropped 4.7% in the first quarter from last year, which makes sense given the rocky start to the year in tech stocks and lowered company valuations.
But not every city in the San Francisco Bay Area saw high end real estate values decline.
Across the Bay Bridge, the city of Oakland appears to be the up & coming destination for millionaires looking for a slightly lower price tag. The average price for a home in the top 5% in Oakland was over $2.4 million this year compared to $1.6 million last year — a year-over-year jump of nearly 50%.
Miami Beach is now feeling the most heat. There are now twice as many million-dollar homes for sale than last year. This is possibly due to the new laws requiring foreign and corporate buyers to reveal themselves in order to prevent money laundering.
But that same law took effect in New York, yet doesn’t seem to be phasing developers of New York’s Billionaire Row. That’s where a handful of superluxury skyscrapers overlooking Central Park could soon be home to some of the world’s wealthiest families.
The price tag? A 23,000-square-foot, four-story apartment will go for $250 million dollars.
What do you get for that jaw dropping price? 16 bedrooms and 15 bathrooms, so really, it’s only $15 million per bedroom…
Who on Earth could afford this?
“These are the trophy buildings of our era, and the foreign buyer clearly fuels this very, very high-end condominium tower market,” says John Burger, a broker for Brown Harris Stevens real estate firm.
These prices don’t come near the last high-profile sale in the area – an $88 million penthouse down the street at 15 Central Park West, purchased by Russian mogul Sanford Weill in 2012. A few Americans manage to live there too, including Goldman Sachs CEO Lloyd Blankfein and Yankees slugger, Alex Rodriguez.
I’m wondering if brokers still get 3% commission on a $250 million sale. Shoot, I’d be happy with 1%.
Possibly one of the most interesting multi-million dollar sales happened just down the street from me in Malibu. A mobile home just sold for a record breaking $5.3 million. Keep in mind, this is no ordinary mobile home park. It’s in Paradise Cove, one of the most beautiful beaches in CA and one of the best-kept secret surf spots in Southern California. Of course, it has sweeping ocean views and L.A.’s coast line and has at least 3 bedrooms. ?
While this is all quite fun to talk about, what’s a bit eery is Harry Dent gave this exact prediction when he was a guest on the Real Wealth Show.