How The Pandemic Increased Prices & Sales Of Luxury Homes
The pandemic has caused many to second-guess or reconsider a large move due to fear of a stalled economy and wide-spread job-loss. Financial insecurity paired with the federal forbearance kept middle to low- income Americans in their home.
The same cannot be said for those in luxury and affluent homes across the country.
Initially, when the pandemic first hit, prices for luxury homes declined by 1.7 percent, however, global luxury home prices appear to have weathered the storm and are on their way up as people look for more space, larger property and land outside of major cities.
Despite an overall decrease in all home sales in 2020, luxury residential homes rose 1.9 percent, an increase from the 1.8 percent in 2019 based on a report by Knight Frank’s Prime International Residential Index, according to PENTA.
Five markets saw an increase of more than 10 percent in 2020 compared to two markets in 2019.
Markets in Auckland, Shenzhen, Seoul and Manila are top examples with average prices between 10 and 13 percent higher in 2020.
Experts say some countries like New Zealand have handled the pandemic and economic recovery in such a way that mortgage rates were incredibly low. There’s even the potential for governments to step in, in an attempt to control price inflation by constricting lending rules and raising taxes.
Buyers in North America began a mass exodus from cities such as New York, San Francisco and Chicago, looking for locations in rural or coastal areas – good news for the luxury home market.
“Now more than ever, homebuyers are seeking out features long associated with luxury homes, like spacious yards, home offices, gyms and private swimming pools,” Redfin chief economist Daryl Fairweather told World Property Journal.
The comeback is still lacking in the non-luxury market because of a shortage of homes for sale and of course, financial uncertainty.
Low and middle-income individuals are not “out of the woods” according to Fairweather. Those owners of non-luxury homes chose to stay in their homes but those that were looking, were able to jump at a discounted deal.
Redfin recently released a 2021 market forecast showing the U.S. market overall at a 60 percent increase. Those deal-minded individuals are encouraged by the COVID-19 vaccine rollout and a hope that cities will bounce back as the economy normalizes.
For the affluent, getting a home loan and trading up is an easier proposition and experts say if luxury is what you’re looking for, better buy fast.
The market for vacation homes alone had skyrocketed 100 percent year over year by October and many locations such as Lake Tahoe and the Hamptons are finding massive growth.
“In the spring it was, ‘New York’s on sale, that’s not good, I’ve got to leave,’” Director of Sales at Elegran Jared Antin told Mansion Global. “Now they see it as an opportunity.”
The prospect of working from home for an undetermined amount of time, has people looking for more space if in the position to buy but experts don’t see the current climate as permanent.
Businesses are opening, employees are slowly going back to work and the future of city living is in our sight. Deal hunters are out in full force, grabbing real estate and bottom prices before they rise again.
Miami, New Brunswick, NJ and Phoenix all saw increased home buying of nine percent or higher in the past few months. The largest increase was in Newark, NJ as sales rose 101 percent year over year as individuals moved from the city to close, but more affordable proximity.
Prices rose in 35 of the 49 most populous metros, according to World Property Journal.
Snowbirds coming from New York or Chicago would travel back and forth to the south in the past, but this year, they’ve decided to stay. Furthermore, many feel the price of a small condo in a large city compared to a larger property on the water no longer seems attractive.
They can sell their city home at a discounted rate, buy another, also at a discount, and come out ahead. In addition, they are likely purchasing a larger home with more amenities in favor of social distance living.
If they do plan to return to their home city, why not upgrade in the process?
Delray Valle, Redfin’s market manager in Palm Beach says it’s not uncommon to see luxury buyers come from New York and California, but over the past year, buyers from Maryland, Nevada, Illinois and others in the Midwest have flocked to Florida.
Foreign buyers are also waiting in the wings for property to become available. Eventually, experts see a high demand and low supply situation plaguing major cities across the U.S.
New listings become available as luxury homeowners move across the country and the amenities offered are increasingly what Americans desire.
San Francisco reports a 71 percent increase year over year for new luxury listings as Americans relocate. Mauricio Umansky, founder and CEO of The Agency suggests a decrease in luxury home prices for another three to four months before watching the upswing take over.
In 2020, the average luxury home spent 55 days on the market – 27 fewer days than 2019.
“Buyers may not be getting a discount over last year, but you’re definitely going to buy for less than you would next year,” said Umansky. “If you’re going to make a move, this is the time.”
Sources: PENTA, World Property Journal, Mansion Global
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