In a real estate industry that has gone through so many changes in the last few years, there is finally some positive news that shows that things are looking up. Homes are beginning to sell and there are more qualified buyers than in previous years.
One trend happening in the industry, that is surprising to many, is the demand for luxury homes. Though most of the global economy is still in a somewhat sluggish state, buyers in certain areas are not hesitating to purchase multi-million dollar homes.
Extravagant properties are selling, with buyers competing for a very small list of high-end luxury homes. Homes selling for over $80 million dollars are receiving multiple offers from potential buyers, even causing the listing prices to rise. Jonathan Miller, President of Miller Samuel Real Estate Appraisers, in New York City, calls these high-end home purchases, “trophy sales”.
What are the reasons behind the boom of multi-million dollar home purchases?
U.S. News spoke with some industry experts to gain some insight on this trend.
- High net worth individuals find the United States to still be the safest and most stable country on the globe. Though the U.S. has certainly had its economic turmoil, compared to many European countries, we appear to be the most economically stable. Buyers that fall into the financial category of Fortune 500 executives, see areas like New York City, as a safe financial haven.
- The purchasers of these high-end homes are buyers with a lot of residual cash on hand. One of the reasons for slower sales on moderately priced homes is the lack of credit being given. These high-end buyers can afford to put down more, needing less credit than your average buyer, who has less available currency and in need of more extended credit and long-term loans.
- Even in the luxury market, prices have dropped to rock bottom, so even if a home is selling for a couple million dollars less than it was last year, to a multi-millionaire, that is a deal.
Paul Bishop, VP of research at the National Association of Realtors, says, “All segments of the market have seen declines in prices, including the luxury market.” Though these prices may seem outrageous to most, they are still more affordable to the wealthy buyer than they were five years ago. So like everything else in life, when it comes to real estate deals, it is all a matter of perspective.