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For a while, it seemed like the luxury housing market was downright untouchable. “More properties than ever before were both sold and listed for sale at US $100 million or higher in 2014,” Christie’s International Real Estate reported. In many cases, it’s been easier to get a jumbo loan than a conventional mortgage in the postcrash real estate world.
But wait … are the recent nosedives in the Chinese stock market—and the resulting roller-coaster ride experienced by U.S. stocks—finally making a dent in housing’s vaunted upper-end sector?
“Wild swings in the U.S. stock market over the past few weeks have prompted many high-end home buyers across the country to rethink selling off assets to finance down payments, leading to canceled purchases, delayed closings and requests for price reductions,” the Wall Street Journal reported.
Ryan Serhant, broker with luxury real estate agency Nest Seekers International, told the Journal that six buyers bidding on $5 million properties changed their minds. Many other luxury real estate brokers reported the same thing. Clients, the Journal wrote, “have become more sensitive to pricing.”
This makes sense: Many luxury buyers—21% in 2014—”used the proceeds of a stock or bond sale or borrowed against their retirement accounts to finance a home purchase,” according to the Journal.
And buyers are even more spooked by the expectation that the Federal Reserve will raise interest rates by year’s end, making mortgages more expensive.
Jonathan Smoke, our chief economist, told the Journal that the situation isn’t as serious as it was during the peak of the recession, around 2008. Luxury real estate, he said, will “be in a better position for recovery following the correction.”
Don’t expect this to bring prices down. American buyers may be hesitant to pull the trigger on luxury homes, but foreign investors seem poised to take advantage of our collective gun-shyness—and even the troubles spreading like wildfire abroad.
As the Journal reported, “The unstable equities markets have made real estate more attractive to global investors who see the U.S. as a haven in the face of economic and political unrest overseas.”
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