Luxury On The Rebound

Luxury housing market, real estate market, economy, Casey Key

It is often said that “all real estate is local,” meaning that property values are typically driven by variables that often differ neighborhood by neighborhood; and town by town. However, real estate markets have been anything but typical during the past few years.  Consequently, their housing recoveries are contributing mightily to ours.

This is particularly true of the nation’s luxury housing markets, whose bourgeoning recoveries are having a highly positive impact on our region.  Luxury markets everywhere slowed considerably in 2008 when much of the discretionary wealth needed to purchase such properties receded from many buyers’ balance sheets during the financial crisis. In truth, most high net worth individuals still had plenty of capital on hand to purchase these properties, but held off until they were certain that markets of interest had bottomed.

Fast forward to 2013 and the bottom everyone was waiting for is suddenly in the rearview mirror.  Indeed, the most recent S&P/Case Shiller Home Price Index—the leading measure of U.S. home prices—shows that prices rose by 9.3% in February from a year ago, the largest such increase in the 20-city index in nearly seven years. The report also reveals across-the-board improvement, with all 20 cities posting year-over-year price increases.

Locally, closed sales in Sarasota County’s luxury housing market rose sharply again in April.   With 45 properties over $1 million sold last month, sales were up 25% compared with last April.

The Bigger Picture 

In the meantime, having at long last emerged from the depths of the Great Recession, U.S. financial markets have since rocketed to record levels, restoring virtually all of the $16 trillion in personal wealth that was lost during the Great Recession—and then some.  “There are now more billionaires worldwide than before the 2008 financial crisis and 55 percent more millionaires than in 2000,” says a new report on the luxury market just released by Christie’s International Real Estate.

Southwest Florida’s “feeder” markets—so called because a disproportionate share of our buyers hail from such northern cities as Chicago, New York, Toronto, Cincinnati, Philadelphia and Atlanta—are back in business.  Their economies on the mend, luxury properties in these markets are selling again, freeing their former owners to re-invest in primary or secondary homes here.  International buyers are also making a significant dent in our inventory of luxury properties.

The Time Is Now 

The timing couldn’t be better, as many luxury buyers have not only seen their wealth and confidence in the market restored, but are also among the first waves of retiring baby boomers eyeing Southwest Florida as their destination of choice. Additionally, investors who watched the value of their paper assets plunge during the recession have a new appreciation for real estate, which forever remains a tangible asset to be used and enjoyed—even when the market cycles through rough economic times.

As the Chicago Tribune noted last week: “After a long, dry spell, it’s almost—but not quite—a seller’s market for the nation’s pricier homes.”  This is tantamount to suggesting that the luxury market is—at least for now—in balance.  Thus, the most astute buyers should consider purchasing while the scales of value are still tipped somewhat in their favor.  Meanwhile if you’ve postponed selling your luxury home until the market improved, now is the time to list it.  Why?  Because luxury home buyers are not only back in numbers not seen in many years, but are anxious to act on several years of pent-up demand quickly before the best properties and values slip away.

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