Some real estate experts are starting to notice a slowdown in sales when it comes to high-end homes throughout the country. While a variety of factors may be contributing to this occurrence, economic problems in China, Russia, South America and elsewhere appear to be having an effect on the luxury real estate market in the United States.
International Economic Woes
Currently, there is a great deal of economic volatility in China and Russia, with haywire stock markets and dropping currency values. Meanwhile, oil prices are plummeting, creating economic uncertainty in the Middle East and elsewhere. As a result, international buyers and investors are slowing down their purchases as they wait to see how the economy plays out in their home countries. Similarly, many foreign home owners are interested in selling their homes in order to free up more of their capital.
A Declining Market
According to data from Redfin Corp., prices for the top 5 percent of real estate transactions in the United States remained flat in 2015. At the same time, other houses experienced an increase of 4.9 percent. In the Los Angeles suburb of Arcadia, dozens of ranch homes were demolished and replaced by mansions specifically designed to attract Chinese investors. Yet, many still sit empty due to price ranges that are too high for domestic buyers. Homes in the neighborhood have an asking price as high as $12 million.
Of course, the problem is not just in Los Angeles. Other markets known for luxury homes that attract foreign buyers are also seeing a drop in sales. In Florida, Columbian buyers are struggling to pay for homes due to the drop in value of the Columbian peso. The drop in oil prices and subsequent loss of jobs has had an effect on Houston real estate, while resale prices in Manhattan peaked in February for the top 20 percent and have fallen ever since. Even in San Francisco, the inventory listings for real estate listed at $2 million or more jumped in October and reached record levels. As a result, both buyers and sellers are growing concerned about the direction of the economy.
International Luxury Markets
Luxury markets outside of the United States are also experiencing a slowdown. The market weakened in London after an increase in stamp-duty sales text, causing Chinese and Russian buyers to pull back. As a result, luxury prices in London increased only 1 percent last year following a 5.1 percent increase in 2014. Hong Kong also saw only a 1.5 percent increase in its luxury market, while Paris saw a drop of 5 percent and Singapore fell by 3.5 percent.
For many in the Middle East and Asia, the U.S. market is still considered to be the safest place to invest their money. With the prime home-buying season now underway, it is a matter of time to see if the U.S. luxury market will experience a comeback in 2016.
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(all data current as of 10/18/2017)
Listing information deemed reliable but not guaranteed. Read full disclaimer.