Home News The Luxury Home Market Posts Its Biggest Decline in a Decade. ‘It’s Like Crickets.’

The Luxury Home Market Posts Its Biggest Decline in a Decade. ‘It’s Like Crickets.’

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When Nancy Lam upgraded to a house near her children’s school in the San Francisco Bay Area in January, she figured she’d have plenty of time to list her old home. Located in the popular suburb of Lafayette, her is a 5 bedroom modern home.

After all, the pandemic had caused the luxury housing market to skyrocket, with homes across the country in fierce bidding wars and selling at exorbitant prices. In 2014, Ms. Lam, a professor of business administration, and her husband work in the medical field, and their names are being withheld.

But after going public for $3.95 million in May, they realized they may have been wrong in their calculations. After several weeks on the market, the house hadn’t been scooped up the way they had hoped.There were no reasonable offers, no bidding wars. Four months later, after two big price cuts, the property is still on the market, demanding $3.49 million.

“It’s crazy,” she said. “We didn’t even expect this to be on the market yet. It really surprised us.”

Nancy Lam’s house in Lafayette, California is listed for $3.49 million.


Photo:

Christian Krugman

Lam’s five-bedroom home hit the market in May.


Photo:

Christian Krugman

Experts say stories like Lam’s are becoming more common. Cooling of the luxury housing market After a pandemic-induced bull market.New Report by Real Estate Brokers

redfin

In the three months ended August 31, US luxury home sales declined 28.1% from the same period last year. This is the biggest drop since at least his 2012 when Redfin’s records began, and even surpasses his 23.2% drop recorded during the 2020 pandemic onslaught, the report said. I’m here.

Nancy Lam.


Photo:

Jim Block

Sales of non-luxury homes also declined over the same period, but the decline was 19.5%, less than the decline in the luxury market, defined as the top 5% of homes based on estimated market value, according to Redfin.

“Six months ago, people were buying homes without an appraisal because they were going up in price,” said Herman Chan of Lam’s real estate agent, Golden Gate Sotheby’s International Realty. “They didn’t even beat their eyelashes. Now they’re like crickets.”

Redfin data shows that the high-end California market has seen the steepest decline in sales volume. Home sales plummeted by nearly 64% in Oakland, Calif., while San Jose and San Diego also recorded declines of more than 55%. Home sales were down 44.3% in Los Angeles, 55.5% in Miami and 11.8% in New York.

The main reasons for the slowdown are: fear of recession When rising interest ratesAccording to Redfin chief economist Darryl Fairweather, some buyers were priced out of the market and others were upset. Buyers are experiencing a “sticker shock” as they witness the impact of rising interest rates, which is causing them to reconsider their finances and purchasing power, she said. And while ultra-wealthy buyers are often not directly affected by interest rates, they often buy in cash. Fairweather said she continues to pay attention to broader economic indicators.

“It was Coping with inflation, and inflation reduces profits,” she said. “Wealthy people definitely care how much profit the companies they invest in make.

as for Buy property for all cash, Fairweather said, now looks more favorable to the treasury than real estate. “No investor wants to invest money in a depreciating asset,” she said.

Scott Leonard’s property listed for $12.5 million on Lake Washington in Seattle.


Photo:

Leafcombers Studios

Chan said he believes the slowdown in activity is more acute in the luxury market because luxury homeowners have more discretion over when and at what price to sell. In many cases, sellers face no financial pressure to move, he said. they can wait for it.

Scott Lennard, a Compass agent in the Seattle, Washington area, has a $12.5 million property listing on Lake Washington that his client is willing to offer a fair price and is not in a hurry to sell. said no. It has been on the market for about 8 months.

The Lake Washington home spans approximately 6,900 square feet.


Photo:

Leafcombers Studios

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Sales volumes of luxury goods across the country have dropped dramatically, but prices have remained strong, but growth has slowed. The median sales price of luxury homes in the US rose 10.5% to $1.1 million. It rose 20.3% in the same period last year. Fairweather said he expects prices to fall throughout the winter.

Meanwhile, with homes on the market longer, Chan said, many buyers no longer feel the need to move quickly. Some of his clients have cut budgets amid stock market volatility this summer, he said. A couple originally planned to buy a house in the $5 million range, but cut their budget to about $4 million as some stocks crashed and interest rates rose, he said. “They basically lost their down payment buffer,” he said.

In Seattle, Leonard said he sees technology buyers stepping away from the market and taking a “wait and see” approach.stock price of

Amazon

When

microsoft,

The region’s two major employers have seen significant declines in the last year, he said.

“Wealthier buyers are certainly affected because much of their compensation is tied to stocks, not salaries,” he said.

Frederick O’Shea.


Photo:

Frederick O’Shea

Other buyers left the market during the pandemic frenzy.Frederick O’Shea, 62, the head of a packaging company, said he plans to buy a house after moving from San Francisco’s East Bay to the Montecito neighborhood last year. Melissa Borders

Douglas Elliman,

We saw a number of homes priced between about $3.5 million and $7 million, made several offers, and were sold. Now he’s taking a step back until prices start to fall, he said.

“If there’s something really compelling, it’ll be back soon,” he said, noting that there’s now more inventory on the market and sales are slowing. In terms of aggressively pursuing properties that look like they are, the time has come for buyers to act cautiously.”

With the real estate crash of the mid-2000s in mind, O’Shea said he’s wary of buying at the top of the market.

“I know people who bought a house in 2007 and 2008 and were like, ‘Oh my God, I wish I hadn’t bought it,'” he said. “That trauma still affects me a little bit. I don’t want it crushed.”

A shortage of luxury inventory that helped push prices up at the start of the pandemic is easing, according to Redfin data. 39.2% increase.

However, many sellers have not adjusted to the new reality of the market, Mr. Chan said. Some of his buyers have made modest offers for the home, but have met with considerable resistance. “Sellers live in the past, buyers in the future.”

Coldwell Banker Realty’s Shannon Hagan said he’s also seeing buyers starting to pull out of the luxury market near San Diego. Many are waiting for a price drop that has not happened yet.

“A lot of people are sitting on the fence waiting to see who says ‘uncle’ or is willing,” she said. “And most of the people who own those properties aren’t motivated.”

One of her listings, a $14.95 million beachfront mansion in Carlsbad, Calif., has been on the market since June. The seller received a verbal offer once, but the sale never materialized. Still, she said her clients are wealthy and not eager to sell. “They don’t have to sell. They can keep these assets forever,” she said.

Fairweather said part of the decline in the expensive California market was popularity of remote work“People used to live places like san francisco “There is a great job market,” she said. “But now you can get that job basically anywhere in the country.”

Chan said he has many customers who are leaving San Francisco because of the homelessness epidemic in some areas.

Fairweather said he did not expect the luxury market to improve any time soon due to persistent inflation and the possibility of further interest rate hikes. She said she will likely stay in a “holding pattern” until the economy starts to improve.

Bad news for sellers like Lam. She said she’s grateful to have found a new home, but she said it’s hard to carry two mortgages and she has two property taxes and insurance. rice field. “For over two months, she didn’t have the budget to carry two,” she says.

write destination Catherine Clark [email protected]

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