By: Diana Olick
As the U.S. stock market rises, so do sales of million-dollar homes. That correlation is not lost on the nation’s Realtors.
“There is little volatility in the stock market. It is whoppingly higher, so people in the top 10 percent of wealth are really feeling confident now,” said Lawrence Yun, chief economist for the National Association of Realtors.
Sales of existing homes priced above $1 million jumped over 16 percent in October from a year ago, according to a Realtors report released Thursday, outshining every other price segment. The next strongest was the $750,000-$1 million range, up over 12 percent. Sales of homes priced under $100,000 fell 6 percent.
As a reference point, the median price of a U.S. home sold in October was $208,300. Luxury homes make up just 2.2 percent of the housing market. Lower-end, distressed homes had been making up the bulk of sales over the past two years, but there are now fewer of those on the market. Just 9 percent of sales in October were either foreclosures or short sales.
Much of the growth in the luxury segment has come from markets with heavy international interest: Miami, Los Angeles, Riverside, California, and New York. Buyers from China, Canada, Europe, Russia and South America come bearing cash and buying luxe.
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“But I think the bull market is about to run its course,” said Nela Richardson, chief economist for Redfin. “If you look at the markets where there has been a lot of international investor activity, you’ll see that the participation has actually dropped quite a bit.”
That could be a bellwether sign of where the luxury market is headed in 2015.
Even as the international market cools, however, there are increasingly strong pockets of luxury within otherwise affordable areas. Houston, for example, where the median home price is well below the national average, is number six on a Redfin survey of markets with the most million-dollar sales. It beat out Boston, Washington, D.C., and Seattle.
“It’s the new economy of the energy boom and other industries moving inland and taking dollars with them. Our agents are going crazy in Houston,” Richardson said.
Condominium developers in Manhattan also point to this American-made surge in luxury buyers.
“The foreign market gets blown out of proportion,” said Will Zeckendorf, the developer behind one of the most expensive buildings in Manhattan, 15 Central Park West. “Roughly three-quarters of our buyers are domestic, 25 percent overseas.”
Zeckendorf is building another luxury tower at 520 Park Avenue, which will boast a triplex penthouse listed at $130 million.