Luxurious Home Sales on the Rise
Due to a recent drop in long-term interest rates, overall home sales should see an increase in the near future - but one segment of the housing market that’s remained stronged throughout ups and downs elsewhere is that of the million-dollar-plus homes.
Americans are buying properties that are bigger and contain more luxury features than ever. By some accounts, this is now the strongest segment of many housing markets.
Pamela Liebman, CEO of The Corcoran Group, a leading real estate brokerage in New York City, Long Island, New York and Florida, says, “A lot of money is going into high-end housing. Buyers just don’t want to compromise their desires.”
A lot of those desires have filtered down from the luxury home market to more mundane residences. This has contributed to a jump in single-family home prices of more than 13 percent this past year. The median U.S. home now costs about $214,000, according to the National Association of Realtors.
Leading the expensive home charge
The largest areas of million dollar homes cluster in and around big coastal cities and posh beach and mountain resort communities. Among states, California had the highest percentage of million-dollar homes the last time the Census Bureau reported; 4.1 percent of all Golden State homes were worth a million or more at the end of 2003.
Other centers of high million dollar home ratios as of December 31, 2003 include Connecticut (3.3 percent), the District of Columbia (3.2 percent), and Massachusetts (2.2 percent).
So, what can buyers expect from these purchases? In expensive Santa Monica, it might only buy a two bedroom teardown on a vest-pocket lot. In much more reasonable area, such as Dallas, it could buy a 5,000 square foot mini-estate with six bedrooms, five baths, in-ground pool and spa.
The growing need for home improvement
Americans everywhere continue to make their homes bigger and better. Harvard’s Joint Center for Housing Studies reported in January nearly $150 billion, a new record, was spent on home improvement in 2005. This was up 4.3 percent from remodeling costs in 2004.
Low mortgage rates fueled the home improvement mania, according to the Joint Center report. Many homeowners refinanced their loan when mortgage rates cratered and some owners took out extra cash to pay for home improvements.
Mortgage rates have been on a slow upward trajectory lately, however, which could lead to fewer cash outs and home renovations, as well as a dampening effect on home prices. This trend of million-dollar home loans may have already begun decreasing. Median home prices in the second half of 2005 grew much more slowly than the first half.
The forecast for 2006 home prices from the National Association of Realtors calls for much more modest increases, more in the mid-single-digit range. Those seeking a reasonable Florida home loan can look forward to this drop in their direction.
