Is the luxury real estate market oblivious? In a recent Newsweek article, David Koeppel outlines some news that might lift our financial spirits in what seems to be fairly gray economic weather. With the subject of subprime mortgages and foreclosure at the helm of our concerns, it is difficult to see beyond the gloom. According to recent data however, this luxury pocket of real estate inventory has somehow flown to fairer weather.
Aptly titled, What Housing Crisis?: Why the mortgage mess hasn’t hit the luxury market, yet Koeppel’s article laments the statistics—dropped new home sales (29 percent—the biggest decrease in four decades), and a 70 percent increase in the number of foreclosure proceedings (from 2006 to 2007) to name a few. However, it seems there is a market that has not quite responded to the dismal forecast. Koeppel writes:
It’s a simple matter of supply and demand, say brokers from hot markets like Manhattan, the Hamptons, Palm Beach and both ends of California. While there’s a national glut of McMansions in the $500,000 and up range, there’s a shortage of trophy properties on the market and an increasing number of wealthy foreign buyers from Asia and Europe looking to capitalize on the weak U.S. dollar. Those struggling to pay their monthly mortgage or buy a first home may be envious or appalled, but according to market data from DataQuick, sales for homes costing $5 million and above climbed 31 percent in the first quarter of 2007 compared to the same quarter in 2006.
This may be good news for areas like our coastal market. Koeppel quotes Shlomi Reuveni, the executive vice president and senior managing director of Manhattan-based Brown Harris Stevens Select and exclusive affiliate of Christie’s Great Estates. “Affluent clientele are not about price,” Reuveni says. “With the highest caliber properties, supply is limited, and cost is not something that determines their purchase.” These exclusive buyers have little reason to fret over financial concerns that are not as applicable to their situation. Because of this, “Not every sector of the housing market is tanking; high-end real estate sales are surprisingly strong,” says Koeppel. So, while the nation readies itself to bolster some stormy predictions, markets like ours may be more sustainable than we think.
(Article: ©2008 Newsweek, Inc.)