What’s Up With The Luxury Market?

With existing home sales down across the board nationwide, there is one category that is getting hit harder than the rest: homes listing at greater than $1 million. It should come as no surprise given that we are in a “recession”, or whatever the current administration feels like the definition of a recession is. Anyhow, the luxury market tends to reflect the current state of the economy more-so than the general housing market. i.e. more correlated to the stock market.

Think John Doe, the CEO of a regional bank making >$700k per year on salary + bonus/stock options. Him and his other CEO counterparts are seeing salary cuts across the board. His family isn’t going to starve anytime soon, but this will probably affect his appetite for properties greater than $1 million. Whether it is a liquidity crisis, or shying away from trading up their current residence, the luxury market has seen large declines in demand than the rest of the market.

According the National Association of Realtors, the % change in sales year-over-year for the overall market $0 - $1mm is down about 33%, while luxury saw a staggering 41% decrease. Obviously, the biggest remedy for this problem is home staging : )

In all seriousness, the rich have far deeper pockets to weather economic storms, but as of now there are fewer upper middle class folks attempting to make the jump into luxury. Only time will tell, but but it is not a great place to park your wealth in the short-term.