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Foreign buyers set to enjoy savings due to weaker US dollar
The transition to lower interest rates is expected to boost economic activity, and prime housing markets across the country are set to benefit ahead of a broader housing recovery, according to international real estate consultancy Knight Frank.
Cash buyers are more common, but high borrowing costs have also slowed activity in the luxury market. Many prime buyers have assets in other asset classes that have been affected by rising interest rates, adding to the uncertainty that will be exacerbated by the upcoming November election. Across the country, just 29 properties sold for more than $50 million in 2023, down 41% from two years ago, according to Miller Samuel data.
“You look at this (the Fed’s price changes) and think, ‘Wow, home prices are going to go up,’ but mortgages… “We have to remember that interest rates are still double what they were before the pandemic.” “The initial impact will be an increase in sales activity, which will be noticeable, but we won’t see a frenzied boom.”
florida
New Yorkers have been driving a lot of activity in the real estate market, but much of it is flowing into markets outside of New York. For example, the influx of New Yorkers helped Florida become the fastest growing state in 2022 for the first time since 1957. Net population growth of nearly 250,000 people has fueled unprecedented real estate value appreciation in many of the state’s most prestigious spots. Average prices in Palm Beach have increased 214% in five years, according to Miller Samuel/Douglas Elliman.
Volumes fell 4.5% year over year in the six months to the second quarter, while average prices fell slightly by 0.1%, while growth slowed due to increased inventory and buyer resistance to record high prices. did. This trend reflects the stabilization of an expanded luxury goods market rather than a reversal of the pandemic boom. Even though inventories are increasing, it could take years to meet demand. Miami was once primarily a Latin American business center, but now competes with established financial centers like Chicago. A prime example is Citadel, a $38 billion hedge fund that moved from Chicago to Miami in 2022, triggering the so-called “Citadel effect.”
new york city
Manhattan is one of the few markets where inventory is increasing, with more than 8,000 apartments currently for sale, compared to a 10-year average of about 7,000. This inventory increase has kept sales volumes stable, with volumes down 0.7% year-on-year in the first three quarters of 2024. Meanwhile, Miller Samuel/Douglas Elliman says prices have remained stable, with average values down just 1.1% over the same period.
Despite the market downturn, higher-value properties outperformed as buyers used cash to avoid mortgage rates above 6%. In the first quarter, 68% of Manhattan deals were financed with cash, a record high and above the long-term average of 50%. Miller, who has analyzed the past 30 years of data for post-election trends, said sales volume is expected to increase after the election. “The economy slows down from July until Election Day, but it slows down right after that,” he says. “It doesn’t seem to affect prices, it just adds another factor for buyers to consider, and the market catches up over the next three or four months.”
aspen
In most markets that have seen significant price increases during the pandemic, supply-demand imbalances are likely to continue. Between Q1 2020 and Q3 2023, Aspen experienced a 67.3% price jump, making it one of the major markets with the most recent price increases.
The Aspen market is divided into three tiers, each driven by different factors, said Riley Warwick, co-founder of Douglas Elliman’s Aspen-based Suslove & Warwick team. Like Miami, Aspen’s population growth suggests the sub-$10 million real estate market could face years of undersupply. Sales of homes priced between $10 million and $25 million have slowed as buyers seek value following recent price increases. Meanwhile, above $25 million, the inventory of nearly irreplaceable homes remains scarce. Land is limited and the building process takes time, so buyers are willing to pay record prices. “A home can take a year to design, another year to get permits, and three to four years to build,” Warwick says. “People are willing to pay for instant gratification.”
Other US markets
Other emerging markets do not face similar land constraints. Developers in Dallas and Austin are increasing supply to accommodate an influx of new residents attracted by tax breaks. Dallas issues 40,000 housing permits a year, but the demand for 150,000 to 160,000 new residents each year can’t meet the demand, said Concho Mink, sales director at Douglas Elliman in Dallas-Fort Worth. It is said that it is still not close to that level.
Luxury developers in Dallas are now building homes typical of New York and Los Angeles to appeal to the city’s growing affluent population. Four Seasons and Rosewood are both developing branded housing developments. “This is going to be a big change because we haven’t seen this level of luxury on the market before,” said Linda Villarreal, a broker with Douglas Elliman in Dallas-Fort Worth. Developers are hoping to replicate their success in Los Angeles, where full-service branded homes are growing amid a depressed market, said Corey Weiss of Douglas Elliman in Los Angeles.
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