In the luxury home market, sales in the $750,000 to $1,000,000 range have increased by 15 percent in 2016 over 2015 sales. In the over $1,000,000 category, the increase is smaller at 12% but still significant. While home prices for lower priced homes are going up at twice the rate of more expensive properties, the more expensive properties continue to reflect steady increases.
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The Luxury Market remains strong, particularly in larger metropolitan areas such as New York City, San Francisco, Los Angeles, Seattle and the District of Columbia.
In Manhattan, the median sales price increased more than 13 percent over 2015 prices to $1,108,500. The average sales price rose more than 13 percent as well to more than $2,000,000 marking the second consecutive quarter in which the average price to buy Manhattan housing surpassed $2 million. The other major cities are not far behind.
In the San Francisco Market the property assessments reached over $208 billion which is slightly higher than the estimated net worth of the world’s three wealthiest people and, just a little bit below the combined fortunes of the Bay Area’s nine most successful tech billionaires including Mark Zuckerburg at $44.6 billion and eBay founder Pierre Omidyar at $7.2 billion.
The property in the San Francisco area has appreciated almost 73 percent in just 10 years. Median homes prices fluctuate significantly by season and San Francisco experienced a slowdown from the increases from 2014 to 2015; however, median home prices remain at an all-time high.
Contrary to popular opinion, many housing analysts believe residential real estate isn’t in a speculative bubble. The lower inventory levels of available homes is responsible for driving demand up, with prices following suit. In a ‘bubble,’ home prices inflate due to a combination of factors. According to Investopedia, a housing bubble “is a run-up in housing prices fueled by demand, speculation and the belief that recent history is an infallible forecast of the future.” According to some industry observers, the speculation isn’t a condition that is currently present.
The National Association of Home Builders (NAHB) released its Housing Opportunity Index for this year’s first quarter which is a quarterly assessment of home affordability designed to indicate the typical American household’s ability to purchase a typical home. The data compiled is derived from 225 Metropolitan areas in the United States. The first quarter report accentuates the fact that lower mortgage rates are responsible for homes remaining affordable despite sharp and consistent rises in pricing.
The lower end of the housing market is very competitive with buyers creating bidding wars as the home building industry focuses on the more profitable luxury projects and as would be sellers in negative equity situations hesitate to sell.
According to Svenja Gudell, Zillow’s Chief Economist, “The top of the market is starting to stabilize, and people are beginning to take notice.”
The prices continue to escalate on every level of the market with the largest increases in the lower half of the market. However, prices across the board continue on an upward curve surpassing marks set last year and, with growing confidence in the economy just may continue upward through this quarter and the next. Please contact us to discuss your home financing needs by clicking here.