The resilience of the luxury customer segment to interest rates and the strong stock market were the main factors behind the luxury market’s strong performance in 2024.
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As the overall market faced a year of stagnation, there was no stopping luxury real estate sales.
The high mortgage rates and home prices that paralyzed the average home buyer in 2024 have had little effect on luxury home buyers, who sold for more than $1 million in the first half of this year alone, according to the magazine. The number of housing units increased at an annual rate of 5.2%. Realtor.com data was analyzed by The Agency for the Red Paper Annual Wealth Report.
“This year’s report provides unparalleled insight into the evolving trends impacting the global real estate market, the luxury goods sector and the broader asset environment,” Mauricio Umansky, CEO and founder of the agency, said in a statement. “I will.” “This truly comprehensive and advanced resource provides agents and clients with the knowledge, tools and vision to make informed decisions in a rapidly changing market.”
The report notes that overall home sales in the first half of 2024 declined by 12.9%, with the contrast exhibited particularly in the luxury market. Median home sales prices in the first half of 2024 rose 5% year over year, and luxury home sales prices (95th percentile homes) rose 14.2% over the same period.
The red paper cites interest rate resilience and a strong stock market as key factors for the luxury goods market’s strong performance in 2024. Luxury buyers are more likely to purchase property with cash, so mortgage rates are relatively high at around 7%, and despite arriving on the market last year, these luxury buyers are not interested. I wasn’t intrigued.
In fact, nearly half of U.S. luxury buyers purchased a home with cash in the first quarter of 2024, the largest share in a decade, according to Redfin data, the report notes. .
Last year’s strong stock market also allowed many luxury buyers to increase their equity and increase their purchasing power. The S&P 500 is up 26.9% this year, and the Dow Jones is up 17.9%. When the stock market performs well, investors become more confident and more likely to make large purchases, such as real estate investments.
Looking ahead to 2025, the agency said there will be more than 70 global elections in 2024, and geopolitics will also impact the luxury goods market. A global war or the election victory of a right-wing politician could influence where wealthy people decide to invest, the report said. However, with the US presidential election over, some overseas buyers may see US real estate investment as a stable option, especially compared to other regions facing conflict.
Even if lower interest rates and U.S. political stability are not enough to attract large-scale buyers from abroad, the agency predicts that intergenerational wealth transfers will continue to drive the luxury market over the next decade starting in 2025. He pointed out that it should be supported.
“Intergenerational wealth transfers are already motivating purchasing power,” Paul Lester, a partner at The Agency in Los Angeles, said in the report. “There are 30-year-old couples who can aggressively compete for the best properties in the $10 million, $20 million or even $30 million range.”
According to the report, approximately $31 trillion is expected to be transferred by 1.2 million people (each with a net worth of at least $5 million) over the next 10 years. Based on Altrata data, about $20 trillion of that wealth is expected to be inherited from individuals with a net worth of $30 million or more. Most of that wealth will be transferred to younger Generation X and older Millennial heirs.
The Red Paper also noted that off-market transactions have become a very common way to sell trophy properties, and the frequency of this practice is likely to increase in the future. Off-market deals are attractive to sellers because they involve privacy and exclusivity, while to buyers the potential for less competition and fewer bidding wars is attractive.
In the current low-inventory market, potential sellers will also look to off-market retail properties to test their listing appetite and avoid increasing the number of days on the market.
Related to this section, the report includes quotes from Umansky himself, criticizing NAR’s clear cooperation policy, which has come under scrutiny by industry insiders in recent months.
“When it comes to high-end, multi-million dollar properties, off-market transactions provide privacy and exclusivity for sellers, while giving buyers the opportunity to avoid the competitive pressures of listing,” Umansky said. “But policies like explicit cooperation run the risk of limiting those options. Above all, I want policies that build in flexibility and allow clients to navigate the market as they see fit. I advocate.”
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