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The U.S. luxury real estate market is expected to perform better in the first half of 2024 than in the first half of 2023, according to the Midyear Luxury Real Estate Report from Coldwell Banker, Compass and Sotheby’s International Realty.
The number of ultra-luxury homes (over $10 million) sold in the first half of this year increased 3.9% compared to the first half of 2023, according to the Compass report.
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According to the Coldwell Banker report, sales of single-family homes in the overall luxury market (defined as the top 10 percent of the market) increased 2.66 percent year over year, but sales of homes in luxury neighborhoods increased just 0.25 percent year over year.
Luxury home prices also hit new highs, with the median price for the top 10% of luxury homes in the U.S. increasing 37.5% from June 2020 levels to $1.695 million as of June 2024, according to Coldwell Banker.
“Luxury properties are timeless and the findings from this report indicate that both buyers and sellers are eager to complete transactions,” Felipe Hernandez Smith, head of Compass Luxury, said in a statement. “There are amazing homes across the country that cater to every lifestyle, and it’s encouraging to see that luxury real estate remains in fashion.”
Overall, luxury real estate agents and brokers are optimistic about where 2024 has gone so far and where it is headed, with nearly 70% of Coldwell Banker’s global luxury real estate specialists expressing optimism about the market this year. As the brokerage median luxury real estate report suggests, some key factors agents will continue to focus on this year include dream home buying trends, the election, the economy, and growing and emerging markets.
Consumer Trends: Unicorns and Dream Homes
According to the Coldwell Banker report, attractive inventory continues to drive market demand, especially homes that don’t require any work before occupancy.
More than 44% of the firm’s luxury home experts said demand remains high for affordable, great-looking homes, especially “unicorn” homes that are move-in ready, new or come with lots of amenities.
“Demand for luxury spec homes and townhomes has remained especially strong,” the Coldwell Banker report states. “Modern aesthetics using natural materials like wood, open plans, eco-friendly features and the latest smart home technology are all must-haves, along with flexible, functional living spaces that cater to a range of experiences, wellness and a sense of community. This shift appears to be driven by an increase in younger, more affluent buyers who have different priorities than previous generations.”
According to luxury home agents at Coldwell Banker, more luxury home buyers are seeking their lifelong dream home. During the pandemic, clients were desperate to find shelter, but now that life is normalizing and remote work policies are changing, buyers are looking for a new home that fits their long-term goals, agents said. Life transitions, such as starting a family, are also motivating buyers to move, agents added.
Credit: Canva
election
There’s a reason Time magazine called 2024 “the ultimate election year”: Nearly half of the world’s voting-age population — more than 4 billion people in 80 countries — will be eligible to vote in this year’s election. And according to a preliminary report from Sotheby’s, the results of the U.S. polls could have a major impact on the real estate market.
When it comes to real estate, Democrats and Republicans are also moving in different directions on policy, with Democrats seeking to make home buying easier through initiatives like tax credits and down payment assistance, while Republicans want to stimulate economic growth through business-friendly policies like low taxes and less regulation.
Experienced agents know that buyers and sellers tend to stay off the market during election periods.
“In my experience, I see the market go quiet around October leading up to the November election,” Kristie Ann Weiss of TTR Sotheby’s International Realty in Washington, D.C., said in the company’s report. “Once the election is over and we know who the president will be, business resumes as usual. This is buyer psychology, and people don’t make big investment decisions when there is imminent uncertainty.”
An international real estate agent with Sotheby’s International Realty suggested the same was true in other countries around the world, but political stability could also have a positive impact on the market.
With India’s ruling Bharatiya Janata Party retaining power in this year’s elections, Ashwin Chadha of India Sotheby’s International Realty expects the real estate market to benefit.
“The current administration has repeatedly stated its intention to spend heavily to attract investment to boost manufacturing,” Chadha said. “Both infrastructure spending and manufacturing bode well for the real estate market, including luxury properties.”
Economic factors
While the political situation will no doubt have some effect on the market, fluctuations in interest rates could have an even bigger impact on buyers and sellers, said luxury goods experts at Sotheby’s.
“There’s been a lot of political discussion and polarization this year,” said Russ Anderson, president and CEO of Briggs Freeman Sotheby’s International Realty in Dallas, “but when it comes to real estate, people are paying more attention to interest rates than they are to politics. No matter who wins, if interest rates start to fall, people will buy. If rates stay high, people will stay on the sidelines.”
The anticipated decline in interest rates has not happened as quickly as consumers and real estate professionals hoped. Currently, economists expect the decline in interest rates to occur by 2025. The Mortgage Bankers Association (MBA) expects interest rates to fall to about 5.9% by 2025, and Wells Fargo predicts rates will fall to 6%.
“I think we can say with some confidence that U.S. mortgage rates will fall by the end of the year,” Anthony Chang, former chief economist at JPMorgan Chase, said in a report from Sotheby’s International Realty. “As buyers see rates falling, they will be less worried about the ‘lock-in effect’ — that is, the reluctance to sell a home if their next purchase means taking out a higher-rate mortgage. This should ultimately support housing transactions if the economy avoids a slowdown.”
In addition to interest rates, rising prices and low inventory continue to pose challenges for homebuyers. Prices will remain under upward pressure until inventory reaches normal levels of about six months. Goldman Sachs experts told Sotheby’s International Realty that home prices could rise 5% in 2024 and 3.7% in 2025.
But luxury home buyers may be more concerned about the U.S. stock market than interest rates, the Sotheby’s International Realty report said. “If investors perform as well as they have so far in 2023 and 2024, we will see increased demand for luxury homes,” Anthony Chan added.
Changes in U.S. interest rates will ultimately have indirect and somewhat delayed effects on other economies around the world.
“Some estimates suggest it will take one to two years for U.S. monetary policy to have its full effect,” said Julian Brown of Sotheby’s International Realty in New Zealand, “but there is a lot of uncertainty because economic structures change over time and conditions change.”
Nashville sees surge in ultra-luxury sales so far this year | Canva
Market Highlights
According to Compass’ mid-year ultra-luxury home report, Los Angeles led the way in transactions over $10 million in the first half of the year, with 135 sales bringing in $2.67 billion in sales. Manhattan, Palm Beach County, Miami-Dade County and Orange County rounded out the top five markets for ultra-luxury home sales.
Sales of ultra-luxury homes rose year-over-year in 20 markets, including Palm Beach, Miami-Dade and Orange County, Florida, as some buyers used the investments as a hedge against inflation, often relying on their cash purchasing power to buy properties and avoid high mortgage rates.
Compass reported that emerging and second home markets, especially those with favorable tax policies, saw the most growth in the first half of the year, with the Nashville metropolitan area seeing ultra-luxury home sales increase 600 percent year over year to seven ultra-luxury home sales, and Central New Jersey seeing ultra-luxury home sales increase 500 percent to six ultra-luxury home sales.
Among markets with 10 or more sales over $10 million in the first half of the year, Orange County, Telluride and Greater Palm Springs saw the largest annual increases in ultra-luxury home sales.
“With the increased supply of luxury properties, we will undoubtedly see an uptick in sales,” said Compass Palm Springs agent Valerie Newman. “As more people discover what Palm Springs has to offer, we have high hopes for the second half of the year.”
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