THE SURGE IN U.S. MANSION PRICES IS OVER FOR NOW

The six-bedroom mansion in the shadow of Southern California’s Sierra Madre Mountains has lime trees and a swimming pool, tennis courts and a sauna — the kind of place that would have sold quickly just a year ago, according to the real estate agent representing the Seller.MansionNot now….

It’s being offered at a discounted $3.68 million, but nobody’s biting.  The owners, a couple from China, are getting anxious. They’re the kind of well-heeled international investors who fueled a four-year luxury real estate boom that helped pull America out of its worst housing slump since the 1930s. Now the couple is reeling from the selloff in the Chinese stock market and looking to raise cash to shore up finances.

Across the U.S., the story is much the same. The world’s economic woes — from China to Russia to South America — are damping sales in the high-end real estate market. Haywire overseas stock markets and dropping currency values caused in part by plummeting oil prices are dulling the demand for mansions, penthouses and winter escapes.

images-1

The volatility in China and Russia and the oil issues in the Middle East are impacting the high end of the American housing market.  And we’re probably not going to see material price increases any time soon.

Prices for the top 5 percent of U.S. real estate transactions remained flat in 2015 while all other houses gained 4.9 percent.

In the Los Angeles suburb of Arcadia, dozens of aging ranch houses were demolished to make way for 38 mansions built with Chinese buyers in mind. They have manicured lawns and wok kitchens and are priced as high as $12 million. Many of them sit empty because the prices are out of the range of most domestic buyers, and there has been a crackdown by the Chinese on large sums of money leaving the country.

The stronger dollar is driving South American buyers away from luxury condos in Miami’s downtown area.  Buyers there signed 25 percent fewer pre-construction contracts in 2015  than in 2014.

Unknown-1

Manhattan resale prices for the top 20 percent of the market peaked in Feb. 2015 and have fallen every month since.

Even in San Francisco, where the market for luxury properties remains strong, the inventory of listings for $2 million or more jumped in October to a record level.  Both buyers and sellers are increasingly worried about the direction of the economy.

With more sellers jumping in and more buyers holding off the law of supply and demand is having an effect and prices are slipping.

The real test for the U.S. market will come after the Super Bowl on Feb. 7, when the prime home-buying season begins. images-2

As the U.S. jobless rate hovers at 5 percent, the lowest in almost eight years, demand for lower-priced homes has increased.  The cheapest U.S. ZIP codes had annual home-price growth in November that was more than twice the 4.3 percent rate for the most expensive ones.

But it’s the high end market fueled by wealth overseas investors that will remain flat.   After a lackluster 2015, the Standard & Poor’s 500 index has tumbled 8 percent. Benchmark oil prices are now around $30 a barrel compared with more than $100 eighteen months ago. The dollar has climbed 8 percent against 10 leading currencies in the past year, making U.S. real estate more expensive for foreign buyers, according to the Bloomberg Dollar Spot Index.

When the foreign buyers do come come back, they’ll be on the hunt for deals, because believe it or not, there’s even a limit to what a wealthy person will spend —Unknown

Leave a Reply

You must be logged in to post a comment.