After a 2-year pandemic, real estate agents would have hoped sales would sore through the roof. With plenty of luxury homes sitting patiently and empty, agents have preceded for an influx of big buyers for the slice of commission they have been waiting for. However, with interest rates climbing and "lay-off announcements" more common, spenders might be tucking their cash back into their pockets. A dark cloud of recession is seemingly looming over the market.
Cities like New York, San Francisco, and Miami are where the real deals are. As the primary city sources for sky-line apartments and phenomenal views, attractive factors are becoming outweighed by economic fear. Wealthy clients are suddenly not making impulsive purchases based on their financial stability. Due to the mass increase in tech startups over the pandemic, these industries have to constantly watch the market, now focusing on "financial security," where "valuations are down, layoffs are up, and startup funding no longer feels limitless." Buyers now have to look at the bigger picture rather than the square footage. Housing opportunities have changed for luxury buyers as mortgage rates are taking off, going from 3% (average) to 5%. Even more so, owners of luxury homes will need to lower their expectations from agents and clients, dropping their asking prices and increasing anticipation.
So what does this mean for the luxury housing market? Redfin real estate brokerage advocate, Ryan, has noticed a shift in the market, from "optimistic" to "conservative," making conscious choices over purchases. Though the market has always been pretty persistent, buyers are currently less likely to face economic competition on potential purchases due to other buyers taking a backseat. Still, with an incalculable view of tech stocks, it is challenging to commit to a purchase for those heavily invested in these markets. With the risk of losing out on a slightly valuable commission, agents are settling on offers as buyers are less drawn to buy. At the same time, agents have gone from 20 phone calls to 1 daily, even for excellent properties.
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Though, an analysis from Redfin found a dramatic cooling period in the housing market. The research found that houses on the markets were becoming less attractive by the New York minute due to market inflation. While agents are yearning for incoming buyers, luxury home sales have dropped by almost 18%, while there has been a 5.4% drop for non-luxury homes. Though selling is becoming more flexible, it appears the buying potential is becoming more staggered.
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