It has become easier to sell high-end expensive homes. The strongest growth in home sales in the latest data occurred at the very top of the price category.
In October, home sales increased 16.2 percent from one year ago for those properties at $1 million and above. Overall home sales had increased by only 4.7 percent.
The inventory change was also most noticeable on the upper end. The months’ supply of inventory fell by the largest magnitude for the expensive homes as it declined to 10.6 months’ supply from 12.1 a year earlier. By contrast, the months’ supply increased for all homes to 5.1 months from 4.9 a year earlier.
The improving trends in the upper-end market do not mean REALTORS® should only chase this market. First, the million dollar home market makes up only 2.2 percent of total sales. Second, even though this specific market may be improving, it is still not easy. The months’ supply, as mentioned, is 10.6 for $1 million homes. But it is less than 6 months for homes priced under $500,000 and 7 months for homes priced between $500,000 and $1 million.
The million dollar homes are moving better likely due to the huge gains in wealth in America from the stock market boom over the past 5 years. The ultra-loose monetary policy of bringing down interest rates has moved investor money into the stock market since there is virtually no yield in bank deposits or in bonds. But only about 10 percent of Americans are said to have a significant investment in the stock market. (Slightly more than half of Americans have some amount in the stock market through 401K and pension funds, but not a significant amount).
Because many vacation home sales go to the people on the top, one may see improving conditions in the vacation home market as long as the stock market wealth holds up.
It’s hard to take our eyes off The Lifestyle of the Rich and Famous even as we secretly may be wishing for their downfall, particularly the arrogant and stuck-up kind. But wealth should be viewed not solely in financial terms. Think of how much cultural wealth a person could accumulate by visiting museums or reading a fine book or of relationship wealth that comes from chatting with dear friends. These are activities, however, that take a long time to develop. That is, one can instantly buy a fancy watch from sudden wealth, but one cannot buy an improved vocabulary skills or true friendship no matter how much money is flashed around.
Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.