The luxury market in the San Gabriel Valley, affected by higher mortgage rates, may not be immune to an expected dip in sales and prices, but the luxury home market is still seen as a strong investment, according to a recent national report.
According to The Trend Report 2022 by The Report Group, the luxury property sector is showing signs of a recession following an unprecedented homebuying boom during 2020 and 2021.
Following the pandemic, high-net-worth buyers have shifted their focus, according to the report. Rising interest rates, inflation, and increasing economic uncertainty have also lessened the demand that was seen in 2021.
At the same time, however, the high-end real estate market is still in a strong position for 2022 and 2023, according to the report. Luxury single-family home prices have seen a 60% appreciation since 2017, while luxury attached home prices increased nearly 41%.
According to a survey of over 2000 US-based affluent individuals, conducted by Censuswide and the Coldwell Banker global luxury program, 80% of those respondents believe that Real Estate is still a safe investment.
In August 2022, the majority of luxury home markets that were analyzed for the trend report were still sellers’ markets, but conditions are gradually shifting in the buyers’ favor, the report stated.
Homebuyers may have more negotiating power, but they still must contend with a shrinking inventory coupled with higher home prices. At the same time, affluent buyers appear to be moving towards smaller properties including secondary and investment homes, according to the report.
In 20 US markets between April and August 22, luxury single-family homes with smaller footprints sold 18.6% faster than larger single-family homes. In addition, about 25% of survey respondents who purchased a home in the last two years said that they were not satisfied with their home purchase. According to the report, those buyers could be on the move again, looking mostly in California and New York.
According to the Trend Report, property investment is a priority among the affluent. The report stated that “Real Estate has the ability to provide financial emotional and psychological stability in the face of the rise in uncertainty over time most home values typically appreciate, demonstrating exactly how much affluent customers play the long game when it comes to financial and lifestyle investments today.”
The luxury real estate market has also shown resilience, according to the Report, leaving buyers with plenty of purchasing power still to acquire the home they desire. The Report also stated that “Affluent buyers remain bullish as most continue to see the value of property investment.”
In fact, 75% of respondents noted the current market conditions have changed their mind about buying a home or investment property in the future as notary consumers remain optimistic about the market.
The report cited “more inventory, rising rent, and stock volatility,” making real estate a better hedge against inflation.
