What does the stock market have to do with luxury home sales you might ask?
Corelogic took a close look at the statistics between stocks and the sales of upper-end luxury properties ( $1 Million+ Sales price) Here is what the report uncovered:
“The powerful ‘wealth effects’ generated by the rapid rise in equities between 2009 and 2015 drove a large rise in the sales of homes that sold for $1 million or more.
Historically, sales of homes priced $1 million or more averaged 1.2 percent of all home sales. The spread between high-end sales and equities widened during the housing bubble but then moved more closely in unison. By the time the equity markets had peaked in May 2015, the $1 million or more share of the market had nearly doubled, averaging 2.2 percent for the remainder of the year.”
This makes a lot of sense. As people start to see their own personal wealth increase they become much more confident in their purchasing power. And, of course this has an impact on the decisions they make about real estate. Earlier this year the stock market took a dip and there was quite a bit of evidence that the Luxury real estate market was beginning to soften up a little.
As many investors know first hand the market is flourishing again. Back on the road again despite the speed bumps the market faced earlier in the year. This may wake up the luxury market as we move through fall.
As we continue through 2016 into 2017, the strength of the stock market will be a major factor in the strength of the luxury real estate market. If the stock market takes another dip, look for high-end luxury home sales to slow. However if the market stays healthy as it has shown signs of lately, the high-end luxury real estate market will continue to advance.
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