RECESSION PROOF REAL ESTATE MARKETS
WORDS BY CARL AGARD
WORDS BY CARL AGARD
excerpt from Moves Magazine Summer 2008
Everyday, you hear more bad news about the real estate market. Record highs in foreclosures throughout the country and depreciating values in many markets are causing many consumers to be concerned with the outlook of the housing segment. There are many factors ranging from the sub prime mortgage implosion, to the resulting credit crunch by lenders, to overheated housing markets correcting themselves. This housing “bubble” affected almost every aspect of real estate for the negative; however, there is one segment of real estate that continues to go strong….the ultra luxury high end market.
Ultra luxury homes such as a 30,000 square foot home in Beverly Hills for $50 million, or a $70 million penthouse in Manhattan with a 360 degree panoramic view of New York City has not felt the bust of the market. These are just some of the recently sold ultra luxury homes sold within the past few months.
According to a research by NPR.org, the high end of the real estate market is also the hot end. Sales of properties in lower cost communities have plummeted, while those in the middle are struggling. But the market for luxury properties, those defined as worth $10 million or more, is booming. In almost every large U.S. residential market, the number of sales of houses priced in the highest top 5% has either stayed level or even increased, while the rest of the market has tailed off considerably.
The Florida real estate market is one of the hardest hit in the country with record number of foreclosures and large drops in property values. This was one of the hottest real estate markets in the country with the great weather and many speculators buying vacation homes and condos left and right. With many Florida home owners now feeling the pinch of the housing bubble, Palm Beach is still enjoying record home sales.
Sales prices of single family luxury homes in Palm Beach, Florida rose by nearly 16% to $5.3 million according to the Realty Times. The most notable to date is the 62,000 square foot estate that Donald Trump just sold for $100 million. Donald Trump bought the property at a bankruptcy auction for $41 million with the intentions of turning it into a hotel. He poured $25 million in renovations and upgrades into it, and listed the estate for sale for $125 million making it the highest priced home on the U.S. residential market. Even though he dropped the sales price upon sale to a Russian buyer, the sale of the estate still broke records.
Just down the block from the Donald Trump mansion, retailer and philanthropist Sidney Kimmel just sold his estate to former Goldman and Sachs CEO John Thornton for $75 million. The listing price did not scare off many prospective buyers for there were numerous bidders on the oceanfront property ranging from a Saudi prince to sports team owners to according to a Palm Beach realtor.
Besides the Palm Beach market, other areas for the affluent such as the Bel Air section of Los Angeles, the Central Park side of Manhattan, and Greenwich, Connecticut, are still experiencing record high sales. Manhattan co-op apartments achieved a record average sales price of $1.4 million up from $1.2 million last year. The supply of Manhattan apartments cannot keep up with the demand from prospective buyers.
A surprise market is the Mclean, Virginia area. Home to many members of the U.S. Congress and Senate, Mclean is desirable because of its close proximity to Washington D.C. Last year the median price of luxury homes sales were $1.3 million, now it is up to $1.5 million. Sellers that were getting 91% of their asking price are now getting 95% of what they are listing.
What are some of the factors driving the heated ultra luxury real estate market?
Market was not saturated: The luxury high end market was not oversaturated with inventory like other markets. This created a good balance between supply and demand. With many wealthy buyers entering the market from all over the world, this drives up the demand, and the price, of the most sought after addresses.
Cash rules: The luxury market does not depend on mortgages to close the deals. Most buyers in this market use all cash to fund their transactions. Therefore, this market did not get affected by the sub prime mortgage collapse.
Foreign buyers: With the U.S. dollar weakening, foreign buyers from Japan, United Kingdom, and Dubai are using their stronger dollar to find “bargains” in the U.S. luxury market. In New York City, real estate brokers are gearing marketing campaigns towards foreign buyers. They are even recruiting multi language speaking realtors to help with the sales of these homes.
The rich got richer: The wealth of the top 5% of income earners is growing steadily at a rapid pace. The gap between the high income and the middle class is getting wider and wider every year. According to Census data, middle income families saw their wealth increase just 7% in the last 15 years. The richest 5% of the population saw their wealth grow by 40% over the same period.
Price is no option to the ultra wealthy. They will continue to buy what they want when they want to. The luxury real estate market continues to see no boundaries.
Carl Agard is a licensed real estate broker in New York and Georgia. He is the author of Getting the Real out of Real Estate (Adelphi Publishing & Media Group). http://www.carlagard.com/
Everyday, you hear more bad news about the real estate market. Record highs in foreclosures throughout the country and depreciating values in many markets are causing many consumers to be concerned with the outlook of the housing segment. There are many factors ranging from the sub prime mortgage implosion, to the resulting credit crunch by lenders, to overheated housing markets correcting themselves. This housing “bubble” affected almost every aspect of real estate for the negative; however, there is one segment of real estate that continues to go strong….the ultra luxury high end market.
Ultra luxury homes such as a 30,000 square foot home in Beverly Hills for $50 million, or a $70 million penthouse in Manhattan with a 360 degree panoramic view of New York City has not felt the bust of the market. These are just some of the recently sold ultra luxury homes sold within the past few months.
According to a research by NPR.org, the high end of the real estate market is also the hot end. Sales of properties in lower cost communities have plummeted, while those in the middle are struggling. But the market for luxury properties, those defined as worth $10 million or more, is booming. In almost every large U.S. residential market, the number of sales of houses priced in the highest top 5% has either stayed level or even increased, while the rest of the market has tailed off considerably.
The Florida real estate market is one of the hardest hit in the country with record number of foreclosures and large drops in property values. This was one of the hottest real estate markets in the country with the great weather and many speculators buying vacation homes and condos left and right. With many Florida home owners now feeling the pinch of the housing bubble, Palm Beach is still enjoying record home sales.
Sales prices of single family luxury homes in Palm Beach, Florida rose by nearly 16% to $5.3 million according to the Realty Times. The most notable to date is the 62,000 square foot estate that Donald Trump just sold for $100 million. Donald Trump bought the property at a bankruptcy auction for $41 million with the intentions of turning it into a hotel. He poured $25 million in renovations and upgrades into it, and listed the estate for sale for $125 million making it the highest priced home on the U.S. residential market. Even though he dropped the sales price upon sale to a Russian buyer, the sale of the estate still broke records.
Just down the block from the Donald Trump mansion, retailer and philanthropist Sidney Kimmel just sold his estate to former Goldman and Sachs CEO John Thornton for $75 million. The listing price did not scare off many prospective buyers for there were numerous bidders on the oceanfront property ranging from a Saudi prince to sports team owners to according to a Palm Beach realtor.
Besides the Palm Beach market, other areas for the affluent such as the Bel Air section of Los Angeles, the Central Park side of Manhattan, and Greenwich, Connecticut, are still experiencing record high sales. Manhattan co-op apartments achieved a record average sales price of $1.4 million up from $1.2 million last year. The supply of Manhattan apartments cannot keep up with the demand from prospective buyers.
A surprise market is the Mclean, Virginia area. Home to many members of the U.S. Congress and Senate, Mclean is desirable because of its close proximity to Washington D.C. Last year the median price of luxury homes sales were $1.3 million, now it is up to $1.5 million. Sellers that were getting 91% of their asking price are now getting 95% of what they are listing.
What are some of the factors driving the heated ultra luxury real estate market?
Market was not saturated: The luxury high end market was not oversaturated with inventory like other markets. This created a good balance between supply and demand. With many wealthy buyers entering the market from all over the world, this drives up the demand, and the price, of the most sought after addresses.
Cash rules: The luxury market does not depend on mortgages to close the deals. Most buyers in this market use all cash to fund their transactions. Therefore, this market did not get affected by the sub prime mortgage collapse.
Foreign buyers: With the U.S. dollar weakening, foreign buyers from Japan, United Kingdom, and Dubai are using their stronger dollar to find “bargains” in the U.S. luxury market. In New York City, real estate brokers are gearing marketing campaigns towards foreign buyers. They are even recruiting multi language speaking realtors to help with the sales of these homes.
The rich got richer: The wealth of the top 5% of income earners is growing steadily at a rapid pace. The gap between the high income and the middle class is getting wider and wider every year. According to Census data, middle income families saw their wealth increase just 7% in the last 15 years. The richest 5% of the population saw their wealth grow by 40% over the same period.
Price is no option to the ultra wealthy. They will continue to buy what they want when they want to. The luxury real estate market continues to see no boundaries.
Carl Agard is a licensed real estate broker in New York and Georgia. He is the author of Getting the Real out of Real Estate (Adelphi Publishing & Media Group). http://www.carlagard.com/
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