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The U.S. luxury real estate market has made a stronger showing during the first half of 2024 than it did in the first half of 2023, according to midyear luxury reports from Coldwell Banker, Compass and Sotheby’s International Realty.
The number of ultra-luxury homes (those $10 million and higher) that sold during the first half of the year increased by 3.9 percent from the first half of 2023, according to Compass’ report.
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Sales of single-family properties across the full spectrum of the luxury market (defined as the top 10 percent of the market) were up 2.66 percent year over year, according to Coldwell Banker’s report, while attached luxury sales only increased by 0.25 percent year over year.
Luxury prices also hit new heights, with the median price for the top 10 percent of U.S. luxury homes up 37.5 percent as of June 2024 from June 2020 levels to $1.695 million, according to Coldwell Banker.
“Premium properties remain timeless, and the findings of this report demonstrate a strong commitment from both buyers and sellers to complete transactions,” Felipe Hernandez Smith, head of Compass Luxury, said in a statement. “There are exceptional homes nationwide catering to every lifestyle, and it’s encouraging to see that premium real estate is always in vogue.”
Overall, luxury agents and brokers are optimistic about how 2024 has shaped up thus far and where it seems to be heading, with nearly 70 percent of Coldwell Banker Global Luxury property specialists expressing optimism in this year’s market. A few key factors agents will keep an eye on as the year continues, as brokerage midyear luxury reports suggest, include dream homebuying trends, elections, the economy, and growing and emerging markets.
Consumer trends: unicorns and dream homes
Desirable inventory continues to drive market demand, particularly those homes that don’t require any work before moving in, Coldwell Banker’s report noted.
More than 44 percent of the firm’s luxury specialists said that well-priced, well-presented homes, especially those that are “unicorns,” meaning move-in ready, brand-new or with many amenities, continue to see high demand.
“Demand for luxury spec houses and townhomes remains particularly strong,” Coldwell Banker’s report said. “Modern aesthetics with natural materials like wood, an open plan, eco-friendly features and the latest smart home technology — these are all on the must-have list, along with flexible and functional living spaces that cater to a variety of experience, wellness and a sense of community. This shift seems to be driven by growing numbers of younger affluent buyers who have different priorities than previous generations.”
A growing number of luxury homebuyers today are also seeking out their forever dream home, Coldwell Banker luxury agents said. During the pandemic, clients scrambled for a place in which to shelter, but now that their lives have normalized and many remote work policies are shifting, agents said that buyers are looking for new homes that match their long-term goals. Life transitions, like starting a family, are also increasingly a source of motivation for buyers who are moving, agents added.
Credit: Canva
Elections
Time Magazine has called 2024 “the ultimate election year” for a reason — about half of the world’s voting-age population, or more than four billion people across 80 countries, will be eligible to vote in elections this year. How things shake out in the polls in the U.S. could have a significant impact on the real estate market, Sotheby’s midyear report noted.
Democrat and Republican platforms are also moving in different directions when it comes to real estate — Democrats are targeting housing affordability through initiatives like tax credits and down-payment assistance, while Republicans are hoping to stimulate economic growth through pro-business policies, like low taxes and low regulations.
Seasoned agents know that buyers and sellers tend to take a break from the market during elections.
“From my experience, what we see again and again is that our market gets quieter around October,” in anticipation of the election in November, Christie-Anne Weiss with TTR Sotheby’s International Realty in Washington, D.C., said in the firm’s report. “Once the election is over and we know who the president is, business will resume as normal. It is buyer psychology; people do not make major investment decisions when there is imminent uncertainty.”
The same holds true for other countries across the globe, international agents affiliated with Sotheby’s International Realty suggested. But political stability can also have a positive impact on the market.
Since India’s incumbent Bharatiya Janata Party retained power in this year’s elections, India Sotheby’s International Realty’s Ashwin Chadha expects the real estate market to benefit.
“The current government has reiterated its intentions for high spending, drawing in investments to boost the manufacturing section,” Chadha said. “Both infrastructure spending and manufacturing augur positively for the property market, including luxury real estate.”
Economic factors
The political landscape will undoubtedly have some kind of impact on the market, but interest rate movements may impact buyers and sellers even more, Sotheby’s luxury specialists said.
“There’s a lot more conversation about politics this year and a lot of polarization,” Russ Anderson, president and CEO of Briggs Freeman Sotheby’s International Realty in Dallas said. “But, when it comes to real estate, people are more focused on interest rates than politics. No matter who wins, if interest rates start falling, I think people will buy. If they stay elevated, people will remain on the sidelines.”
The expected drop in interest rates has not come as quickly as consumers and real estate agents might have hoped. Now, economists are estimating that rate drops will come by 2025. The Mortgage Bankers Association (MBA) anticipates that rates will fall to about 5.9 percent by 2025 and Wells Fargo estimated that they would drop to 6 percent.
“I believe we can say with some certainty that U.S. mortgage rates will be lower at the end of the year,” Anthony Chan, former chief economist of JPMorgan Chase, said in Sotheby’s International Realty’s report. “As buyers see lower rates, they will be less worried about the ‘lock-in effect’ — the hesitancy of selling their house if it means taking out a higher-rate mortgage for their next home. This will ultimately support housing activity if the economy avoids a slowdown.”
In addition to interest rates, rising prices and low inventory also continue to present challenges to homebuyers. Until inventory hits normal levels of about six months, prices will continue to experience upward pressure. Experts from Goldman Sachs told Sotheby’s International Realty that home prices could increase by 5 percent in 2024 and by 3.7 percent in 2025.
Luxury buyers may be more concerned with U.S. equity markets than interest rates, however, Sotheby’s International Realty’s report noted. “If investors are doing well, as they did in 2023 and have so far in 2024, that will boost demand for luxury housing,” Anthony Chan added.
Changes in U.S. interest rates will also ultimately have an indirect and somewhat delayed impact on the economies of other countries throughout the globe.
“Some estimates suggest that it takes between one and two years for U.S. monetary policy to have its maximum effect,” Julian Brown of New Zealand Sotheby’s International Realty said. “However, there is a large degree of uncertainty because the structure of the economy changes over time, and conditions vary.”
Nashville has seen a surge in ultra-luxury sales so far this year | Canva
Market highlights
Los Angeles saw the greatest number of $10 million-plus transactions during the first half of the year with 135 sales accounting for $2.67 billion in sales volume, according to Compass’ midyear ultra-luxury report. Manhattan, Palm Beach County, Miami-Dade and Orange County rounded out the top five markets with the most ultra-luxury sales.
The number of ultra-luxury sales rose year over year in 20 markets, including Florida markets in Palm Beach, Miami-Dade and Orange County, as some buyers used these investments as a means to hedge against inflation, and often relied on their cash-buying power to acquire properties to circumnavigate high mortgage rates.
Emerging markets and second-home markets, especially those with tax-favorable policies, saw the greatest growth during the first half of the year, Compass reported, with the greater Nashville region seeing a 600 percent annual increase in ultra-luxury sales with a total of seven ultra-luxury sales, and Central Jersey seeing a 500 percent increase in such sales with a total of six ultra-luxury sales.
Out of those markets with 10 or more $10-million-plus sales during the first half of the year, Orange County, Telluride and Greater Palm Springs saw the greatest annual increase in ultra-luxury sales.
“With an increased supply of luxury listings, our sales would undoubtedly climb even higher,” Valery Neuman, a Compass Palm Springs agent, said. “Looking ahead, the second half of the year holds great promise as more people discover the allure of Palm Springs.”
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Email Lillian Dickerson