Most people are aware that when the real estate market crashed, one of the hardest hit sectors was Luxury Real Estate. We are now seeing a resurgence in Luxury Real Estate across the US. We will briefly look at each vertical within the luxury market and some worries that US Government has with international buyers of luxury real estate.
Luxury Real Estate Developments
Luxury Real Estate Developments all over the country either went bankrupt or were selling at pennies on the dollar. Today, with the real estate market coming back, we see a resurgence in Luxury Real Estate. The Luxury Real Estate Market is seeing growth because of a couple of reasons:
- Extremely low interest rates on new mortgages. We have gotten used to seeing low mortgage rates, but we are still seeing substantial subsidies by the government to drive mortgage rates down. This makes large home purchases very appetizing for large money investors.
- Very little yield in money market accounts. Money Market and savings accounts are providing an extremely small return. This is driving people with money to invest in a variety of higher yield investments. Real Estate, with its proven long term track record is a good place to have your money tied up.
- Real Estate Investments are growing at near record rates. The Real Estate Market has come back and with a vengeance. We are seeing low supply and high demand fueled by the low interest rates and low unemployment.
Luxury Condos have made a comeback. Some areas, such as Florida, saw devastating reductions in value when the market took a turn for the worst. We have seen certain markets such as Luxury Condos in New Orleans see big gains. Although prices have not gotten back to the insane prices pre-crash, we are seeing solid movement and more than enough money to have the developer make a profit.
Residential Real Estate Markets Recovering
With many residential real estate markets across the country starting to recover from the bust, some areas have seen tremendous growth in the Luxury market. Don’t let the statistics fool you, in some areas such as Florida condos and Los Vegas new construction have seen tremendous growth, but only because of their tremendous decline. Many of these markets are just getting back to pre-bust pricing. One of the luxury real estate markets that didn’t see a huge decline but has benefited from the new factors driving up luxury real estate is New Orleans. Luxury homes for sale in New Orleans are at an all time high. Even when the credit markets were dry, areas such as Uptown New Orleans and the Garden District of NOLA were still seeing quite a few transactions in cash.
Influx of International Money into Luxury Markets
With investing options worldwide not having strong yields, we have seen a tremendous influx of international money come into the US Luxury housing market. Some of the strongest real estate markets have seen quite a bit of international investors come in to purchase properties. We have noticed that Texas has seen an influx of international investors as has New York and Florida.
The US Government Pays Attention
Many are worried about the influx of international investors into the US luxury real estate market. Now, the US Department of the Treasury will be looking much closer at cash purchases for luxury properties over one million dollars. The Department of Treasury is worried about international money being “washed” via cash, luxury real estate purchases. New rules are going into effect to monitor these types of purchases in a limited number of states.