It now is evident that the inventory in the market for premium and luxury residences has been increasing over the last several years as noted in a most recent National Association of Realtors existing homes sales report on April 19.
From March 2018 the inventory of premium and luxury homes is up 19.8 percent and the average days on the market is 47 days and longer. Also, price appreciation for those homes has decreased 5.7 percent since that time and is up barely 0.3 percent.
So now this would be considered a buyer’s market for premium and luxury homes, as prices continue to decrease, potentially making for better deals. I have seen this in various high-end areas on Long Island and New York City. More important is the additional effect that the SALT tax (maximum $10,000 deduction on real estate, sales and local taxes on your income tax return) has had on prices on those high-end homes. I am wondering how many buyers have changed their attitude and gotten more conservative about their purchase price points and maybe are trending down to lower priced homes (eliminating the 1 percent luxury tax on those homes sold at or above $1 million), homeowner associations, condos or even co-ops and creating greater demand at the lower level?
On the other hand, inventory for starter and trade-up properties has for the most part, increased by just 2.4 percent during that same period and are only on the market for a mere 36 days. Price appreciation has decreased only 3.7 percent, but still is up 3.8 percent. The greatest demand is still very strong for those starter and trade-up homes and this is the reason that inventory has been very slow to increase. For as fast as those homes are put on the market and priced properly, they are snatched up by aggressive cash-ready and qualified buyers, who want to get out of their rentals to finally stop giving away their wealth, appreciation, future equity and tax deductions to their landlords.
Even those trade-up buyers are out in full force and are looking and searching for homes to move up to larger spaces in possibly a better location and school district. Going forward over the next few years, I do not see the demand or price appreciation subsiding for those starter or trade-up homes. If for some reason interest rates increase once again (they are down from December 2018 and currently stand at or below 4 percent, depending on the buyer’s qualifications) or some long-term event occurs that causes the psychology of the market to change and make purchasers leave, enabling inventory to increase at a faster pace, I see the market demand continuing for those that can afford to make the plunge and buy.
Demand continues to rise with lower-than-normal inventory levels in the starter and trade-up home markets, which has caused prices to climb on a year-over-year basis for 85 consecutive months The good news is that the “American Dream” of ownership and that “white picket fence” is still alive and well going forward.
Even the debt-burdened millennials truly desire to own their own home and from what I have read this past week, there are a few banks that will roll over some of their student loans into a home mortgage. However, every situation is different and there is no guarantee, but if you need assistance, call me and I will try to help you. However, my solution for some of those millennials is to either get another job or two or start a side business (as many who come to the United States do and for some within 5-10 years become millionaires).
Unfortunately, there is sometimes great pain involved (meaning how much is required in time, effort, discipline, diligence and sacrifice one is willing to put in) in getting ahead and really being where they want to be in today’s challenging and competitive work and business environment before the pleasure of homeownership. Is it worth it? I believe it is because what other way can you tell me that one can build their wealth independently, outside of your job, business, or family inheritance, assuming you have one? I would like to know my readers’ thoughts and ideas about our current market, so email me with your comments.
Philip A. Raices is the owner/Broker of Turn Key Real Estate at 3 Grace Ave Suite 180 Great Neck. He has earned designations as a Graduate of the Realtor Institute and a Certified International Property Specialist. Receive regular “free” updates of sold homes in your area and a “free” Comparative Market Analysis” of what your home would sell for in today’s market or search on: WWW.Li-RealEstate.Com If you would like to receive a digital copy or a printed copy of “Unlocking the Secrets of Real Estate’s New Market Reality