Luxury Housing Markets Heat Up

April 13, 2012

While many markets continue to languish with more price declines and  so-so sales, one real estate sector is red hot, and you might be  surprised at which one it is.

Even with the economy just starting  to pull out of the doldrums, the luxury market has come roaring back in  recent months according to experts, and that could signal good things  ahead for U.S. real estate.

“There is very little inventory,  which is driving a lot of activity,” says Richard Smith, president and  CEO of Realogy Corp., a global provider of real estate and relocation  services. “You’re getting multiple offers and quick sells. It’s not  uncommon in New York City to see a co-op or an apartment go on the  market and two days later it’s gotten 10 offers and it’s sold. That’s  becoming pretty typical of New York City.”

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Other  high-end markets in Boston, Greenwich, Conn., the Hamptons, and Miami,  Fla., are seeing increased activity as well, Smith says.

Even  far from the hustle and bustle of major city centers, real estate  watchers have seen luxury markets heat up. In Bozeman, Mont., ERA broker  owner Robyn Erlenbush has already seen the same number of closings and  pending sales three months into 2012 as she did halfway through 2011.

“There’s great energy in our market,” she says.

Why  are buyers suddenly scooping up more high-value properties? Lack of  selection does play a role, but sellers have also become savvier when it  comes to pricing their properties. On the flip side, would-be  buyers have become more realistic about prices as well, sensing that they aren’t likely to drop much farther.

“These are  high-end buyers that have been sitting on the sidelines for long enough  and pricing is not going to get any better,” Smith says. “These are  people who are smart enough to know that you can’t really call the  bottom of the market—you can get close, but if you miss it, prices start  escalating pretty quickly.”

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The  uptick in buyers plunking down mega-bucks for mega-mansions could bode  well for the broader market, Smith adds. While it’s not likely the  average Joe looking to buy a $200,000 home in Columbus, Ohio, will take  his cues from multimillionaires purchasing second homes in the Hamptons,  it could give more credence to the idea that the housing market could  be on the mend.

“If I’m in a market and I see the very  high-end buyers grabbing the headlines, it tells me that people who are  astute investors—when you’re buying a $30 million property, you’re  probably pretty astute—think things are starting to improve,” Smith  says. “Is there a bleed-over effect? Probably.”

Foreign  buyers have given some luxury housing markets such as Miami a shot in  the arm, Smith and other experts say, with healthy interest hailing from  locales as diverse as Russia, China, Canada, and Brazil.

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“We  have an influx of Russians because it’s like their winter Riviera,”  says Coldwell Banker Realtor Jill Eber, who specializes in luxury real  estate, adding that current “bargain” prices have given foreign buyers  incentive to move into the American housing market, especially popular  vacation spots such as Miami.

Her colleague, Realtor Jill  Hertzberg agrees. “Many of them are buying very big properties. You  can’t buy a single-family home in the middle of Moscow on a gorgeous  waterway,” she says.

And Hertzberg doesn’t think the  resurgence of activity in the luxury market is a flash in the pan. “I  think it’s going to sustain,” she says. “It’s definitely continuing.”

mhandley@usnews.com

Twitter: @mmhandley

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