A new midyear Luxury Outlook report from Sotheby's International Realty reveals that while global elections might temporarily slow luxury home buying, rising interest rates pose a more significant concern. Buyers often delay purchases during elections due to uncertainty, but high interest rates are discouraging transactions more persistently. Despite this, luxury home prices are expected to remain stable as aging homeowners opt to "age in place" rather than downsizing. With limited supply and potential increased demand when rates eventually fall, competition could intensify. The report suggests now may be an opportune time for buyers before competition heats up.
A new midyear Luxury Outlook report from Sotheby's International Realty suggests that elections around the world might cause a short-term dip in luxury home buying, but rising interest rates are a far more significant concern.
The report highlights a trend where buyers tend to hold off on major purchases during election periods. This "wait and see" approach typically lasts a few months leading up to the election (around October in the US) and picks back up once results are known. Experts believe this hesitation stems from general uncertainty surrounding election outcomes.
While elections might cause a temporary blip, rising interest rates are seen as a much bigger factor affecting the luxury housing market. The report suggests that interest rates which have stayed "much higher for much longer" are discouraging buyers and causing sellers to hold onto their properties. A Dallas broker quoted in the report believes that if interest rates start falling, "people will buy," but if they remain elevated, "people will remain on the sidelines."
The report suggests that high interest rates are causing sellers to hold onto their properties. In Brazil, where interest rates have already begun to decrease, luxury market activity is picking up. This suggests that cash-rich buyers might not be affected by interest rates, but those relying on financing are more cautious.
Despite the slowdown in transactions, luxury home prices are expected to remain stable. This is partly due to an aging generation choosing to stay in their large homes (valued at potentially millions of dollars) rather than downsizing. These homeowners have accumulated significant wealth and can afford in-home care, allowing them to "age in place" for longer.
With a limited supply of luxury homes available and the potential for more buyers entering the market when rates fall, competition could become fierce. The report suggests that for those looking to buy, now might be a good time, before competition intensifies significantly.
The luxury housing market appears to be in a state of flux. While elections might cause short-term dips, rising interest rates are a bigger concern for buyers. With limited supply and the potential for increased demand, the market could see a shift once interest rates start to fall. The report predicts that rates will not fall significantly until 2025, suggesting that luxury transactions might remain subdued for the rest of the year. However, for those who are ready to buy, this could be an opportune time before competition heats up.
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