Expensive Home Prices and Sales Rise in the US

Expensive Home Prices and Sales Rise in the US

Expensive Home Prices and Sales Rise in the US

A housing shortage, strong economy and demand have driven many homes in major US cities over $1-M, offsetting buyers’ concerns about the reduced benefits of owning a pricey property under President Donald Trump’s tax reform, the data show.

Home sales at $750,000 and above have risen by double digits annually in the past 3 years, closings data from realtor.com show for 30 counties on the east and west coasts.

Sales below $750,000 are down in the past 2 years due to a scarcity of homes priced around $500,000 and below and the lower end’s larger market size has pulled down overall sales, the data show.

While The Trump Tax Plan affects homes for sale above $750,000, the fact that overall sales fell suggests the new tax law is not the Key for the fall.

The new tax law caps the deductibility of mortgage debt at $750,000 and annual property taxes at $10,000. This was expected to hurt home sales as fewer people would be able to utilize mortgage interest and property deductions when paying taxes.

But the number of homes sold above $750,000 actually grew in December and January, though they slowed to single-digit gains of 7.9% and 4.8% from a year earlier, respectively.

Ten counties accounted for 75 of the 4,268 sales in January above $1-M, while 50% or more homes sold in San Mateo, San Francisco and Santa Clara counties in California and New York county, which is Manhattan, were above that mark.

“Our data suggests that in these high-priced markets there was enough momentum in demand and enough inventory toward the end of last year and the beginning of 2018 to power sales growth in the $750,000 plus segment,” the director of economic research at realtor.com, told Reuters.

The stock market boom and higher property values have helped propel the high end.

Those that can afford a $1-M+ property have seen their net worth benefit from asset price inflation over the last several years.

This is a marked difference when compared to most working class Americans that primarily see their spending power and home affordability as a function of wage gains alone.

The 30-county data from realtor.com represent 98% of final closings unlike the less comprehensive, but more timely, samplings often used to indicate real estate activity. The counties account for 10% of all home sales and 60% of sales above $1-M, but only 1% of US counties.

The new tax code created a pause among home-buyers in December and is much discussed, said the President and CEO of William Pitt-Julia B. Fee Sotheby’s International Realty in Stamford, Connecticut.

“It’s definitely having some effect but consumer confidence and the economy are overriding the tax costs,” he said.

An overall sales decline in the 30 counties in December and January prompted an outcry from realtors about the tax reform’s perceived impact.

The falloff was in line with declining nationwide home sales during those 2 months, according to the National Association of Realtors (NAR), and sales rebounded in February, it said.

Preliminary realtor.com data for the 30 counties still show an overall, though slower, decline in February. But sales rose at the high end that month too, highlighting the supply constraint at the low end and strong demand for pricier homes.

The variance is due to an accelerating decline in sales below $750,000 in the 30 counties and the shrinking size of that segment, which was almost three times larger than sales above that threshold in Y 2014. By last year it was less than 2X the size of the higher end where sales are still rising.

The supply-demand imbalance is proving to be less acute at the higher price points and the overall pool of buyers in this segment remains large.

“While many that were on the fence of buying a million dollar home many have had to reassess their move.

“For many this year the purchase decision will be driven by finding the right home more than the new tax code.”

Most buyers see around $1-M as a “sweet spot” because if $200,000 is put down on a purchase there’s still a tax break on a mortgage up to $750,000.

“That is how most buyers are viewing it,” said the CEO of Town & Country Real Estate in East Hampton, New York, adding accountants are very busy fielding calls from their clients.

A sampling of nationwide US housing data for March show the median listing price was up 8% from a year ago, surpassing the Y 2017 high, and the inventory of available homes for sale was down 8% Y-Y, realtor.com said.

If the pattern holds, 1 in 12 US listings will be above $1-M this Summer, up from the 1 in 40 homes listed at that price in February, according to the NAR data.

Have a terrific weekend.

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Paul Ebeling

Paul A. Ebeling, polymath, excels in diverse fields of knowledge. Pattern Recognition Analyst in Equities, Commodities and Foreign Exchange and author of “The Red Roadmaster’s Technical Report” on the US Major Market Indices™, a highly regarded, weekly financial market letter, he is also a philosopher, issuing insights on a wide range of subjects to a following of over 250,000 cohorts. An international audience of opinion makers, business leaders, and global organizations recognizes Ebeling as an expert.

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