Wealthy Buyers Re-Emerge in Real Estate Market
|March 7, 2011||Posted by Sandie under Real Estate|
“It hasn’t been a good six months for all people, but it was a good six months for rich people,” says Glenn Kelman, CEO of Redfin real estate brokerage. The numbers seem to back up Kelman’s assertion; despite a four-year decline in the housing market, the rich are back in the real estate game.
Sales of million-dollar homes and condos rose last year in all 20 major metro areas. The average jump in high-end home sales in these areas was reportedly 18.6 percent.
What’s the inspiration behind the re-emergence of wealthy buyers in the market? According to Kelman, “When Wall Street goes up, rich people buy homes.” Take a look at the market and you’ll see that stock values have almost doubled from their March 2009 lows.
Greg McBride, chief economist at Bankrate.com, said that “Higher income households are feeling better about their financial security.” The biggest market for million-dollar homes, San Jose, California, saw a 27.4 percent spike in sales last year.
The wealthy have taken advantage of the dip in home prices, and getting mortgages for these homes has become cheaper too. Normally buyers must take out a jumbo loan in order to finance a mortgage above the $417,000 threshold. Loans for homes that fall above the threshold typically have higher interest rates because they are what is technically referred to as non-conforming, or higher risk – not backed by Fannie or Freddie. Whereas interest rates on homes with higher mortgages have typically been significantly higher than average, by 2010 the difference between interest rates for average buyers and buyers of high-end homes had shrunk to just 0.6 percent more.
To read more, visit the CNN Money site.