Luxury Home Buyers Have Opportunity in Today’s Market
If you’ve been shying away from the idea of buying a luxury home because of the price, it might be time to revisit your visions of a dream home. The Wall Street Journal recently reported a significant rise in inventory of high-end homes across the country. As the laws of supply and demand dictate, when inventory is high, homebuyers are handed the power in the real estate world. With expensive houses sitting on the market longer and longer, buyer who have been reserving their urges to see what’s on the market should consider seeing what’s out there now.
In late winter and early spring of 2016, the inventory of luxury homes priced between $500,000 and $750,000 increased by nearly 16% nationally when compared with inventory counts from the same time of the year in 2015. Homes priced over $1 million saw an increase in inventory approaching 13% from the prior year. Overall, high-priced homes are sitting on the market far longer than they were in recent years.
As builders and affluent homeowners look to unload their current properties in an increasingly competitive selling market, buyers are being given the upper hand in terms of price, negotiation, interest rates, and availability to choose the home of their dreams. With economic issues elsewhere in the world seemingly halting the influx of foreign investors, buyers are now able to demand requirements of sellers that would have been unheard of not long ago. As bidding wars and multiple offers quickly become a thing of the past in the high-end home market, sellers are being forced to adjust their expectations.
Here are some things to think about if you’re considering buying a luxury home in the near future:
- Low interest rates. Interest rates have been at or near historical lows for quite a while, and they’ll likely start rising soon. This means a jumbo loan today will cost far less money over the life of the loan than it will when rates rise. In June of 2016, jumbo loans were reportedly averaging 3.72% on 30-year fixed mortgages, with 5-year ARMs coming in at just 2.87%.
- Down payment requirements increase. Most financial institutions that handle large mortgages segment lending requirements in terms of pricing tiers. The more expensive the home you’re looking to purchase, the higher percentage of a down payment you’ll likely be required to have on hand.
As an example, you might be able to secure a loan of 89.9% for a home that costs less than $1 million, but the same financial institution might reduce loan availability to 80% if your loan crosses the million-dollar mark. This means that acting now, while prices are increasingly competitive, could keep you in the bracket that requires the lowest down payment (measured as a percent.)
- Costs beyond the sticker price. It’s important to remember to factor in all costs of the home to calculate the true cost of the home. Buyers who are trading up should bear in mind the costs of taxes, insurance, and maintenance will likely increase, as well. If you get in while property taxes are low, be sure to set savings aside so you’ll be well-prepared if prices start to rise.
Luxury homes are just a signature away at The Residences at The Ritz-Carlton, Dove Mountain. At The Residences, you’ll get to choose your own piece of the desert and build a custom luxury home that comes complete with pristine views and spectacular sites at every angle. Let us know when you’re ready to learn more!