Reanna Martinez

CaDre #01957040



Demand Wanes For Luxury Homes

Demand Wanes For Luxury Homes by myCAREexpert
Demand Wanes For Luxury Homes by myCAREexpert


A surplus in the market of high-end homes may mean big deals for homebuyers.


The U.S. has seen a growth in inventory of high-priced homes.  Homes for sale between $500,000-$750,000 rose 15.9% in March compared to the same time last year, according to the National Association of Realtors®.  Homes over $1 million rose 12.6% year over year.  But many of these high-priced homes are lingering on the market for months and not fetching the desired purchase price.

The real estate market in the U.S. is strengthening, for sure, but consumers are much more wary post-recession.  Stock market volatility  is likely to add to homebuyers concerns, and economic conditions overseas means fewer foreign buyers than in previous years. 

Today’s California homebuyer is more likely to choose affordability rather than luxury.  The move toward minimalism and downsizing are furthering this trend.  Homes priced between $300,000-$450,000 sell quickly, but listings priced at $600,000-$800,000 often stall depending on location.  Homes sales get even more challenging above the $1 million mark.

When a home for sale has been lingering on the market, the seller will often lower the price or consider a lower offer.  Some buyers are benefitting from huge discounts on high-priced homes that were not selling otherwise. 

If you are considering a high price tag for your home purchase, there are a couple things to keep in mind:


Low Interest Rates

Mortgage interest rates on jumbo mortgages are still near record lows.  Rates are remaining around 3.72% for the 30-year fixed rate, and 2.87% for a five-year adjustable-rate mortgage.

Be sure to shop around for your mortgage!  Not all lenders offer the same programs; review as many as you can to find one that fits your situation.

Find out more about how to choose a lender


More Cash Upfront

Lenders require higher down payments and more cash reserves as borrowers reach higher loan amounts, or “tiers.” For example, Wells Fargo will lend up to 89.9% on amounts up to $1 million, 80% on amounts between $1 million to $2 million, 75% on loans between $2 million and 2.5 million, and so on.


Higher Maintenance Costs

Homebuyers who are trading up should make sure they can also afford higher property taxes, homeowners’ insurance, and home maintenance costs. If the home is exceptionally large, furnishing and decorating a large space can also be quite expensive.



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9 Responses

  1. Not surprising IMO, the luxury homes segment is the riskiest, and have been the hardest-hit by the 2008 financial crash. That segment is also fueled by foreign investments i.e. foreign buyers. And given the current status of emerging economies, oil prices and how China is in the process of hard-landings, it is only natural that luxury homes will ultimately be hit.

  2. The shift to practicality and minimalism is but a natural offshoot of the lingering fear over the economy. People would rather have real money in the bank than invest in luxury homes that have higher mortgage interest rates and more stringent purchase requirements. If you can’t afford to buy one in cash, it would not be wise to buy a luxury home through financing. It is so much more practical to buy a basic home and to introduce improvements over time.

    1. This is so true! I come from a family that are anything but minimalists. My family leads a modest life and I wouldn’t say that we have a luxury home, but our home is definitely one of the bigger ones in our town. Our house is a gigantic mess though, and there’s clutter everywhere! My grandma is the only thing that is keeping this house alive. If it weren’t for her, we simply couldn’t afford the place anymore. Because I’m more worried about finances and such, I want to switch to a more minimalist life. I want to sell the mountain of dolls up in the attic (no exaggeration! My attic is filled with dolls, and the pile is at least a few feet taller than me!) and I want to get rid of everything around the house that is causing the clutter! It just doesn’t seem practical to me for anyone to collect anything that they don’t need anymore.

      1. The bigger the home is the bigger the mess is going to be, having to clean a lot really gets me tired without even doing it. That’s a common thing, grandmas are always taking care of anything at home, that’s why they deserve all our love.

  3. I have some experience with this. My parents had a luxury home on Lake Michigan and it took them over half a decade to sell it. I think part of it is that the Baby Boomer generation is growing older and they’re looking for more simple places to settle down. Like the article said, a lot of it is post-recession scare. People really don’t want to take the chances on luxury homes, and you honestly can’t blame them from a practical standpoint.

  4. Ownind a luxury house has become one of the majority of the people’s biggest dream, it is difficult to achieve, but it’s not impossible.Economy is quite rude nowadays which acts as an obstacle for those who are struggling to make their dreams come true, indeed.

  5. I guess that means good news for people who are in the market for luxury homes, which of course I am not and probably never will be. They say it is good to buy in a down market, so I wonder if people are or were (not sure how late I am here) waiting to take advantage.

  6. This can actually be a double edged sword depending on which side you’re on, I guess. My dearest friend has just recently gone through this. He’s a radiation oncologist and needed to move due to a change in practice locations. His home was on the market for a few months and just not selling so he decided to keep it and rent it out for a while. Hired a good property manager and that’s where it stands now.

    One of the problems with this particular situation is that it’s an area where people come and go often… it’s a suburb of Washington, D.C. and between the goverment officials who switch jobs/move on a lot more than normal and the cost of living in general, it’s just a very difficult market for real estate.

    Anyhow, when that problem was solved, the other end of the double edged sword came into play, because as a buyer, it was extremely easy for him to find a perfect home in the new location. 🙂

  7. My husband and I are trying to buy a home that was selling for $1.1 million last summer 2016. We had a hard time getting a loan but finally got one and found that the house was STILL on the market some nine months later. Evidently, several buyers tried and failed to buy the house except for one, who was a flipper and bought the house in January 2017 for $1.1 million and is now selling it for $1.2 million, without having to make any improvements as the house had been completely renovated and modernized (AND has a separate-entry AirBnB space!).

    The property sits on 1.25 acres and sits on top of a small mountain with killer views. I told my husband I really want this house!!

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