NY Times: Unsold $100 Million Homes 'Ultimate Bubble Signal'
Sunday, 29 May 2016 02:31 PM
A global pileup of homes listed for $100 million or more is "the ultimate bubble signal" and a warning of a looming housing crisis, the New York Times reported.
“When you have a record number of homes for sale at a price point of $100 million or more, that tells you these homes aren’t selling,” Jonathan Miller, president of Miller Samuel Inc., a real estate appraisal and research firm, told the Times. “It’s not as deep a market as some might hope.”
A record 27 properties with nine-figure prices are officially for sale, according to Christie’s International Real Estate, up from 19 last year and about a dozen in 2014.
Brokers told the Times that the actual number of nine-figure listings worldwide could easily top 40 or 50 if you add in private sellers.
"The rise in nine-figure real estate listings comes just as sales of luxury real estate have cooled. Hyperprice homes are often built and sold by speculative investors," the Times explained. "The last time a sudden pop in $100 million-plus listings occurred was in 2007 and 2008, just before the housing crash. In 2008, at least four homes in the world listed for nine figures."
Actual sales of nine-figure homes are rare, even in good times, the Times said. Between 2011 and 2016, only 15 homes in the world have sold for $100 million or more, according to Christies, and five of those were in 2014. Last year, only two homes in the world sold for over $100 million, according to Christie’s.
“The era of aspirational pricing is over, and I’m not sure it ever really worked,” Miller said. “These prices get headlines, but the properties just don’t sell.”
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Dan Conn, chief executive of Christie’s International Real Estate, doesn't fear a bubble. “It’s a sign of growing wealth in the world and the quality of some of the new construction,” he said. “It’s just a new world in terms of what people are building and offering for sale.”
However, the Fiscal Times warns that despite recent solid home-sales data, the housing market is far from being on stable ground.
"Though new homes sales rose from 2013-2015, sales of homes below $200,000 keep falling. And homes at the higher end, particularly those selling for $400,000 and over, are rising. According to Bill McBride of Calculated Risk, 30 percent of new homes sold in 2002 were under $150,000. In April, that number was 2 percent," the Fiscal Times reported.
"It’s clear that builders are making more luxurious homes rather than trying to attract entry-level buyers," the Fiscal Times reported.
"Home values remain one of the few ways for lower-income families to gain wealth in America. If they don’t want or don’t feel they can get a mortgage, we have to find other wealth-building strategies," the Fiscal Times reported.
"The continuing trend toward the luxury market could create a price spiral that eats away at affordability, especially if mortgage interest rates rise," the Fiscal Times said. "The economy won’t expand as much if residential housing is a mere playground for the rich."
(Newsmax wire services contributed to this report).
Read more: NY Times: Unsold $100 Million Homes 'Ultimate Bubble Signal'
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