Luxury Home Sales & the Impact of the Stock Market

We’ve been thinking about how the stock market is affected by luxury home sales.  It’s interesting to read this article from CoreLogic.  What are your thoughts?

In a recent post, CoreLogic looked at the correlation between the impact on the stock market and the luxury home sales of upper-end properties ($1 Million+ sales price).

The report revealed:

 “The powerful ‘wealth effects’ generated by the rapid rise in equities between 2009 and 2015 drove a large rise in the luxury home sales that sold for $1 million or more.

Historically, luxury home sales priced $1 million or more averaged 1.2 percent of all home sales. The spread between high-end sales and equities widened during the housing bubble but then moved more closely in unison. By the time the equity markets had peaked in May 2015, the $1 million or more share of the market had nearly doubled, averaging 2.2 percent for the remainder of the year.”

This makes sense. As people see their wealth increasing, they feel more confident in their purchasing power. And, of course, that would also impact their decisions regarding their involvement in the real estate. The stock market dipped earlier this year and there was quite a bit of anecdotal evidence that the luxury home upper-end market was beginning to soften.

As we can see in the chart below, the market is again flourishing. That may rejuvenate the luxury home sales market as we move through the rest of the year.

As we proceed through 2016 and enter 2017, the strength of the stock market will be a key factor in the strength of the luxury home sales market. If the stock market falters, look for high-end luxury home sales to slow. If the market advances, as it has shown signs of doing most recently, the luxury home high-end market will advance.

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