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Would You Call This An Explosion Of Luxury Homes For Sale?

Explosion Of Luxury Homes For Sale In AmericaThere is a ticking time bomb hidden in the luxury homes market that I don't see the mainstream media addressing.

And this is no hidden bomb, it is glaringly obvious and sitting right out in the open.

The question is not "will it blow up," the simple question is "what will the fallout be when it does explode?"

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Loving Our McMansions

This is not a Tallahassee problem, this is a US housing market issue that will be felt in most areas. Only the highest-growth, strongest economic areas of our Country will be shielded from the blast when it occurs.

We have built too many McMansions; too many luxury homes for sale for an upper 5% of the market that is going to change dramatically when the trigger point is reached. As with any time bomb, you have to wonder just what is needed to make it explode.

luxury homes for sale near me

The real estate graph above shows home sales in Tallahassee priced above $400,000. Five different price ranges have been displayed, showing the phenomenal growth of luxury homes in Tallahassee.

For our "out of town" readers who think $400K is too low to be called a luxury home, I will define "luxury" as the top 10% of the market. That means it could be far higher or far lower in your market area.

Interest Rates Carry Luxury Homes Market

The high end homes market has changed a lot in the past 20 years. Its growth has been so significant that it warrants further study. Why?

Because we are in a market that has been buoyed by low interest rates for more than five years, and its impact on the top 10% of homes is staggering.

If you were told the graph above measured the number of known outbreaks of a deadly virus, you would say that we have a full-fledged epidemic on our hands. Eight total sales in 1991 grew to 469 by 2006, which is a growth of 5763%!

Has our economy growth six thousand percent? No!

Has our population growth six thousand percent? No!

So then why has the luxury homes market grown by nearly that much?

The simple answer is low mortgage interest rate. The following graph shows how the Federal Government has manipulated interest rates to historically low levels in order to "fix" the housing market. The resulting mix of homes is not going to be fun to deal with when market rates return.

luxury houses for sale

The graph above shows that current interest rates are about 1/2 the "normal" rate measured over the past 40+ years.

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The Ticking You Hear

So what is going to make this time bomb explode? Rising mortgage interest rates.

When rates return to normal (or heaven forbid ... well above normal), the buyer pool for our largest homes will shrink to a level far smaller than the inventory of these homes in Tallahassee.

It will take many years of population growth to consume the plethora of McMansions that were built to satisfy the "low interest rate" demand that has existed for more than 10 years, but sustained over the past five years with historically low rates.

If you own a luxury home in Tallahassee and are thinking about down-sizing, today is a good day to start.

Interest rates are still low, the buyer pool is still fairly large and stable, and there is a respectable amount of liquidity to forecast a home sale date.

If you would like to explore your options, just drop me a note and we can schedule a time to help you review your options and show you the real numbers for supply and demand for homes similar to your own.

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2066 Thomasville Rd
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