5 Reasons Why Luxury Homebuyers Took a Time Out Last Year

This past year of 2016 was the first time in history that luxury home prices went down rather than up in a dramatic way. This was independent of downward economic pressure. This was a reaction to the dwindling number of buyers on the market, in an effort to get them to see the price as more attractive and start purchasing homes again. Here’ five of the many reasons that there were less buyers in the market last year:

 

Luxflation

Luxflation can be described as the continual inflation of the luxury value of goods. Research states that the sales of luxury goods rose 11 percent from 2010 to 2012 and seven percent in 2013, but the last several years have experienced more of a plateau of that rapid growth. The luxflation started to scare buyers into hibernation until prices inevitably lowered.

 

Wait- and- see approach

When buyers have the financial ability to spend more on a house, they see no issue in applying caution at the tail end of a rapidly escalating cycle. A wait-and-see approach is safe and comfortable.

 

Nationalism scared many foreign buyers

The 2016’s global political uncertainty was very discouraging. This tense political environment frightened foreign buyers from moving to the U.S. Combined with a very strong dollar, this trend removed a small but important group of buyers in the real estate market.

 

Quantity exceeding demand for luxury houses

As the number of wealthy Americans continues to grow, the volume of luxury homes built is still exceeding the demand. In other words, as homes are being built rapidly, we are running out of people who can afford to buy them.

 

As price is increasing, quality is staying the same.

Well-off buyers most likely have some inherent background knowledge that allowed them to accumulate their wealth. They realize that the quality of these expensive homes is not matching up with the price tag. This causes buyers to get frustrated and cautious in the pursuit of a new home.

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