The shifting lap of luxury

While home prices around the country have gone up, there’s been an even bigger spike in the luxury market. We are seeing some truly eye-popping numbers.

Our third story has more of those massive numbers. It shows us where the biggest spikes are happening, and what these trends say about luxury buyers and their current preferences.

Plus, in today’s Foundation Plans, we have three key reasons why agents will be needed in our business, no matter what changes are ahead.

Now, on with today’s Blueprint!

– James and David

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Home prices hit all-time high in April

The median U.S. home sale price rose 6.2% year over year in April to $433,558, the highest level on record. That’s according to Redfin’s latest market update. Here are other key numbers from April:

• Home sales were up 0.2% month-over-month on a seasonally adjusted basis, but were down 1.4% year-over-year

• Active listings were up 0.3% month-over-month and up 7.5% year-over-year on a seasonally adjusted basis, rising to the highest level since December 2020.

• 17.6% of home sellers are cutting their asking prices, up 5.6% from last year, the biggest annual jump in over a year.

• Home sales rose the most in San Jose (38.2%), San Francisco (30.4%), and Stockton, CA (23.2%) and fell the most in Fresno, CA (-3.5%), Jacksonville, FL (-3%) and Albany, NY (-2.6%).  

Our take

The basic takeaway here: it’s still a seller’s market. So far, home sale prices are defying expectations from the start of the year. Meanwhile, active listings are still historically very low and well below pre-pandemic norms. Although buyers have relatively more options than last year, and sellers in some markets are cutting prices, the advantage is still on the seller’s side.

Mortgage rate forecasts raise projections

Fannie Mae, NAR, and Wells Fargo have revised their forecasts for mortgage rates for the remainder of 2024, and they all raised their initial projections since the start of the year.

• Fannie Mae: 5.9% —> 6.4%

• NAR: 6.3% —> 6.5%

• Wells Fargo: 6.05% —> 6.5%

These updates arise from the slow pace of inflation decline. Consequently, the Federal Reserve continues its stringent monetary policy until further data shows consistent signs of easing prices. This likely means mortgage rates will stay elevated for longer, and that rates will remain relatively high even if the Fed reduces the benchmark interest rate.

The market is now pricing in roughly a 50% chance that the Fed will cut rates by 25 basis points for the first time this year in September, according to the CME FedWatch Tool.

Our take

Our avid readers will know we always take projections and forecasts with a grain of salt. They are merely a best guess at things to come. We think projections like these help us manage the expectations of our clients, our fellow agents, and ourselves. Whether your clients interpret a 6.5% mortgage rate as a bargain, as exorbitant, or something in between will depend on the expectations they bring to the table. The better you manage expectations, the more persuasive an agent you will be.  

Where luxury home prices are spiking

Over the past four years, median luxury home prices have risen 47% from around $1.5 million to about $2.2 million, while the median U.S. home list price rose 34% from about $320,000 to about $430,000. That’s from Realtor.com’s study of the most expensive 5% of all home listings from April 2020 to April 2024.

Here are the cities where luxury home prices have spiked the most:

1. West Palm Beach, FL – 171%

2. Savannah, GA – 137%

3. Lake Havasu City, AZ – 111%

4. Reno, NV – 101%

5. East Hampton, NY – 94%

6. Park City, UT – 86%

7. Raleigh, NC – 78%

8. Sevierville, TN – 78%

9. Midland, TX – 77%

10. Toms River, NJ – 72%

Our take

There are a few interesting takeaways here: a) luxury prices spiked in sunny, warm climates b) even as some markets have seen luxury prices stabilize, these cities continue to attract affluent buyers c) luxury demand is moving south d) since this list only focuses on spikes, it does not include well-established luxury markets such as Malibu and Medina. Those markets are doing just fine, as we’ve discussed.

Schematics

The news that just missed the cut

• This home upgrade has skyrocketed in interest 

• How home affordability differs among red, blue, and swing states

• Take these steps to ensure a successful buyer-showing

• Donald R. Horton, founder of the nation’s largest homebuilder, dies at 74

• These home remodeling projects offer the highest return on investment in history

Foundation Plans

Advice from James and David to win the day

Given all the big real estate news this year, many people are questioning whether agents are even needed at all in today’s market. We think the question itself is based on very false and fundamentally confused premises. Today, we’d like to lay out several reasons why we think agents will be very much in demand in our new era. 

Network and Resources – Nearly 90% of sellers and buyers don’t understand everything involved in home sales. They don’t know how and when to involve home inspectors, marketing professionals, stagers, title reps, title attorneys, relevant lenders, down payment assistance programs, handymen, and the bevy of other resources they will need to get a deal done. Top agents have a bundle of resources they bring to the table. 

Knowledge and experience – Those who try to sell their homes on their own soon discover that it isn’t easy at all. Most people want to partner with someone who they trust. Survey after survey indicates that most people want an agent who handles the process for them. They are willing to pay for the help, especially if it will yield a return on their investment. Show potential clients how you can make the process easier for them.

Negotiating skills and pricing expertise – Agents can analyze how a particular home is priced currently but also offer guidance on where they think prices will be headed. This kind of knowledge isn’t easily acquired. When you meet with potential clients, demonstrate this expertise. It’s literally how you can demonstrate value.

We genuinely believe that agents can thrive in the new era of real estate. However, agents will need to communicate the value they bring to the table. To learn how to do that effectively, start here.

To learn more about Estate Media, visit their website.

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

To be an effective agent, you have to manage your time. That means learning how to say no to anything that distracts you from performing the core functions that advance your goals. This includes even “good” things. If they take time away from achieving your goals, either delegate them to others or say no.

That’s a wrap on this edition of The Blueprint. Thanks for reading, and we’ll see you back here on Friday!

– James and David