Sales of $1 million plus homes back to 2007 levels

A new analysis shows that the upper end of the real estate market, at least homes over $1 million, has recovered:

Home sales from Los Angeles to Charleston, South Carolina that are priced at more than $1 million are gaining at triple the pace of the broader market, according to real estate research firm DataQuick Inc. Wealthy purchasers, helped by gains in equities, are diving into real estate a year after a recovery began in the housing market when less-well-heeled buyers rushed to take advantage of record-low interest rates, said Susan Wachter, a professor of real estate and finance at the University of Pennsylvania’s Wharton School…

Sales of homes priced at more than $1 million jumped an average 37 percent in 2013’s first half from a year earlier to the highest level since 2007, according to DataQuick. Transactions priced at less than $1 million rose 11 percent in the same period to the highest since 2009, data from the National Association of Realtors show.

The $1-million-and-up end of the market usually trails cycles of the broader market because real estate purchases by wealthier buyers “tend to be discretionary spending” that can wait until economic conditions are right, Wachter said. Those homeowners usually can hang onto properties during tough times, and their houses are big enough for them to stay even if their families expand…

Homes priced at more than $1 million lost about 46 percent of their value during the housing crash, according to a Bloomberg survey of sales in the top four cities, based on valuation data from Zillow.com. Since then, their value has more than doubled. Home prices in the broader market fell to $154,600 in early 2012 and increased to $214,200 in June, according to the Realtor’s group.

At least one part of the market is doing well (the lower end is not doing as well): some expect homeownership rates in the US are expected to fall into next year.

I wonder if another reason these homes are selling at such a rate includes a perception that real estate is a good investment at this point, particularly compared to other investment opportunities that are more uncertain. This would assume that home prices would rise consistently but it would also help explain why so many investors are purchasing real estate.

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