Tag Archives: real estate market

How big is the market for properties over $100 million?

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Properties costing over $100 million filled all the top spots in a recent analysis of the most expensive property sales in 2025 in the United States. How many people are realistically in this market? This passage provides some hints:

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Affluent buyers are scooping up luxury real estate as a way to diversify their portfolios, store wealth or as a hedge against inflation. “People feel the stock market is trading high, so they are investing in hard assets,” said Ryan Serhant, of real-estate brokerage Serhant. “Luxury real-estate is recession resistant.”…

Throughout the U.S., agents said domestic buyers are dominating the luxury market. In Palm Beach and Miami, deep-pocketed buyers are chasing the same properties, resulting in off-market deals being struck for astronomical sums. “It isn’t as much comp driven as it is, ‘This is what we’re willing to pay,’” said Miami agent Danny Hertzberg of the Jills Zeder Group at Coldwell Banker Realty.

I suspect that more than just listing the most expensive properties sold – is more expensive better or more noteworthy? – it would be interesting to know about how this exclusive market works. It sounds like the market involves wealthy people from the United States who are looking to avoid the swings of the stock market. They want an investment with a good return and assume real estate will provide this. They need to have the funds to make such a purpose. In the meantime, they might get some use out of the property.

Some searching suggests there are around 1,000 billionaires living in the United States. The Forbes 400 for 2025 says all the people on the list have a net worth of over $3.8 billion. It would be interesting to see how many of those on this list own properties worth more than $100 million or even $50 million. Do see they see as expensive real estate as a good deal?

And then there is the matter of how such properties are known. I imagine they are not on regular listing services. Either online or in real estate magazines, I do not remember seeings listings over $10 or so million. These tend to be expensive waterside properties or big city residences. How big is the network of agents who work with such properties? How do they contact prospective buyers or let them know that an expensive property is available? What kinds of fees are generated by agents, brokers, and other actors involved with real estate when one of these expensive properties is sold? Are there showings of these properties and what are these like?

Since these sales are still rare, it might not be hard to identify them and try to track down more information. On the other hand, operating at this level likely involves lots of behind the scenes activity and quiet operators and methods.

American mobility and the Americans locked into their low mortgage rates

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Among other real estate concerns in the United States, here is one unusual feature of the current market:

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Yet despite a market full of reluctant buyers, sellers are not under pressure to drop their prices. Almost 60 percent of households have an interest rate below 4 percent, according to a study published in the Journal of Finance; selling would mean trading that low rate for a much higher one on a new purchase. Not since the 1980s, when borrowing rates soared into the double digits, have so many Americans been locked into their mortgages, said Lu Liu, an assistant professor of finance at the Wharton School at the University of Pennsylvania, and an author of the study, describing the conditions as “unprecedented.”

The implication of the argument above is that people do not want to leave a low mortgage rate for a higher mortgage rate. But this is not necessarily a new situation; mortgages rates go through cycles. Is this just about mortgage rates or do low mortgage rates make it easier to not move due to other reasons? American geographic mobility is low.

Presumably, many people have a price or conditions under which they would move even with a low mortgage. What exactly would it take: a new job that offers 10% or more compensation? An unbelievable housing deal elsewhere? A perception that where they are does not have a good future?

Imagine this scenario: mortgage rates slowly decrease in the next year or two, getting back to 3-5%. Would this significantly increase mobility? It could put more homes on the market as homeowners might be more willing to see what they could get. But would this significantly change the calculus of moving in the first place?

My suspicion is that this is a bigger issue that just mortgage rates. With higher rates, some people will still move: those with resources and opportunities they feel they cannot pass up. With lower rates, more people will feel they could move. But geographic mobility is already low compared to the postwar years and it could take a lot more than mortgages to change this.

Rockford as the top real estate market in the US

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One source suggests affordable housing plus job opportunities means Rockford has a lively real estate market:

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ROCKFORD — The city is now home to the top real estate market in the country, according to a new ranking released Thursday by the Wall Street Journal and Realtor.com.

The housing market ranking evaluates the real estate market and economic health of the 200 most populous metro areas in the country. The Rockford metro area was the only one in Illinois to crack the Top 50. Peoria landed at 59.

“It’s a great validation of what we’re seeing locally in the market with our year-over-year price increases, hitting our record highs,” said Conor Brown, CEO of the NorthWest Illinois Alliance of Realtors. “We know we’re such an affordable market, but we have seen an influx of people from Chicagoland and elsewhere coming into the market being so impressed with how much they can buy, and they’re really helping drive the prices.”

The new report is a major turnaround from one released by the Wall Street Journal a decade ago, when Rockford was declared the underwater mortgage capital of America. At that time, about 32% of the metro area’s homes were valued at less than the money owed on the mortgage.

Now, the city is being praised for an affordable housing stock and growing health care, aerospace and logistics industries.

Several things strike me as interesting in this ranking and reaction:

  1. An important part of the story is that the city/real estate market was not doing well not too long ago. This is not just about things improving; it is also about coming back from challenges.
  2. Increasing housing prices is seen as a good sign. Do these rising prices also make it more difficult for some to find housing?
  3. Missing from this story is any mention of the population. Rockford’s population is roughly flat over the last two decades. Is Rockford growing? Or growing in certain areas (like particular sectors or neighborhoods or communities)?
  4. Proximity to Chicago appears to be a positive factor. Do these people commute to the Chicago region or need to be in the office infrequently? Is Rockford seeing an influx of remote workers?
  5. How long can such a streak continue? Rockford can have the hottest market at the moment but it could be surpassed by other places or the local market could cool off. What does the narrative become then?

Foreign investment in Chicago real estate reaches record high

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Chicago was an appealing city for international real estate investors in 2015:

Chicago’s continuing rise to prominence on the world stage was further boosted by the latest figures indicating that 2015 will not only be a banner year for new construction and hotel occupancy, but a record-breaking period for foreign real estate investment as well. 2015 saw $3.27 billion of new overseas capital flow into the Windy City, according to recently published report by Crain’s Chicago Business, a figure that shatters the previous record of $2.18 billion set in 2013. Citing data from New York-based Real Capital Analytics, Crain’s reports that foreign buyers accounted for roughly 16 percent of Chicago’s total $20.2 billion of real estate sales this year. Chicago now ranks as the fourth largest market in the nation for foreign investment — up from last year’s eighth place — and trails behind only New York, Los Angeles, and Washington D.C.

These positive figures are attributed to several factors. Oversaturation of traditionally stronger coastal markets has driven up prices to the point where commercial investors are often finding more lucrative opportunities in Chicago. Chicago is seen as a somewhat riskier choice for firms taking on commercial properties due to the relative ease at which new buildings can be added and tenants relocated — similar to CNA’s announcement earlier this week — but foreign buyers willing to take on this risk have enjoyed greater returns. In 2015, investment in Chicago saw first-year rates of return (“capitalization rates” for you finance-minded folks) averaging 5.1 percent, outperforming the 4.1 and 4.7 percent yearly yields of Manhattan and San Francisco, respectively.

While this sounds like good news (more capital flowing into the city and the potential for these investments to lead to other deals), I could imagine two downsides:

  1. This recently happened in Chicago, but it wasn’t the first city of choice for international investors. It is suggested here that investors are now turning to Chicago because the more desirable markets – NYC, LA – are oversaturated. So, this may confirm that Chicago is still the third city – or maybe even the fourth city if you include Washington, D.C. This may just feed the anxiety some in Chicago have of their place on the world stage.
  2. Even as investment from outsiders is viewed as good, would investment from foreigners be viewed as positive by all in Chicago? Americans occasionally have periods of fear that people from other countries are taking over and Chicago is a more parochial/less cosmopolitan market than some on the coasts. Foreign investment may be good but do Chicagoans like the idea that others are benefiting greatly off the Midwest?

How big investors buying up properties may be limiting cheaper housing

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The economic crisis opened up space for bigger housing investors yet here is one argument about how their actions may be limiting the supply of cheaper housing:

A recent article in the Wall Street Journal highlighted how some investors are using algorithms to quickly parse housing data and formulate bids on undervalued properties, site unseen. While doing so is a cool technological feat, it can spell trouble for normal people trying to navigate the often complex home-buying process in order to make offers on similar homes. And algorithms aren’t the only benefit that more sophisticated investors have. “Investors are winning over the first-time buyers in some bidding processes because investors are all cash,” says Lawrence Yun, a chief economist at the National Association of Realtors. For a seller that means a smoother deal: no waiting around on financing, loan approvals or other inconveniences that traditional buyers bring to the table.

For their part, some investors contend that the homes they purchase don’t put them in direct competition with first-time buyers. Invitation Homes, an investing and leasing company owned by Blackstone says that they typically funnel another 10 to 12 percent of the purchase price into renovations in order to make a property market-ready—an investment that most first-time home buyers wouldn’t be able to afford. Many investors also contend that compared to the number of homes that are bought and sold nationwide, their activity is just a drop in the bucket.

When looking at the big picture, that’s true. Nationwide, large institutional investors made up only 4.3 percent of the single-family home purchases in the market during 2014, according to RealtyTrac a real-estate data firm. And overall investment activity is dwindling as home values return to normal and there are fewer deals to be had. Dallas Tanner, the chief investment officer at Invitation Homes says that the group currently buys about $25 to $30 million a week of single-family properties, that’s down from their 2012-2013 peak when the group spent upward of $160 million each week.

But like all things in real estate, it’s also a matter of location. Lots of investor activity is concentrated in markets where homes are still available at reasonable enough prices that purchasers can turn a profit. According to a February 2015 report from RealtyTrac, “There were 35 zip codes nationwide where at least 50 single-family homes were purchased by institutional investors in the fourth quarter, with institutional investor purchases representing from 17 percent to 74 percent of all single-family home sales in those zip codes.” Places like: Atlanta, Phoenix, Las Vegas, and Memphis. Those are also places that first-time buyers have the best bet of stretching their dollar far enough to purchase a home. Herbert, of the JCHS, says that that in some places, developers may in fact be pushing out normal home buyers, “For certain property segments, they may be creating competition.”

Even as the higher end of the housing market does well (see recent evidence here, here, and here), any impediment on the lower end of the market isn’t helping these days. With developers not showing much interest in building starter homes, these institutional investors may be grabbing up homes that those who want to join the housing market – whether recent college graduates or those working lower-income jobs – would need to get their foot in the door.

So if Americans – from politicians to average citizens – want to push homeownership, are these institutional investors good for this in the long run?