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      2020 Luxury Market Forecast

      2020 Luxury Market Forecast | MyKCM

      By the end of last year, many homeowners found themselves with more equity than they realized, and at the same time, their wages were increasing. When those two factors unite, it can spark homeowners to think about making a move to a larger or more expensive home in the luxury space. That said, now is a perfect opportunity to take a look at the forecast for the 2020 luxury market.

      Three Things to Think About in the 2020 Luxury Housing Market

      1. Prices

      The U.S. economy is strong today, with buying opportunities throughout the luxury end of the market. Thomas Veraguth, Strategist at UBS Global Wealth Management, says in Barrons.com,

      “There’s a good link between luxury real estate prices and [economic] growth.”

      Available inventory is a key element that can impact home prices. In the upper range, the inventory is greater in comparison to the entry-level market, making moving up to a luxury home a growing reality for many buyers right now.

      2. Activity in the Market

      With more buying opportunities at the higher end, we should start to see an increase in activity. The same article states,

      “Affluent homebuyers will start to come out of the woodwork as they find rising luxury rents less appealing and sellers get even more negotiable on price.”

      Buyers looking in the luxury market are taking the opportunity to negotiate on price in a segment where there are more choices, too. According to the Luxury Market Report, homes sold for an average of 96.94% of the list price in December.

      Buyers are also getting more for their money with greater purchasing power due to the current low-interest rates.

      3. Buyers Are Coming Back

      Keep in mind, buyers are often sellers too, especially those looking to move up. Homeowners with an entry-level home can take advantage of the inventory shortage at the lower end of the market, thus driving higher sales prices for their current homes. Combined with growing equity in the homes they’re listing, it’s a great time for those who are ready to make a luxury move.

      The extra equity and greater purchasing power are bringing many buyers back to the market. The same article mentioned that,

      “We’ve already seen buyers who’ve been on the sidelines for two years tread back into the market.”

      Bottom Line

      If you’re considering entering the luxury market, 2020 is shaping up to be a great year for those who are ready to make that move. Let’s get together to set your real estate plan for the year.

       

      Compass Contemplations for Thursday

      Good morning,

      DID YOU KNOW?  Mortgage application volume decreased 9.2% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. The week’s results also include an adjustment for the Thanksgiving holiday. Refinance weakness caused the overall drop. Those applications fell 16% for the week but were 61% higher than the same week a year ago. (CNBC)

       

      DID YOU KNOW?  In 2000, just before the Bush tax cuts and a recession, U.S. governments collected 28.3% of GDP in taxes. Today that figure has dropped to 24.3% of GDP in 2018, the 4th lowest in the OECD and down from 26.8% a year earlier and 25.9% in 2016. (WSJ)


      DID YOU KNOW?  Realtor.com predicts sales of existing homes will fall 1.8% compared with 2019. Home prices will flatten nationally, increasing just 0.8% annually, but in 25% of the 100 largest metropolitan markets, prices will fall. These include Chicago, Dallas, Las Vegas, Miami, St. Louis, Detroit, and San Francisco. Millennials will dominate the housing market, accounting for 50% of all mortgages by spring, according to the forecast. Just short of 5 million millennials will turn 30, which is when many people buy their first home, and the oldest will turn 39.

      DID YOU KNOW? According to its 2019 U.S. Vacation Home Counties Report, between 2013 to 2018, the median sales price in vacation home counties increased at a slightly higher pace of 36% compared to the pace of increase of all existing and new homes sold, at 31%. (NAR)

      DID YOU KNOW? National home prices increased 3.5% year over year in October 2019 and are forecast to increase by 5.4% from October 2019 to October 2020. The October 2019 HPI gain was down from the October 2018 gain of 5.2% and was up a bit from the September 2019 gain of 3.3%.  Home prices have been increasing year over year in a narrow range of 3.2% to 3.5% over the past six months, indicating that the rate of home price growth is leveling off. (CORE LOGIC)

      DID YOU KNOW?  As a percentage of disposable income, we have the lowest debt service to income obligations in 40 years in the USA. (JP MORGAN)
       

      Baby Boomer Billions

      The 74 million US Babyboomers (born 1946-1964) are a hot topic these days, being blamed for many of society's current ills. I won't touch that subject. But I will remind everyone yet again how important this demographic is as it relates to wealth and buying power, and a continued force to be reckoned with in the economy at large. Here are some facts to ponder as so many of us continue to fixate on younger generations when its the baby boomers that are the generation we should never, ever ignore....in fact, they should be an important focus of our marketing!

       

      1)  Almost 20% of Americans over the age of 65 were employed or actively looking for work in 2018: that is up from less than 12% twenty years ago. (The youngest baby boomers, born in 1964, turned or will turn 55 this year.)
      2)  Americans inherited $427 billion in 2016, according to the most recent data available, up 119% from 1989 after adjusting for inflation. Those who have inherited wealth also are older. The average age of recipients over the past 30 years rose from 41 to 51. More than 25% of bequests now go to people who are 61 or older.
      3)  Americans who are younger than 50 held only 16% of investable assets in 2016, a decline from 31% in 1989, according to the Fed's Survey of Consumer Finances. The remainder is held by households 50 and older.
      4) The median household age 65 to 75 in 1989 held eight times more wealth than families headed by 25- to 35-year-olds. 
      5) In 2016 the median baby boomer had close to 13 times more wealth than average millennials. 
      6) During the next 30 years, a staggering $36 trillion is expected to flow from Baby Boomers to Generation X, those born between the early 60's and the late 70's. (Most stats from Bloomberg, thanks to Jaques Cohen)

      This Babyboomer wealth has its upside, besides being a potent home-buying audience. Inheritance will reduce the burden on younger taxpayers to fund Babyboomers' retirement. And younger generations can expect lots of gifting prior to death too, a trend that keeps growing even on a more junior level.

      Compass Contemplations for Wednesday

      DID YOU KNOW? Wall Street is bracing for what seems almost assuredly to be a third interest rate cut in as many meetings of the Federal Reserve this afternoon. (Marketwatch)

       

      DID YOU KNOW? The other night I attended a very civilized agent soiree at a chic listing of Steve Dawson. The guest speaker was Robert Couturier, one of the great interior designers to the super-wealthy. Here were some key takeaways:
      * The very wealthy used to spend MUCH more on their furnishings relative to the cost of the property compared to today.
      * Quality furniture costs have come down sharply, especially with less emphasis on antiques that used to cost a fortune.
      * Interiors are and always have been fashionable.
      * Building dining rooms is an old concept that has come back: in the old grand buildings of Manhattan, most had smaller kitchens and a dining hall. Some had TINY kitchens.
      * People should decorate for themselves, not for visitors: chances are you will never please your visitors! Surround yourself with things you love, that work for you and your lifestyle.
      *Very tall ceilings in small rooms can deliver an effect similar to being stuck in a well.
      * Be aware that when you have a gorgeous view of a large body of water during the day, at night that view could be a sea of black.

      DID YOU KNOW? In 2010, average Chinese workers saved 39 cents of every dollar of income. Today, it is 33 cents. Many young Chinese save nothing at all. Household bank balances have soared more than 1000% since 2000, faster than the nearly 800% expansion in GDP during that period—a wealth accumulation unmatched by any country in modern times. Households will owe 68 cents per dollar of GDP by 2024. U.S. consumer debt is 78 cents per dollar. (WSJ)

      DID YOU KNOW? An estimated 3,788,235 people born in the USA in 2018, a 2% decrease from 2017 and the lowest number of births in any year since 1986, according to a report published by the National Center for Health Statistics. The birthrate among women in their early 20s declined 5% in 2018 and has dropped an average of 4% each year since 2007. It is now 1,728 births per 1,000 women (similar to England, but 15% higher than in Canada). Without immigration, the US population size would be in decline.  (NY TIMES)

      Compass Contemplations for Thursday

      DID YOU KNOW? WeWork occupied more than 7 million square feet as of the end of June, about 73% more than it had a year before, CBRE data show.  Yet it is still a small fraction of the total office space in New York City which is roughly 550 million square feet.  WeWork accounted for 6.8% of Manhattan leasing activity in 2018, and 5.2% so far in 2019. Less demand from WeWork would probably lead to a modest increase in vacancies across the New York office market.


      DID YOU KNOW?  Cities with more than 500,000 people collectively lost almost 27,000 residents age 25 to 39 in 2018, the 4th consecutive year that big cities saw this population of young adults shrinks, yet HALF the number that left in 2017 (54,000).  New York, Chicago, Houston, San Francisco, Las Vegas, Washington and Portland, Ore., were among those that lost large numbers of residents in this age group. Los Angeles, Phoenix, San Antonio, San Diego, Austin, Seattle, Denver and Columbus gained large numbers of this age-group. The majority of people in these age groups who leave cities move to nearby suburbs or the suburbs of other metro areas, and there is absolutely nothing terribly new about this trend! (WSJ)

      DID YOU KNOW? A 2017 study of U.S. mayors that found that only 13% said the housing stock fit the needs of their constituents “very well” or “extremely well,” a sentiment that was true in rich and poor cities alike. (WSJ)

      DID YOU KNOW?  There were 22.8 million people worldwide with fortunes of more than $1m in 2018, an increase of 1.1% over 2017. (WEALTH-X)

      DID YOU KNOW? Retail vacancies in New York City doubled to 11 million square feet between 2007 and 2017. Empty storefronts jumped by nearly 50% to 5.8% from 4% during that same period. Rates are the highest in Staten Island at 11%. On average rents rose by 22% and the Upper West Side saw the highest hike at 68%.  (Good Day New York)

      DID YOU KNOW? Lower demand for US lumber due to 25% China tariffs has pushed prices down 20% in August from a year earlier, one rare upside to the US-CHINA trade war. Could this fuel lower building costs?

       

      Compass Contemplations for Sunday

       

      DID YOU KNOW? According to a 2018 report from the Pew Research Center, 19% of American adults live in “upper-income households.” The median income of that group was $187,872 in 2016. The share of U.S. adults considered upper-class varies depending on where you live, Pew noted: In affluent metropolitan areas, it’s much higher than 19%. The metropolitan areas with the largest shares of adults in upper-income households are mostly in the coastal areas of the Northeast and California and tend to be in high-tech corridors, such as Boston-Cambridge-Newton, MA-NH, or in financial and commercial centers, such as Hartford-West Hartford-East Hartford, CT. The metro with the highest share was San Jose-Sunnyvale-Santa Clara, CA, where 32% of adults were considered upper-income. (CNBC)

       

      "Narratives that can periodically surge into epidemics are capable of changing the economy’s direction or of turning small booms and recessions into big ones. The probability that a recession will come soon — or be severe when it does — depends in part on the state of ever-changing popular narratives about the economy. These are stories that provide a framework for piecing together the seemingly random bits of information that one picks up from friends, the news or social media." - Robert Schiller, NYT 

       

      DID YOU KNOW? Here are some interesting stats from the NAPLES, Florida area via NABOR (Naples Area Board of Realtors) (Thanks to Yasmin Saad).

      * Collier County Florida 2017 Population: 372,880

      * # of licensed brokers/agents who are members:  Brokers: 689, Agents: 6,375

      * 96% of users logged in at least once to the SunshineMLS in the last 12 months.

      * # of homes sold in the last 12 months (buyer or seller side):  6,574 Single Family homes closed had a Naples agent on the Listing Side

      914 Land sales closed that had a Naples agent on the Listing Side

      * The total number of sales in the last 12 months: 14,130 closed.

      Compass Contemplations for Wednesday

      WELCOME, WELCOME to Alain Pinel Realtors who over the past 30 years have become leaders in the Bay Area, known for their luxury offering and strong culture. 

      DID YOU KNOW? More than 50% of the executives recently surveyed by KPMG said Silicon Valley will cease to dominate global tech innovation within the next 4 years, as New York, Boston, Beijing, London and other cities continue their evolution into tech innovation powerhouses, citing factors that include an expansion of tech investing in cities and regions outside of San Jose, Palo Alto and Menlo Park, Calif. Their top pick for the next leading source of technology innovation was New York—up from No. 3 in 2018—followed by Beijing, Tokyo and London. Other U.S. cities that ranked in the top 10 were Boston and Austin, Texas. Washington, D.C., placed 13th. 23% named the U.S. as having the biggest global impact on technology, down from 34% in a similar survey last year. (WSJ)

       

      DID YOU KNOW?  Speak to any developer or builder and they will let you know how their costs have risen in the past 12 months: American consumers have been saddled with $69 billion in added costs because of the tariffs the U.S. imposed in 2018, including on $250 billion on Chinese imports as well as levies on steel and aluminum, according to a study released by a quartet of economists working on a National Science Foundation grant. (WSJ)

       

      DID YOU KNOW? About 63% of the world’s wealthiest said they grew richer in 2018, thanks in part to stock market gains and global economic growth. These individuals also expect their wealth to increase over the next year. Confidence was highest in the U.S., where 80% of individuals worth $30 million and more expect to be better off over the next year. Over 47,000 people in the USA are worth $30 million plus. (WSJ) 

       

      DID YOU KNOW?  I have personally never witnessed more creative photography angles than those being used to photograph 220 Central Park South - the uber-tower that houses the USA's most expensive penthouse sale:  all are either blocking out - or photo-shopping out - it's next door neighbor that looms several hundred feet taller.....

      Upgrade Utopia...A Great Time to Act!

       

      While many buyers in the luxury real estate markets can freeze into a 'wait-and-see' mode when pricing and sales volume drop, those willing to upgrade could experience the ultimate buying opportunity. Here is why:


      1.  Imagine you live in a $4 million home, and the market is down 20%. You'd have to sell that home for around $3,2 million, a loss of around $800,000.  Assuming you are buying a $10 million home that is also down 20%, that home should cost $2 million less, a substantive savings of around $1.2 million net.

      2.  Assume you live in a $4 million home and the markets rise 20% allowing you to sell your home for $4.8 million. Unfortunately, if the market is up 20% across the board, that $10 million home you wish to upgrade to will now cost $12 million.....it will cost you $1.2 million MORE.

      Applying BALANCE SHEET MENTALITY to your real estate needs is always wisest. Your lifetime real estate is mostly not about a single transaction. While we await election results, equity market and rising interest rates clarification, trade-war results, price-cuts, equity market roller-coasters, extreme media sensationalism 24-7 and the true results of the tax bill, opportunity always exists. Always!

       

      Don't Wait to Sell Your House! Buyers Are Out Now

      Dont Wait to Sell Your House! Buyers Are Out Now | MyKCM

      Recently released data from the National Association of Realtors (NAR) suggests that a now is a great time to sell your home. The concept of ‘supply & demand’ reveals that the best price for an item is realized when the supply of that item is low and the demand for that item is high.

      Let’s see how this applies to the current residential real estate market.

      SUPPLY

      It is no secret that the supply of homes for sale has been far below the number needed to sustain a normal market for over a year at this point. A normal market requires six months of housing inventory to meet the demand. The latest report from NAR revealed that there is currently only a 3.6-month supply of houses on the market.

      Supply is currently very low!

       

      DEMAND

      A report that was just released tells us that demand is very strong. The most recent Foot Traffic Report (which sheds light on the number of buyers who are actually out looking at homes) disclosed that “foot traffic grew 10.5 points to 52.4 in March as the new season approaches.”

      Demand is currently very high!

       

      Bottom Line

      Waiting to sell will only increase the competition between you and all of the other sellers putting their houses on the market later this summer. If you are debating whether or not to list your home, let’s get together to discuss the conditions in our market.

      Moving Up to Your Dream Home? Don't Wait!

      Moving Up to Your Dream Home? Dont Wait! | MyKCM

      Mortgage interest rates have risen by more than half of a point since the beginning of the year, and many assume that if mortgage rates rise, home values will fall. History, however, has shown this not to be true.

      Where are home values today compared to the beginning of the year?

      While rates have been rising, so have home values. Here are the most recent monthly price increases reported in the Home Price Insights Report from CoreLogic:

      • January: Prices were up 0.5% over the month before.
      • February: Prices were up 1% over the month before.
      • March: Prices were up 1.4% over the month before.

      Not only did prices continue to appreciate, the level of appreciation accelerated over the first quarter. CoreLogic believes that home prices will increase by 5.2% over the next twelve months.

      How can prices rise while mortgage rates increase?

      Freddie Mac explained in a recent Insight Report:

      “In the current housing market, the driving force behind the increase in prices is a low supply of both new and existing homes combined with historically low rates. As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”

      Bottom Line

      If you are thinking about moving up to your dream home, waiting until later this year and hoping for prices to fall may not be a good strategy.

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