Homebuyers with million-dollar budgets can’t find homes to buy where they want to live. They’re pushing into surrounding towns with cheaper options and further squeezing affordability.
Wealthy Young Buyers in Race to Buy in Suburbs
Young homebuyers with million-dollar budgets are racing to buy homes in hotspot suburbs. But guess what? Entry-level mansions are almost gone.
(Check out another one of our posts this week titled “Housing Inventory Metrics 1/22” and you’ll see that in January 2022, there were approximately one million fewer listings than there were in July 2016.)
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From Wellesley and Newton outside of Boston to Rye outside of Manhattan to Austin and Boise, for-sale houses are few and far between. Across the country’s spectrum of upscale suburbs, buyers are racing to lock in purchases as mortgage rates rise. This race to buy is intensifying already fierce demand and driving up +18% y/y higher prices everywhere in the country. In places like Austin, prices increased +40% y/y!
Shortage of Luxury Listings Pushing Up Prices
When young couples with dual incomes rush to buy houses with kids’ rooms and “his” and “her home” offices in elite suburbs can’t find those houses to buy, they “spill over” to surrounding towns (such as South Natick next to Wellesley) with relatively cheaper priced houses.
The problem? According to Chris Herbert, managing director for Harvard University’s Joint Center for Housing Studies, “The entry price for these towns has already gone sky high. It ends up pushing prices up across the board.”
High-End Inventory Plunged in 2021
Inventory nationally dropped -14% y/y in Q4 2021, according to Redfin. Zillowi ndicated that the number of cities where million-dollar homes are the norm jumped by the most ever (+146 cities) during 2021. Both of these outfits said that as of Q4 2021, there were 1.9 months of supply for luxury single-family homes for sale. In Q4 2019, there were 3.3 months of supply.
Outside Boston, high-end inventory plunged nearly -40% y/y. Luxury inventory in Greenwich CT is at the lowest level in at least six years.
In Texas, according to an analysis by the Texas Realtors group, sales of single-family homes with price tags of at least $1M nearly doubled in the 12-month period ending October 2021.
Lara O’Rourke, an agent with Gibson Sotheby’s International Realty, said, “You have to act fast. Inventory is not hanging around.”
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Thanks to Bloomberg.
