In 2022, homes crossed the record price increase from the Great Depression. Prices have gone up by 8% to 56.2% from 2019. The economy is hostile, and the real estate market feels like a complete rip-off. This is the perfect time to buy a luxury home.
It may seem contradictory, but the hostile real estate market effectively lowers the value and price of luxury houses. The price hike, market oversaturation, lower purchasing power, and renting ability make a volatile mix that makes it hard to keep owning a luxury home profitable. If you’re calculating enough, you can snag yourself the perfect home at a lower cost, and make a profit.
In this article, I’ll go more into detail about how this market is optimal to buy a luxury home, how to do so, and even provide a TLDR solution you can check out.
Why Is The 2022 Housing Market So Optimal?
On the surface, this is the worst the housing market has ever been. Houses are selling for the highest prices to date, insurance and mortgage rates have doubled, and the economy is going downhill. But dig deeper, and you’ll find these factors working in your favor.
Prices for homes have increased consistently since 2019, up to a record amount of 18.7% by September 2021. By 2022, prices have increased over 20% on average for houses, making them very hard to purchase. People have resorted to buying lower-quality homes, and condos, instead of single-family houses.
With the recent price increase, everyone wants to sell at the highest price. And newer and cheaper housing is filling the market. There are 726,000 of only housing units, and 5.95 million total properties waiting to be sold.
Lower Renting Ability
Rent has increased by 8% on average in most states, with the average rent per month reaching $1708 in New York. About 18% or 5.9 million renters have fallen behind on their rent, unable to keep up with the soaring cost.
High Mortgage and Insurance Costs
Mortgage rates have jumped to 6.7% by 2022, the highest in 15 years. Home insurance has seen an average increase of 4.48%.
Lower Purchasing Power
The economy, market conditions, and mortgage and insurance rates have crippled purchasing power. Most are opting for low-end housing units. Some are hunting down foreclosed properties. Almost everyone has turned away from the upper range of the housing market.
A Crashing Market
As of September 2022, home sales in the US have fallen by 1.5%. This is the lowest since May 2020, and the market is expected to experience a steep decline. This nosedive will cause the unsold inventory to increase, and prices to fall drastically.
The situation is simple to interpret. The market is full of competition, and crashing, and people are looking for cheaper options. While it stabilizes, no prospective buyers or renters for luxury homes will exist. This will back luxury home sellers into a corner, and they will have to sell at a very low price or go under.
So, How Do You Buy A Luxury Home In 2022?
Now that you understand the market conditions, you’ll need to learn how to exploit them. I’ve listed a few ideas for you to use while you’re looking for your perfect home.
- Take your time. The market has only begun to crash. You’ll want to buy right before the worst of the crash when everyone is desperate.
- Look at all options. Don’t shy away from looking at houses beyond your reach. Look at all listings, and compare their characteristics and value. Build up an inventory and use that knowledge in your talks.
- Find options with no takers. Find luxury houses that have no prospective buyers. Find out why, and if you can deal with it. Get in touch with the owner and avoid the middlemen.
- Bargaining is key. Bargaining is ingrained into the real estate business. Especially in a crashing market. Use everything you’ve learned and knock the price down as much as you can, then some more.
- Offer a large down payment. Offer 20% or more as a down payment. Offer this is a quick return to the owner for letting you buy the house. Also, the larger the down payment, the lower the mortgage you have to pay later.
- Avoid FHA. FHA loans are meant for those who have a bad financial record. These have higher rates but offer a lower down payment. This is entirely against your strategy, so find private sources with lower rates.
- Use your equity. Using equity as leverage can be a risky move, but getting into debt to increase purchasing power will lower the overall cost.
How To Find the Best Luxury Homes for Sale
When it comes to finding the best luxury homes for sale in the United States, there are a few things that you will want to keep in mind.
- Make sure that you are working with a reputable real estate agent who specializes in luxury properties. This will ensure that you have access to the best selection of homes on the market.
- Pay attention to the location of the home. Luxury homes in desirable locations will always fetch a higher price tag than those in less sought-after areas. Therefore, if your budget allows, it is always worth considering homes in prime locations such as Colorado Springs, Beverly Hills or Aspen.
Real Estate can have a lower price, but never lower in value. If you’ve got a luxury house at a lower price than the original cost, then you’ll profit once the market recovers. So, no matter what happens don’t freak out and rush to sell.