- There’s an abundance of luxury real estate across the US, and it may be a warning sign for an upcoming recession, reported Robert Frank for CNBC.
- New York City penthouses, Miami condos, LA mansions, and luxury ranches out west aren’t selling.
- But the picture is bigger than that: The wealthy are spending less overall in the US, from retail to houses, and it could threaten economic expansion, an economist told Frank.
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America’s lingering luxury real-estate market is waving a red flag.
The wealthy aren’t buying homes as much as they used to, leaving a surplus of empty high-end real estate across the US, reported Robert Frank for CNBC. According to Frank, luxury real estate hasn’t been this bad since the financial crisis.
While tax changes play a role in this decline, it’s also part of a broader trend in which the wealthy are saving more and spending less in luxury retail, classic cars, art, and houses – and it could “trickle down” to a recession, he said.
“If high-income consumers pull back any further on their spending, it will be a significant threat to the economic expansion,” Mark Zandi, chief economist at Moody’s Analytics, told Frank.
From NYC to LA, luxury real-estate markets across the US are seeing a slowdown.
In New York City, penthouses have been sitting on the market for months to years. Many of those properties eventually receive drastic price cuts or get carved into two smaller apartments,Business Insider’s Katie Warren previously reported.
“Like any commodity, when the market is saturated with them,their value declines,” Jason Haber, an agent at Warburg Realty in Manhattan, told Warren. “If under every rock you found a diamond, diamonds would decline in value. That’s what is happening right now.”
Down south, luxury condos in Miami are sitting on the market a hair too long – some are taking four to six years to sell,Jerry Iannelli reported for the Miami New Times last year.
And out west, multimillion-dollar luxury ranches have been undergoing price cuts and sitting on the market for years,Katherine Clarke reported for The Wall Street Journal. While they held a wild west allure for previous generations, millennials find the ranches too labour-intensive and expensive, she wrote.
Consider the 16,000-square-foot California mountain estate, which comes with a fully operational buffalo ranch, that a $US180 million lottery winner put up for sale last year, Warren reported. Originally listed for $US26 million, it was cut by $US6.9 million in August.
Clarke also said that Los Angeles has a glut of empty mega-mansions. Real-estate agents and developers are employing extreme measures to get those mansions off the market, from themed parties and gimmicky amenities to $US100 million price cuts.