Uncertainty is a hallmark of 2020, especially in most sectors of the economy. However, one part of the economy that has been spared from uncertainty is the real estate market. According to every conceivable metric, the real estate market is red hot. The fuel behind the flaming real estate market has been record low mortgage rates. These attractive mortgage rates are causing even unlikely groups, like millennials, to jump into the home buying frenzy. While home sales are up overall, some types of homes are more in demand than others. Right now, luxury home sales are fueling the real estate market boom. 

Luxury Homes Sales are Increasing

The numbers are clear that more people are buying homes. This is especially true for luxury homes. The year over year increase in luxury home sales is a staggering 41.5%. Luxury homes are considered any home in the top 5% of homes based on housing prices. The prices for this top tier are not stagnant, either. Increased demand for larger and more expensive homes is only pushing home prices higher. This is especially true since there is a fixed inventory of high end homes. Even though the cost of buying a top tier home is increasing, buyers are not seeming to be deterred. 

Why Do Home Buyers Want Luxury Homes?

On face, the increased demand for luxury homes might seem puzzling. There is more economic uncertainty than ever before. Already expensive homes are now even more expensive. So why are buyers rushing into the real estate market to purchase their own luxury property?

Many Home Buyers Want More Space

The needs of home buyers have changed dramatically over the past year and luxury homes make a lot more sense for many. Since March, our nation has dealt with rolling waves of the COVID-19 pandemic and our routines have been upended because of it. First, the pandemic has caused many to reconsider where they want their home to be relocated. Dense urban areas are no longer as attractive as they once were. Homeowners are rejecting crowded streets and sleek apartments with crowded elevators for suburban and rural settings. Living in major cities used to be attractive because of dining, entertainment and nightlife, but pandemic restrictions have rendered those benefits obsolete. Homeowners are now more interested in parks, walking trails, and large backyards. Luxury homes are often located in areas with these outdoor amenities and give homeowners ample room outside on their own property.

Luxury home buyers are not only interested in more outdoor space, but also more space inside their homes. The pandemic has changed how we work, how we go to school, and how we exercise. More Americans than ever are working remotely, which means homeowners need home offices. While parents are working at home, children are also taking classes from home. This means that multiple people in some homes need their own areas to complete their work or school assignments. Larger homes with more rooms make this much easier, especially since work hours and school hours often overlap. On top of this, many are no longer able to go to the gym because of restrictions. So, on top of having to add office space to their home, many also have to find space for exercise. Luxury homes can accommodate these new demands by giving families more square footage to work with. 

Low Mortgage Rates Make Luxury Homes a Bargain

Even though home prices for luxury properties are increasing, low mortgage rates mean that buyers are still getting a deal on them. Home buyers are not scared off by larger price tags on bigger homes. That’s because low interest rates mean they are still getting more bang for their buck. Locking in low mortgage rates on a luxury property saves you a lot of money over the life of your loan. What you end up spending on higher closing costs because of the high demand is far outweighed by what you save on interest. As long as home buyers are able to take advantage of rock bottom mortgage rates, luxury homes will still be in demand. Many are predicting that interest rates will remain low for a long time. If true, we should continue to see high demand for home purchases, including luxury properties. 

Final Thoughts

Favorable mortgage rates are driving demand in all housing sectors and this includes luxury homes. The current interest rate environment functionally means that all homes can be considered on sale given what you can save on interest. Since that is the case, it is no shock that home buyers are looking to lock in luxury homes with favorable loan terms. However, you do not have to be in the market for a luxury home to take advantage of today’s interest rates. 

If you want to buy a new home and can qualify for a mortgage, then now is the time to do it. If you would like to find out if you can qualify for a mortgage to buy the home of your dreams, then contact us. The team at Peoples Choice Mortgage will give you a complimentary qualification review. The real estate market is on fire for a reason and it is always best to strike while the iron is hot.