If you want to buy a million dollar home, then you better hustle out there and get one. The National Association of Realtors says that sales of homes costing $1 million or more rose 7.8 percent in March of 2014. With big bonuses back in style in the financial sector and stocks tripling their value since 2009, the wealthiest 10% of the population is living in style.
Oh yes, the number of transactions for $250,000 or less – about two-thirds of the housing market – fell by 12%. Slow wage growth, rapidly rising prices, and rising mortgage rates have put home ownership out of reach for many first-time homebuyers.
With demand so slow at the bottom of the market, many homebuilders are switching to larger, more expensive properties that appeal to wealthier buyers. For example, KB Home now builds about half of its houses for the upper tiers of the market. “With the mortgage headwinds and the lack of job growth and everything else that we dealt with through this housing cycle and now into the recovery, the typical first-time buyer got kneecapped,” said Jeff Mezger, company CEO.
Since the Federal Reserve Bank announced last May that it was going to begin cutting back on its $85 billion monthly purchases of housing bonds and treasury bonds, the average mortgage rate has risen by almost a full point. In addition, millions of Americans are still stuck in homes where they owe more on their mortgages than their houses will sell for. In March of 2014, nearly five years since the recession officially ended in the summer of 2009, 18.8% of homeowners – 9.7 million families – have mortgages that are “underwater.” Another 18% are all but underwater because their home won’t sell for enough to give them a down payment on a new house.
Let’s face it, there are winners and there are losers in 21st century America. As Bonnie Stone Sellers, CEO of Christie’s International put it, “The trends in luxury housing are similar to trends in other luxury goods. Whether you’re buying a third home in Manhattan as a pied-a-terre or another Picasso, these are acquisitions of passion, of lifestyle, and of experience.”