The Contrarian

“In the investment markets, what everyone knows is usually not worth knowing.”

Luxury Housing Prices Are Crashing

Recently we read about how the average home price in Vancouver is down an incredible 20% in just one month. Initially it appeared as if it was just related to Canada’s new tax on foreign buyers that was implemented earlier this year. But now we are seeing a similar trend in popular US luxury real estate markets as well.

Here is an excerpt from an interesting article from ZeroHedge about how the luxury housing markets in the Hamptons, Aspen and Miami are all crashing.

“We reported that sales in the Hamptons plunged by half and home prices fell sharply in the second quarter in the ultra-wealthy enclave.

Reuters blamed this on “stock market jitters earlier in the year” which damped the appetite to buy, however one can also blame the halt of offshore money laundering, a slowing global economy, the collapse of the petrodollar, and the drastic drop in Wall Street bonuses.

The statistics are stunning: single-family home sales in Aspen are down 62% in dollar volume through the first-half of the year… “Aspen has never experienced such a sudden and precipitous drop in real estate sales,” according to the post… Recent Aspen sales also closed at more than 15 percent below listing price, a rare discount.

The latest figures out of Miami this week showed residential sales are down almost 21% from the same time last year. But as bad as this double-digit decline may seem, it pales in comparison to what’s happening at the high end of the market. Luxury condo sales in Miami have crashed 44%.

So far, the collapse at the luxury end has failed to transmit to the broader market, less impacted by lack of foreign demand, however as we documented two weeks ago, it is only a matter of time before the overall US housing market suffers as well. The only question is whether the NAR and the US Census Bureau, who tabulate the “goal-seeked”, seasonally adjusted data, will admit it before or after the presidential elections.”

So Vancouver is down over 20%, the Hamptons are down 50%, Aspen is down 62%, and Miami is down at least 21%. That’s alarming. A lot of the buying demand since the bottom of the housing crisis came from foreign cash buyers. Now that it looks like that foreign money has dried up, it will surely impact the broader US housing market.

Miami has an additional problem: the ZIKA virus which is transmitted by mosquitoes. Lots of people are cancelling their planned trips to Miami and Florida. You can bet that foreigners are deferring their purchases of Florida real estate as well. As the saying goes, “when it rains, it pours.”

This is so reminiscent of 2007 when real estate data was public, but the average person didn’t pay attention to it at all. And then came the collapse, one year later.