Stock market fainting pulls the rug from under luxury home sales

The June sale resolved it.

by Wolf Richter for Wolf Street.

Luxury Manhattan real estate prices drop against stock market in June: In the week ending June 19, only 12 sales contracts were signed for condominiums, co-ops, and townhouses with asking prices of $4 million and above, worst week since the week of December 28 (December) 2020 (with ten decades), according to the weekly report released today by Olshan Realty.

The number of contracts was about a third modified The number of contracts signed in the previous 52 weeks, down 70% from the same week in June last year (41 short deals).

“This poor performance coincided with the S&P 500 declining 5.8%, its worst week since March 2020. The S&P 500 has fallen 11 of the past 12 weeks,” the Olshan report said.

There have been other reports about this phenomenon – although not nearly as real and brutal: what is pulling the rug out from under luxury real estate isn’t necessarily the rise in mortgage rates – although that could also play a role through the massive boosting of costs. Luxury real estate endures – but plunges in stock prices throw all sorts of pre-imposed equations and feelings of wealth into uncertainty.

that Analytics By Redfin, released earlier in June, found that sales of luxury homes – priced in the top 5% of the local market – in the three months to April across the US fell about 18% year-on-year – a smaller decline. Much more than what is happening now in Manhattan. But the Redfin report was only for data up until April, and stocks have fallen pretty dramatically since then.

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“Only two cases in the past decade have had sharper declines: the three months ending June 30, 2020 (-23.6%) and the three months ending May 31, 2020 (-21.6%),” the Redfin report said.

The Redfin report blamed the “cooling” of the luxury housing market on “high interest rates, a tepid stock market, inflation and economic uncertainty.”

The phrase “tepid stock market” to describe the state the stock market has been in since January should give Redfin the award of the year.

However, luxury sales in the three months to April mentioned in Redfin’s report were unaffected after recent heavy selling in stocks, including a brutal drop last week.

“The year-on-year slowdown is also a reflection of the high-end home market returning to Earth after increasing sales of nearly 80% a year ago,” Redfin said.

. sales luxury homes Redfin’s report found that it fell only 5.4% in the same three-month period through April.

But that was before the recent rise in mortgage rates to 6%. In the three months through April covered by the Redfin report, the average 30-year fixed-rate mortgage rose from about 3.7% to just over 5%. But in June, 30-year fixed-rate mortgage rate exceeded 6%adding another layer of complications for potential homebuyers.

But unlike the Redfin report, today’s Olshan data — the 70% annual drop in the number of contracts for homes $4 million and above in Manhattan — affected at least a portion of the stock market by 11%. June so far.

The stock market sell-off, if it continues, is of some concern to people who have a lot at stake in the stock market, especially if the dynamics suggest asset repricing as a result of a prolonged and A tough tightening cycle by the Fed, which is now of late cracking down on rampant inflation.

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