This is the insane pool/patio video everyone is going crazy over

This is the insane pool/patio video everyone is going crazy over

Never expected our Facebook to blow up over one of these

Freddie Mac: Here are the top 5 improving metro housing markets

Not just L.A. and NYC

It’s official: Steve Horne out as Wingspan CEO

Jason Spooner takes over; Horne becomes senior advisor
W S
Lending

The real estate 1% and the S&P 500 are secretly connected

CoreLogic links high-end home sales to stock market index performance

highendhome
/ Print / Reprints /
| Share More
/ Text Size+

Analyst Sam Khater at CoreLogic (CLGX) walks through a look comparing ultra high-end home sales versus homes sales on the lower end of the pricing segment.

So what is happening with the residential real estate 1%? (That’s not rhetorical flourish – Khater notes that historically, homes that sold for $1 million or more accounted for 1% of all sales.)

The real estate “1%” has benefited from the gains made in the financial markets over the past three years.

There is a little variance in this segment constituting 1% even in the good and bad times – the share of million-dollar home sales was below 1% for most of 2003, but steadily increased between 2004 and 2006, reaching as high as 1.8% in April 2006, when national home prices peaked.

Even after the real estate bubble started to burst, the share of million-dollar-home sales continued to increase, peaking in June 2007 at 2.2%, more than twice the share just five years earlier. Although the overall housing market was clearly slowing by then, the $1million share remained high, averaging nearly 2%, or twice the historical level, until August 2008.

With the market collapse in September 2008, $1 million home sales tanked.

But it wasn’t long in the dumps. By February 2009, the $1 million-plus sales share was back to 1%, the same level as in December 2003.

Then as the financial markets stabilized and rebounded in the second half of 2009, so did the sales of $1 million-plus homes with the share rising to 1.5%, Khater reported.

Over the next three years as the S&P 500 steadily rose and eventually hit all-time highs, the $1 million-plus home sales share also rose, reaching 2% by mid-2013 and remaining at that level since then.

For real estate’s “1%,” the stock market is a barometer of the wealthy consumer’s confidence, Khater concludes. This is clear given that $1 million-plus home sales and the S&P 500 are highly correlated.

In fact, he notes, the S&P 500 serves as a very good two-month leading indicator of million-dollar home sales. While the S&P 500 dipped in the last few weeks of January 2014, as of mid-February, it remains at roughly the same level as in December 2013, so one can expect million-dollar home sales to remain strong as long as the stock market remains high.

Meanwhile, Khater says that there are many lower-price segments enjoying healthy sales growth, but not all.

The fastest-growing sales segments are those with prices between $650,000 and $950,000, where sales are 33% higher than a year ago.

Home sales in the $350,000 to $650,000 range are up 26% year over year. Sales are clearly weaker in the $150,000 to $300,000 range, up only 12% from a year ago.

Sales below $150,000 are contracting, but that reflects several factors, including the rapid run up in prices and the decline of REO, investor and cash sales, which are concentrated in this segment.

Recent Articles by Trey Garrison

Comments powered by Disqus