Economic Summary June 4, 2010, A. Langes, Richmond Hill, GA

Weekly Economic Summaries are submitted courtesy of Richmond Hill, GA mortgage broker, Aaron Langes. Aaron is a Loan Officer with Bank of America, a preferred partner of Keller Williams Realty, Richmond Hill. Please note that this is Aaron’s (912.678.6063) area of expertise and I provide the information as a resource – in other words, he can answer your questions better than I can

OVERVIEW ~ May 24 through May 28 ~ Another very active week ended with a slight gain for the Dow Jones Industrial Average. Friday’s close, though, fell to 10136.63, nearly 1.2% below the prior day’s higher close. More important, the story during this week was really about hour-to-hour changes more than about day-to-day movements. Monday began with fears about European credit problems eroding the stock market indices in the Far East. The DJIA dropped significantly when it opened, but managed to limit its losses by the close of the day. And so it went, throughout the week, with concerns about the stability of the euro dragging share prices down over the whole world, but with the American stock exchanges holding their own for the most part.

FOCUS ~ In the midst of this unusual and unpredictable activity in the stock and credit markets, luxury homes have been making a surprising comeback, according to a May 28 report in The Wall Street Journal. Sales volume has risen sharply, reaching levels not seen since 2005 in some of the nation’s luxury markets.
The Wall Street Journal cited a study by real estate consulting firm CoreLogic®, which found that sales of homes priced from $2 million to $5 million in our nation totaled 2,461 in the first quarter of this year. That’s a 32% jump from sales totals of last year’s first quarter.

Sales are very strong in some expected places. In San Francisco, 49 homes sold for $2 million or more in the first quarter, beating out 2005 first quarter sales by 2 homes. In Manhattan, there were 402 sales of homes at $2 million or more in the first quarter, compared to 311 in the first quarter of 2005. And sales have even been a bit better in the still-devastated real estate markets of Las Vegas and Miami. Other strong areas include the Hamptons in New York, and Menlo Park and Beverly Hills in California.

Historically, luxury home sales respond more to the strength in our stock markets than to lower interest rates. The year’s run-up in the stock markets very likely brought buyers into the luxury home market, but analysts are concerned that the recent drop in stock market indices may slow the luxury market rebound.

Still, the stock markets are extraordinarily difficult to predict. They may resume their upward movement; and they may not. But the fact that we have seen such a rebound at all suggests unexpected strengths in the upper end of the real estate market and, perhaps, in the real estate market as a whole. Luxury home sales figures are well worth continuing to watch closely.