Repeat foreclosures may be on the rise [6] and the underwater mortgage may now be a permanent fixture [7] in the US housing market, but you can certainly forgive the 0.01% — for whom none of that is relevant — for not caring because when your net worth exceeds $30 million, the question isn’t “can I pay my mortgage?,” but rather “where should my fifth residence be?” For these buyers, who understand Janet Yellen’s contention [8] that accumulating financial assets is important and who have thus benefited from the fabled “wealth effect,” it’s as good a time as any to buy (another) vacation home, which is why vacation home sales soared nearly 60% last year on top of 30% the year before that. Furthermore, one in five home sales in the US is now a vacation home and as Moody’s told WSJ, there’s no reason why that figure shouldn’t rise going forward — “more or less.”
Via WSJ [9]:
Last year’s estimated tally topped the previous high from 2006 to become the biggest year for vacation-home sales volume since the Realtor association started tracking the market in 2003. Vacation homes accounted for 21% of all sales last year, the highest share since the survey’s inception.
The small sample size of the Realtor group’s survey, which was based on responses by just 1,971 people who bought U.S. homes in 2014, led some economists to posit that the results might be exaggerated. Mark Zandi, chief economist for Moody’s Analytics, suggested that the gains in the report might “overstate the strength” of that market.
Still, Mr. Zandi noted that vacation-home sales account for one-fifth of all home sales and “that should more or less rise over the next five to 10 years” as the income and number of vacation-home buyers increases...
The number of buyers is likely to grow in the years ahead as 76 million-plus baby boomers advance in age and buy vacation homes that eventually will become retirement homes.
Meanwhile, the prospect of rising prices has spurred buyers to act sooner than later. Rates on 30-year, fixed-rate mortgages, which have hovered below 4% since November, are poised to rise later this year as the Federal Reserve increases short-term rates. And median resale prices on all homes, which increased by 7.5% from a year ago to $202,600 in February, are likely to rise further if the overall inventory of homes available for sale remains tight.
Kris Anderson, team leader with Your Premier Team at ReMax Excalibur in Scottsdale, Ariz., said her team of six agents handled 10% more vacation-home transactions last year than in 2013...
Two of her agency’s clients, Steven and Roberta Strader, bought a three-bedroom home in Surprise, Ariz., last month with the intent of spending up to five months a year in it. The couple, both 72 years old, split time between Arizona and Lacey, Wash.
Mr. Strader said the value of an Arizona condo that he and his wife bought in 2005 had risen enough to justify selling it this year and combining those proceeds with some stock-market gains to buy the house in Surprise for $225,000. “We felt that the market was strong enough that we could take some assets to spread around in more than just stocks,” he said.
With the global population of ultra high net worth individuals growing [10] at a 6% annual clip, and with the middle class set to becomes extinct thanks to, among other things, slumping wage growth for everyone other than America’s “supervisors,” we suspect Moody’s may be correct to forecast robust demand for vacation homes going forward, which we suppose is a good thing for the US because as we noted less than a week ago, the US is the most popular country on the planet when it comes to secondary residence purchases by the world’s 0.01 percenters and New York boasts the largest number of ultra high net worth individual-owned residences in the world.
[11]
[12]
Russia’s richest and most powerful are set to leave in droves, seeking to avoid a tax squeeze and the fallout from the country's economic crisis.
The majority of oligarchs interviewed for a new report on Russian have said that they are likely to leave the country in the next few years. Of the 30 Russian nationals included in a study by Campden Wealth, in partnership with UBS, more than half said that there were likely to move abroad, although not imminently.
Of those living in Russia, more than one in four said they had plans to leave within five years. Participants in the Campden study jointly control $2.5bn (£1.7bn) of personal wealth, and businesses with turnover of $6.5bn last year.
One Russian national interviewed by Campden said: “Russians, if they haven’t done so already, are considering relocation out of Russia. Clearly London is a key jurisdiction of choice.”
New rules introduced at the start of the year have meant that foreign business owned by Russians are now subject to Russian taxes, putting the squeeze on the wealthiest in a country where just 111 individuals control nearly a fifth of all household wealth.
[14]
So Russian oligarchs are unhappy with the domestic situation and as Wealth-X and Sotheby's have shown, this is a group that's already predisposed to "invest" in secondary (and tertiary, and on and on) dwellings:
[15]
* * *
And so, even as a slumping Brazilian real chokes Miami's luxury condo boom [16], the market for secondary "vacation" residences and by extension, the money-laundering [17]-via-US-real-estate-purchases trade, may yet remain intact, which we guess is a good thing ... "more or less."
