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How Sustainable is the Luxury Home Market?

New Luxury Home for SaleAcross the country, the luxury home market has been booming. Nowhere is that more apparent than in Colorado, where the Denver area saw growth month after month in the final quarter of 2014. But business and real estate follow the same laws that everything else does, so what goes up must come down. However, just because the luxury market is going to come down eventually doesn’t mean it can’t stay up for a very long time. So how sustainable is the market?

Surging Confidence Among Homebuyers

Before we answer that question, let’s first look at what the upswing in luxury home sales means. There are a multitude of reasons, but there are two big factors that come into play when it comes to these purchases in the Denver region. First is simply a matter of satisfaction with the area – Denver and its surrounding communities is a very desirable place to live, so a lot of people are looking for homes there. Second is the fact that consumer confidence grew steadily throughout 2014. An economy that was once believed to be on its last legs started to surge again, adding new jobs and creating a higher degree of wealth. This has convinced people to make more long-term purchases again.

Consistency is the Key

One of the greatest dangers in financial matters comes when you jump into a bubble industry only to have that bubble burst on you. In order to combat this situation, you need to look for consistency in the market. Consistency is a key element to a stable market because it indicates that while things will eventually trend downward, they won’t plummet as quickly as they might if there was record-setting growth month after month. Since luxury home sales have increased on a steady but not breakneck pace, all signs are pointing toward long-term growth in this sector. That doesn’t mean that the good times will never end, but it does indicate that they might not end for quite a while.

What about the Future?

So if the luxury trends are likely to be sustainable, what does this mean for the future? While it’s hard to predict exact future trends, the thing that is certain is that the particular combination of events that are leading to this surge – low interest rates, high economic confidence, and sellers who are willing to negotiate downward in order to move their homes – won’t likely last for long. Furthermore, many experts believe that the market will turn back toward the sellers as spring approaches, since the increase in sales also means that competition is getting fiercer among the remaining properties. The bottom line is that those interested in buying a luxury home should probably make their plans now.

Nobody knows how long the luxury home boom will last, but there is a certain degree of wisdom to the notion that potential buyers should strike while the iron is hot. Waiting might get you more favorable interest rates and deals, but it also runs the risk of an increase in competition among buyers, which could drive prices up rather than down.

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