October 2024 Boca Raton Area Luxury Market Report from Jean-Luc Andriot and The Institute for Luxury Home Marketing

As I am a member of The Institute for Luxury Marketing, I thought I would share with you their October 2024 report for Boca Raton - Delray Beach.

It is your guide to a general analysis on the trends and comparative data on the top-residential markets in the Boca Raton - Delray Beach area.

Statistics are separated between single family homes and condominiums / townhomes in Boca Raton - Delray Beach.

At the national level:

Market of Mixed Expectations

September saw a mix of expectations as mortgage rates fell, inventory levels increased, yet home prices remained elevated.

Mortgage rates have been trending downward since spring, and in September, we saw interest rate cuts of 0.5% by the US Fed and 0.25% by the Bank of Canada. In the U.S., interest rates dropped as low as 4.75% on average, while in Canada, they fell to around 4%. This helped bring down some mortgage rates to their lowest levels in over a year.

However, buyers have been slow to respond. This reluctance is partly due to elevated home prices but also because many are waiting to see if rates will drop further.

Institute members report that some potential buyers are holding out, waiting to see if rates will drop further – some hoping to see rates as low as 5%. In the U.S., additional hesitation comes from uncertainty surrounding the new National Association of Realtors’ rules and the upcoming presidential election.

Despite this, demand showed signs of picking up, with agents reporting increased early-stage activity, such as visits to real estate websites, property viewings, mortgage applications, and pending offers.

Pending sales saw an uptick in late September spurred by the interest rate cuts, even though mortgage rates had been declining for several weeks in anticipation the changes.
Sales trends in September varied across property types. Based on the 150 markets reviewed by The Institute, single-family home sales rose by 5.11% while Condominium and townhome sales fell by 4.22% also creating a mix picture of the market.

New listings also increased significantly, with a year-over-year uptick of 17.52% for single-family homes and 18.31% for condominiums and townhomes. Unlike the rise in pending sales, which reflects a recent trend, both inventory levels and new listings entering the market have been growing for nearly a year.

Home prices showed little movement compared to last September. The median sold price for single-family homes dipped by just 0.56% and attached properties by 0.26%.

Impact of Interest Rates on Luxury Real Estate

While affluent buyers rely less on borrowing—with over 40% of luxury real estate purchases in the past year made in cash—falling interest rates are still poised to influence the market. Lower rates may encourage more sellers to list their homes and give buyers greater confidence in pursuing high-end purchases.

Interest rate cuts could also make alternative loan options more attractive to wealthy buyers who prefer leveraging lower rates rather than using cash outright. Even though borrowing costs may not be the primary factor for many luxury buyers, the decision to finance a home often fits into a broader investment or portfolio strategy.

For instance, in a competitive real estate market where cash offers are advantageous, a buyer might opt to take a loan against their stock portfolio rather than liquidating securities and triggering capital gains taxes.

Additionally, many high-net-worth individuals work with private banks or wealth management firms where the interest rates they pay are often dictated by their banking relationship, portfolio size, and contract terms, rather than the standard base rate. However, as banks gain access to cheaper capital, they may have more flexibility to negotiate lower rates on an individual basis.

Another reason to believe the luxury market is poised for a boost: interest rate cuts, as well as the falling mortgage rates, may reflect a larger shift in the market. Even individuals who took a wait-and-see attitude are beginning to feel that the real estate market has reached a turning point, especially as mortgage rates have fallen consistently over the past year.

A WSJ Intelligence poll conducted in August further supports this outlook, showing increased confidence among wealthy home buyers. The survey, which included approximately 4,000 Wall Street Journal readers with an average net worth of $4.7 million, revealed that most respondents were more optimistic about the housing market than they had been at the beginning of the year.

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