Real estate has returned as a favorite topic of conversation at the pair of Starbucks Corp. coffee shops in Granite Bay, a Sacramento, California, suburb where the median income is double the rest of the state.
“When the real estate market was booming, people sat in Starbucks and talked about how much they paid for a house,” said Craig Moe, who in June bought a $1.2 million property discounted 25 percent from its sale six years ago. “Now, they talk about how little they paid and what a bargain they got.”
Home sales from Los Angeles to Charleston, South Carolina that are priced at more than $1 million are gaining at triple the pace of the broader market, according to real estate research firm DataQuick Inc. Wealthy purchasers, helped by gains in equities, are diving into real estate a year after a recovery began in the housing market when less well-heeled buyers rushed to take advantage of record-low interest rates, said Susan Wachter, a professor of real estate and finance at the University of Pennsylvania’s Wharton School in Pennsylvania.
“The real estate recovery has been built on purchases by middle-class families, even though they haven’t been the ones to flourish during the recovery,” she said. “Now, the economy is getting a vote of confidence from wealthy homebuyers.”
Sales of homes priced at more than $1 million jumped an average 37 percent in 2013’s first half from a year earlier to the highest level since 2007, according to DataQuick. Transactions priced at less than $1 million rose 11 percent in the same period to the highest since 2009, data from the National Association of Realtors show.
The $1-million-and-up end of the market usually lags behind the cycles of the broader market because real estate purchases by wealthier buyers “tend to be discretionary spending” that can wait until economic conditions are right, Wachter said. Those homeowners can usually hang onto properties during tough times, and their houses are big enough for them to stay even if their families expand.
“These usually are people who can weather any storm,” Wachter said.
The rebounding housing market meanwhile is helping the economic recovery with economists predicting the U.S. economy will expand by 2.3 percent this quarter from 1.7 percent in the prior three months and grow every period through at least 2014’s third quarter, according to the median estimate in a Bloomberg survey.