While many markets continue to languish with more price declines and so-so sales, one real estate sector is red hot, and you might be surprised at which one it is.
Even with the economy just starting to pull out of the doldrums, the luxury market has come roaring back in recent months according to experts, and that could signal good things ahead for U.S. real estate.
"There is very little inventory, which is driving a lot of activity," says Richard Smith, president and CEO of Realogy Corp., a global provider of real estate and relocation services. "You're getting multiple offers and quick sells. It's not uncommon in New York City to see a co-op or an apartment go on the market and two days later it's gotten 10 offers and it's sold. That's becoming pretty typical of New York City."
Other high-end markets in Boston, Greenwich, Conn., the Hamptons, and Miami, Fla., are seeing increased activity as well, Smith says.
Even far from the hustle and bustle of major city centers, real estate watchers have seen luxury markets heat up. In Bozeman, Mont., ERA broker owner Robyn Erlenbush has already seen the same number of closings and pending sales three months into 2012 as she did halfway through 2011.
"There's great energy in our market," she says.
Why are buyers suddenly scooping up more high-value properties? Lack of selection does play a role, but sellers have also become savvier when it comes to pricing their properties. On the flip side, would-be buyers have become more realistic about prices as well, sensing that they aren't likely to drop much farther.
"These are high-end buyers that have been sitting on the sidelines for long enough and pricing is not going to get any better," Smith says. "These are people who are smart enough to know that you can't really call the bottom of the market—you can get close, but if you miss it, prices start escalating pretty quickly."
The uptick in buyers plunking down mega-bucks for mega-mansions could bode well for the broader market, Smith adds. While it's not likely the average Joe looking to buy a $200,000 home in Columbus, Ohio, will take his cues from multimillionaires purchasing second homes in the Hamptons, it could give more credence to the idea that the housing market could be on the mend.
"If I'm in a market and I see the very high-end buyers grabbing the headlines, it tells me that people who are astute investors—when you're buying a $30 million property, you're probably pretty astute—think things are starting to improve," Smith says. "Is there a bleed-over effect? Probably."
Foreign buyers have given some luxury housing markets such as Miami a shot in the arm, Smith and other experts say, with healthy interest hailing from locales as diverse as Russia, China, Canada, and Brazil.
"We have an influx of Russians because it's like their winter Riviera," says Coldwell Banker Realtor Jill Eber, who specializes in luxury real estate, adding that current "bargain" prices have given foreign buyers incentive to move into the American housing market, especially popular vacation spots such as Miami.
Her colleague, Realtor Jill Hertzberg agrees. "Many of them are buying very big properties. You can't buy a single-family home in the middle of Moscow on a gorgeous waterway," she says.
And Hertzberg doesn't think the resurgence of activity in the luxury market is a flash in the pan. "I think it's going to sustain," she says. "It's definitely continuing."