Is Luxury a Safe Bet

Creative Commons License credit: davey-boyPast wisdom has informed us that even in housing slumps luxury will withstand the pressures and continue to thrive. This conventional notion is not only being tested but its being cast aside as luxury home, condo, and apartment owners are seeing the value of their homes drop and watching them sit on the market for months, even years, without a legitimate bite.

Developers today are seeing some tighter standards than they had in the past and they are faced with more stringent underwriting standards, higher capital costs and lenders that are just not as willing to invest in their expensive projects as they were in the past. The units that are already built or on the market are looking for buyers who will pony up much less than originally predicted.

One of the biggest concerns of those in the luxury housing business is that their own popularity is contributing to their demise. When word got out that luxury was safer than traditional housing people started investing in luxury and more and more buildings touting the L-word started cropping up all over, creating a surplus. And when there is a surplus you’re just not going to get the interest you would if there was a shortage. In fact, some would argue that because there is a surplus these “luxury” homes have lost the right to that definition.