What You Need to Know About the Long-Term Value of Luxury Real Estate

Jacqueline Gallardo  |  March 12, 2023

What You Need to Know About the Long-Term Value of Luxury Real Estate

The current state of the housing market has property owners wondering about the short-term and long-term impact on the value of their Key Biscayne luxury homes. Many people have questions about how high interest rates, inflation, and other factors will impact their property value. This article will provide answers to many of the most commonly asked questions.

1. Are home prices rising or falling right now?

Right now, most markets across the country are in a bit of a slowdown. Unlike the past few years, prospective buyers are no longer coming out in droves to shop for new homes. Interest rates close to two percent a few short years ago are now nearly seven percent. In Key Biscayne, home prices are rising again after coming down earlier in the year. It still remains to be seen how much the national landscape affects the market for Key Biscayne luxury homes.

2. When could the market change?

It’s difficult to know for sure. The Federal Reserve has expressed hope that they will have an opportunity to lower interest rates in the coming years. They understand that an interest rate closer to past averages creates a more favorable situation for everyone involved. The encouraging news is that it seems like it’s only a matter of time before rates trend back towards past averages. This has happened in recent years, even after prolonged seasons where rates were significantly higher than normal.

3. Should I expect my property to lose value in the meantime?

Probably not. There are several reasons to believe that the market remains in a strong position despite the current set of challenges it faces. Many experts highlight the mortgage delinquency rate as a key piece of evidence that reflects the market’s overall strength and health. A high mortgage delinquency rate would suggest greater trouble for the market, but the mortgage delinquency rate is currently as low as it’s been at any point over the past 25 years.

It’s also worth mentioning that luxury property exists in a market of its own to a degree. Anyone who would buy a luxury home is in a strong enough financial position that they don’t have to worry as much about changes in the local market. Because luxury homes usually provide the best amenities as well as proximity to key area attractions, they will always be desirable places to live. If you choose to put your property on the market, interested buyers will emerge despite what the market is doing. Luxury homes are known for their unique and exclusive features that set them apart from other luxury properties. Luxury properties in Key Biscayne offer features such as ocean views, private beach access, spacious outdoor living areas, high-end finishes and appliances, and smart home technology that provide a luxurious living experience. Buyers and investors seek these qualities when looking for homes in Key Biscayne, and they bring lots of value to the home. 

4. How much does my home value fluctuate?

Because homes are hard assets, it often takes time before you notice a significant change in their value. Hard assets are different from soft assets (such as a stock) in this manner. It’s not uncommon to see stock prices rising and falling on the same day. This rarely — if ever — happens with homes. If a home’s value was ever going to drop significantly, you probably wouldn’t notice the change for several months or years.

5. How does inflation affect my home’s value?

It’s understandable if you’re concerned about inflation right now. Take peace in knowing that it won’t negatively impact the value of your home. Over the past 100 years, home values have outpaced inflation by nearly three percent. This is true despite the fact that the last 100 years contained multiple significant financial challenges for the country as a whole. The market has shown an ability to rebound from significant financial crises and withstand the effects of regular concerns such as inflation.

6. What else should I know about my luxury home’s value?

There are several ways you can increase your home’s value. Consider what projects may have the best ROI and what additions will be the easiest for you to make. Lately, minor kitchen and bathroom renovations have provided the highest return. Because your property is a luxury home, you probably already have impressive features in both your kitchen and bathrooms. If you want to go the extra mile, consider adding in a second island or including high-tech elements such as a refrigerator with a built-in touch screen. Buyers are also looking for more energy efficient homes that can save them money on their monthly utility bills. An easy way to make your home more energy efficient is to replace your existing windows or install a new garage door. Not only will these elements improve your home’s insulation but they will also boost your curb appeal.

Reach out to Jacqueline Gallardo if you’re hunting Key Biscayne luxury homes for sale or condos for sale.  Jacqueline is an experienced and well-connected Key Biscayne real estate agent who specializes in luxury properties. She often hears about new properties for sale before they officially come onto the market. She has a deep understanding of what separates true luxury homes apart from properties that are simply more expensive than others. She would love to answer any additional questions you have about the current state of the housing market. When you’re ready to begin shopping for a new property, she is standing by ready to help.

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