Savvy Investors Are Capitalizing on Prime Real Estate Opportunities

Today’s buyer of luxury real estate in the USA has become accustomed to having it all. Covid encouraged many city dwellers to find suburban, beach, and country homes (often in entirely different states), low interest rates and a record stock market made these home purchases more affordable relative to their net wealth, and media proliferation (traditional and social), gave ubiquitous insight into the algorithmic definition of the ideal home and lifestyle. The post-pandemic perfect storm of home price appreciation may have eased into a plateau during 2023, but the appetite of high-net-worth individuals for home acquisition has not, with 2024 already showing dynamic new trends.

The USA accounts for 32% of the world’s total wealth and 37% of the world’s millionaires. From my vantage point representing buyers and sellers in New York City home transactions — America’s most expensive city in terms of USD/m² — the impetus to protect this wealth from economic and political uncertainties, while simultaneously gaining the utility of having a home in a desirable place, has been the hallmark of 2024 thus far. The trend looks set to continue as those residents of the wealthiest cities in the USA no longer simply eye opportunities for a primary home, but look to own in other coveted locales (much of the time distributing cash rather than relying on financing), especially in America’s fastest growing metropolises of Austin, Scottsdale, and Palm Beach, as well as desirable locations such as prime Connecticut, the Hamptons, Miami, and the California coast.

Low inventory countrywide but golden opportunities exist

January 2024 sales over USD 5 million increased 31% in New York City on the year prior, highlighting a healthy market movement emerging for a variety of reasons. These include purchasers preferring to own their homes rather than paying record high rental prices, home ownership offering comfort to parents of children attending one of the city’s colleges, having a more personalized base from where to conduct business, or simply to maximize life and enjoy New York when the opportunity exists to buy with solid negotiability. Despite 2023 being a three-year low of sales activity in New York City, we have a seven-year low of inventory that shows no signs of improving in 2024, especially with increased transaction numbers year on year already being recorded. This low inventory trend is one mimicked throughout the country and looks to define 2024, no matter the sub-markets or budget.

Anecdotally I have worked on a number of sales at the prestigious super-tall luxury building 111 West 57, wherein one of which the buyer purchased two homes for approximately USD 14 million each —one for personal use and the other to rent out for close to a 5% cap rate. The rationale for the additional “investment” purchase was the quality of the asset available to acquire for a relatively good price with respect to other major international property markets, as well as the return on investment being akin to what banks were offering for interest on fixed deposit. In short, while the prices are not reflecting all-time highs, the opportunity exists to buy into best-in-class homes in many mature markets at demonstrable value, and savvy high-net-worth individuals are capitalizing.

Texas comes to the fore among overseas investors

Political uncertainty of a potentially divisive election year would historically give prospective transactions pause, however in relation to other international markets, the USA appears relatively safe and continues to be a store of capital for foreign buyers. Historical overseas focus on New York, Los Angeles, and the Bay Area continues, however these locations are now being supplemented by the Texan trifecta of Dallas, Houston, with its pioneering land use policy reform to build new homes, and the tech darling Austin. Foreign investors recognize the migration of US citizens to lower tax states, as well as the proportionately high number of wealthy individuals on a per capita basis, and with a broader selection of sub USD 2 million priced properties, Texas is one place now commanding improved overseas focus.

As many international buyers continue to wait patiently for the high cost of the US dollar to subside, coupled with the hope of certain nations easing restrictions on moving money internationally, the scene is currently set for a variety of US residential sub-markets to grow prolifically. Throw reduced interest rates into the low inventory mix, and a return to greater geopolitical stability throughout the world, and it’s easy to see why high-net-worth individuals are looking to purchase the very best quality opportunities right now, all across the USA. 2024 is a time of strategic defensiveness for the growing wealth class and we’re seeing the smart money seize this moment by buying prime real estate intelligently and increasingly, when the right opportunities emerge.