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STEADY COURSE
While tariff tensions and stock market fluctuations could temporarily slow down sales, real estate offers luxury buyers a tangible, secure asset.
Luxury real estate presents resilient opportunities amid market shifts, experts say.
On-again, off-again tariffs, stock market volatility, stubborn inflation and currency fluctuations are likely to continue to affect global real estate markets in the coming months, but they could still present opportunities for some buyers.
“ Despite elevated interest rates and slower overall sales activity, the high-end real estate segment continues to show resilience, ” says Odeta Kushi, deputy chief economist, First American Financial Corp., a provider of title, settlement and risk solutions for real estate transactions. “ Wealthy homebuyers are often motivated by lifestyle, portfolio strategy or long-term bets on a specific market, not just short-term cost considerations. And, while headwinds such as trade tensions or financial market volatility may shift the pace or location of demand, they rarely erase it.”
The upper end of the housing market has consistently performed well in the past few years, attributed in part to strong stock market performance, says Lawrence Yun, chief economist, National Association of REALTORS® （NAR）.
While noting that market dynamics might temporarily slow activity, Yun remains optimistic about luxury real estate’s long-term trajectory. “ We’re starting to see a little hesitancy at the upper end, mostly because of the uncertainty about where the stock market will be in a month or next year, ” Yun says. “ But in the big picture, there’s sizable pent-up demand for trade-up buyers. In addition, even with a stock market correction, there’s plenty of household wealth being transferred to the next generation that will add to the demand for luxury housing. ”
Tariffs, investors and luxury housing
“ Residential construction costs, already more than 40% higher than pre-pandemic levels, could be further strained by sustained tariffs, ” Kushi says. Buyer preferences may shift toward turnkey homes that avoid the added cost and delay of new construction or major renovations, she says.
“ If tariffs continue to increase construction costs, that will likely jeopardize profits on the already slim margins in the building industry, ” says Joel Berner, senior economist, Realtor.com®. “ It’s likely more builders will pivot to higher-end homes where the profit margins are a little better, which would increase the inventory of luxury homes. ”
“ Among the top 10% of wealthiest households, real estate represents 18.7% of their total investment portfolio, down from 19.9% two years ago, ” according to a Realtor.com® April 2025 report, Berner says. That percentage may be higher after the most recent stock market correction, he adds.
Stock market volatility can have a dual effect on the luxury housing market, Kushi says. “ On one hand, sharp swings in equities can prompt some high-net-worth individuals to delay big purchases due to uncertainty, ” she says. “ On the other, real estate — especially in prime markets — might be seen as a safer, more tangible store of value. ”
The US$1-million-plus segment has continued to grow in 2025, now comprising nearly 13% of all recent existing — home sales, according to April 2025 data from NAR, Kushi points out. “ This suggests many affluent buyers still see real estate as a safe place to park money, offering both investment potential and the value of a place to live, ” she adds.
“ When the stock market experiences severe swings, wealthier households in the U.S., and globally, look for a more tangible, secure asset, ” Yun says. “ If the stock market continues to be volatile, people are more likely to invest in real estate as a hedge against uncertainty, ” he says.
Slowdown risk, interest rates and the luxury market
Berner anticipates the U.S. Federal Reserve Board （ the Fed ）to hold interest rates steady at least until several months of better inflation numbers are reported. Tariffs are expected to drive prices higher, which works against lowering interest rates, he says.
However, slowdown risks have risen due to evolving trade policies, Berner continues. “ [ It ] isn’t necessarily bad for the housing market, with the exception of the 2008-2010 housing-led downturn. Periods of economic cooldowns usually generate lower interest rates, which has a positive overall impact on the housing market, even the upper end. ”
Currency fluctuations and cross-border purchases
Inflation in May remained steady, according to a June 2025 report in The New York Times, and most economists anticipated that the Fed will continue to hold interest rates at 4.25% – 4.5% for the rest of 2025. Meanwhile, trade wars led to a weakening dollar – down 9.07% for the year as of June 18, 2025, according to The Wall Street Journal.
In mid-May, officials in China and the U.S. agreed to a 90 - day pause on new tariffs, according to a May 2025 report by AP News. As part of the agreement, the U.S. dropped its tariffs on China to 30% from the previous 145%, while China dropped its tariffs on U.S. products from 125% to 10%.
Overseas investor purchases in the U.S. slowed when the dollar was strengthening, which made it more costly to buy in the U.S., Yun says. However, a weaker dollar could make the U.S. more attractive to real estate investors, Berner says.
“ When a local currency weakens, international buyers with stronger currencies may find better value, effectively boosting their purchasing power, ” Kushi says. “ But it’s not just about pricing — currency shifts often reflect broader economic signals. ”
“ The President’s ‘ Gold Card ’ proposed visa program, which offers a path to citizenship for people who invest US$5 million, could potentially boost high-end demand for U.S. real estate, ” Yun says.
Continued volatility on many fronts is anticipated in 2025, but the luxury housing market is likely to be a source of continued opportunity.
Source: Visit the Sotheby’s International Realty 2025 Luxury Outlook report for essential insights. |
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