In partnership with Picasso, I sat down with the company's CEO Austin Allison to discuss lower mortgage rates and the impact on the luxury housing market.
Take a look. mortgage rates dropping after Fetcher Powell expressed labor market concerns at Jackson Hole, Wyoming, and this could mean lower borrowing costs for home buyers and refinancing options for homeowners as well.
With the average 30-year fixed rate hovering around 6.6%, and with slow job growth and important economic data ahead, markets are watching closely.
Two rates.
Well, joining me here this morning is Austin, Alison, CEO of Picasso, the marketplace for co-owned luxury vacation homes.
Austin, great to have you here.
Thank you so much for joining me for having me.
Well, we know that all of us have sky high expectations when it comes to the central bank and what will happen in terms of rates.
But what does this mean for the US housing market?
Well, the housing market's in an interesting place right now.
They just reported the July numbers recently, which reflected that housing sales are approximately flat year over year. and in one of the things that we're seeing though is in the luxury space, the market is doing a bit better.
Transaction volume is a little bit higher, prices are appreciating a little bit more, but the big thing that we're focused on at Picasso is creating a new way for people to own, really redefining the way that people access the American dream through co-ownership, making it more affordable and lower hassle for people to own a vacation home.
Yeah, and we know that home ownership is challenging given the rates where they are, and of course the cost of housing as well.
But as you mentioned, we're seeing this bifurcation.
So when it comes to co-ownership, what do you see?
Well, I mean, if you rewind back about 100 years when the 30 year mortgage became popular, the 30 year mortgage was introduced as a way to make homeownership affordable for more people.
Co-ownership is the latest version of that.
The way that it works is a small group of people get to pool their resources together and own a beautiful luxury home.
We operate in about 40 destinations around the world in the US, as well as Paris, London, Italy, Mexico.
And we enable people to buy more than they would otherwise be able to afford on their own.
In addition to the accessibility, the other thing that we're seeing is that today's consumer is looking for an ownership experience that is hassle-free.
So one of the things that we do is we manage the entire experience.
Some people describe our model like net jets of luxury homes.
It's, it's turnkey and accessible.
It's a smarter way to own.
Yeah, and Austin, when we think about home ownership, no matter where you live in this country, it can be challenging.
So what does owning 1/8 quarter of a home actually look like?
Yeah, well, basically the typical vacation home usage pattern is about 5 weeks per year, meaning even for people who own a whole vacation home, they typically only use that home 5 weeks per year.
So our typical model is 1/18 or 125% ownership, and for 1/8 ownership you get approximately 5 to 6 weeks per year.
We've designed a proprietary owner's app that gives people pro rata access to the whole.
Throughout the year, so if you own 1/8 of the home, you will be guaranteed 1/8 of the peak season, 1/8 of the non-peak season, and 1/8 of the holidays.
And we're seeing this co-ownership model just grow in popularity.
We just conducted a survey where about 80% of Americans reported that they are interested in co-owning a vacation home.
So this is not just a trend.
This is a new ownership structure that is here to stay.
And I understand your focus on the luxury market and in this day and age of social media, all of us have an idea of what luxury looks like.
But when you're talking about supply and demand, what does it really look like?
Yeah, well, the way that we think about luxury, the typical home that we're offering is between 4 and $6 million but the range is from $2 million to $25 million.
Um but when you're looking at the real estate market at large, typically we're referring to anything over $1 million in value to define luxury.
But the reason why we focus on luxury is because we find that most of our customers are leveraging the co-ownership model to buy a bigger or more luxury home than they would otherwise be able to afford on their own, meaning if they could afford a $1 million whole home with Picasso, they can afford 1/8 of an $8 million home.
So our buyers really appreciate that aspect of the model.
Yeah, and finally, before I let you go, the buyers that are in this market, how do rates affect them?
Well, interestingly, over the long term we believe that a higher rate environment is actually helpful for the co-ownership category because the alternative to what we do is buying a whole home, and when rates go up, the impact on a whole home purchase is much greater than the impact on a co-ownership purchase.
That being said, what we found over the course of the last couple of years is that as rates went up, it did sort of spook the entire market.
And we did see transaction volume slow down for the entire real estate industry, but what we're finding now is that people are adjusting to this new interest rate environment as the new normal, and it's no longer the objection that it used to be.
Well, Austin, great having you on the show today.
Thank you so much for joining me here at the New York Stock Exchange.
Thank you.
