Luxury homebuyers changing faces, places
Thursday, December 03, 2020
More than any other factor in recent years, the coronavirus has changed how we live and where we choose to live. Up until this year, demographers have puzzled over why there was so little movement among the population.
Now, individuals and families are relocating in large numbers and to places that a year ago would not have been top of mind. Especially in the case of higher-income households, this is causing profound shifts in the makeup of communities and the distribution of wealth.
While home sales overall in the second half of the year have exceeded expectations, purchases of luxury homes have skyrocketed. Online real estate brokerage Redfin reports luxury home sales in the third quarter surged nearly 42% year-over-year, while the rest of the market saw single digit increases. High demand and the willingness of higher-income buyers to pay top price have brought more properties onto the market, driving sales even higher.
That trend has continued into the fourth quarter. According to the Institute for Luxury Home Marketing (ILHM), sales of single-family luxury homes in October were nearly double those of the previous year. Homes are spending less time on the market and, on average, are selling for around the asking price or higher.
Even more noteworthy than the sales figures is where the wealthy are choosing to buy. Data gathered by Realtor.com show during the third quarter prices of luxury homes rose fastest in outlying and secondary markets but slowed in urban centers and tech hubs. Suburbs away from but within driving distance of large metro areas such as New York, Los Angeles and San Francisco experienced substantial acceleration in price growth due to increased demand for single-family homes.
Another popular option for higher-income buyers is a secondary or vacation home. Housing industry news site HousingWire relates that buyer traffic in beach and resort areas has been “crazy” during the summer months and on into the fall. As there is no sign of the pandemic abating anytime soon, in some cases families who rented properties to get away from the city for the summer are now enrolling their children in the local schools, buying homes and putting down roots where they can have more space and enjoy the outdoors.
Driving the demand for these properties is a new type of luxury buyer who is seeking a higher quality of life rather than ostentation and opulence. A recent study by Coldwell Banker Global Luxury (CBGL) identifies three emerging groups of affluent homebuyers, which it calls “trailblazers,” who are reshaping the luxury home market. What and where they choose to buy is dictated by recent lifestyle changes and a desire to realign their values and priorities.
Briefly, the study classifies these trailblazers into explorers, new suburbanites and resorters. As the name suggests, explorers are leaving cities in favor of exurbs, outlying suburbs and small towns in search of adventure and a more traditional secure and livable lifestyle connected to nature. New suburbanites are drawn to towns that offer some of the amenities of urban living and good schools while providing more spacious homes with big yards suitable for families. Resorters are those snatching up homes in high-class resort areas where they can enjoy the best of both worlds, outdoor recreation and luxury amenities.
As they settle in, these trailblazers, through their wealth, influence and lifestyles, will have an impact on their new communities, and bring wealth and opportunities to new markets. That should help to spread demand for interior design services more equitably and generate more business, both from those wanting to sell a property and from those wanting to buy. Since many of these trailblazers are below age 50, they have the potential to become a new pool of prospective clients, perhaps for some time to come.
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