What Wealthy Homebuyers Want and How It's Driving the Market
The pause button might have been hit on home sales this year, but the luxury market is keeping pace. "The luxury market has been leading the recovery for about two years," says Laurie Moore-Moore, founder of The Institute for Luxury Home Marketing. "When real estate values dropped during the downturn and other investments lost their luster, luxury residences really became an investment focus and became a portfolio as much as a lifestyle purchase."
According to real estate website Redfin, sales of the priciest 1 percent of homes in the U.S. are up 21.1 percent so far this year, following a gain of 35.7 percent in 2013. For the rest of the market, sales have dropped 7.6 percent since the start of the new year.
There are currently more than 9 million millionaires in the U.S., according to Millionaire Corner Affluent Market Insights and they're spending. According to the National Association of Realtors, sales of homes costing $1 million or above increased 7.8 percent in March from the same period a year ago.%VIRTUAL-pullquote-"Money has become a little bit of a dirty word, today's buyer is very below the radar.% During that same time, homes costing $250,000 or less dropped 12 percent.
When it comes to luxury home purchases, it's not all about the McMansions, according to experts. Many high-income buyers are actually downsizing, but moving to big cities like New York and Los Angeles -- the top two luxury markets in the U.S. (London was rated No.1 in the world, according to a recent report from Christies International Real Estate.)
While it seems wealthy individuals are comfortable with the economic recovery and spending money again, that doesn't mean they've totally forgotten about the housing bubble burst heard around the world. "I delineate the pre-Lehman buyer and the current buyer," says Kirk Henckels, vice chairman of Stribling Private Brokerage in New York City, which handles properties worth $5 million or more. "Before the crisis, money was cool, people were ostentatious and didn't mind people knowing what they had. Since then, money has become a little bit of a dirty word, today's buyer is very below the radar.
What's considered luxury housing varies by market. According to Redfin, the most expensive 1 percent of homes in San Francisco sold for $5.35 million or more (which means about a $1 million down payment); 350 miles south in Los Angeles, being a luxury home owner will cost a minimum of $3.65 million. In Atlanta, a luxury housing budget would be around $861,000 and $815,000 in Raleigh. When it comes to buying a home with a seven-figure price tag, here's what experts say buyers are demanding: