That data comes from the total number of home shoppers, as we see our real estate market transition from recovery mode to red hot, once again. Another 26% of poll respondents are considering purchasing a high-end home, typically priced at $500,000 or above, though price tags vary per location. That leaves only 61% of transaction-ready homebuyers who are NOT considering purchasing a high end or luxury home, an astounding statistic.
Why is that so relevant? As we found out with past real estate booms, a huge market factor is consumer confidence, and all evidence points to huge confidence in the market. When that happens, prices always follow – great news for the housing portion of our total real estate recovery. Even as interest rates rise a little as the Fed backs off intervention, a forecast of stabilization is fantastic news. It’s also great news for sellers, who are looking to move their luxury or high end home, sell and then upgrade, or even sellers of more modest homes who can match some of the amenities found in luxury homes to make their homes more attractive.
The Realtor.com survey revealed that valuable of the respondents who were ready to buy a home:
The reasons buyers started their high end or luxury home search:
19% attributed recent career success to why they initiated the home buying process.
A substantial 17% were buying because they were newly retired.
14% said they were buying as an investment.
12% were buying their first home, a high number in the high-end market.
The biggest challenge high-end and luxury homebuyers cited:
40% said that finding a property that met their family’s needs was a challenge.
20% said the limited number of properties offered was an issue.
11% said properties had limited universal appeal.
8% cited challenges with getting a mortgage loan.
The most important features of a home they considered for their luxury purchase:
54% said having a chef’s kitchen was important.
44% wanted a home with a view of the ocean, mountains, cityscape, etc.
Interestingly, only 38% said the square footage of the property was a key attribute, a number that is probably much lower than home buyers only five or ten years ago.
36% wanted an expansive master suite.
What about those 61% of respondents who did NOT want to buy in the high end or luxury market? If they had the means to purchase in that market, they’d look for a home with a great view and a chef’s kitchen, but also outdoor living amenities and a pool. Waterfront homes would be the most desirable, followed by countryside and then in the mountains.
A lot of top shelf home buying is taking place in the Northeast and South Atlantic coastal states, but 15% of luxury homebuyers are currently looking in California, Oregon, Washington, or Hawaii. The number of California homes selling for $2 million or more reached an all-time high last year. In year over year appreciation from 2012 to 2013, Los Angeles saw 14% appreciation and San Francisco 10.4% - big movement on already big numbers in a market where fewer buyers and a delayed wave of foreclosures softened things. This year alone, price reductions on luxury real estate listings have totaled 14% as inspired sellers compete for luxury buyers. Of course, that’s great news for high-end homebuyers, who can basically but 20% more home for the same price tag as they did only two years ago.
There are several reasons for that – jumbo loans are gaining in prevalence and popularity again, and interest rates on these high-dollar homes are favorable. A strong job market among metropolitan areas is another factor. International buyers are playing a big part, particularly Chinese investors who are snatching up luxury homes, vacation homes, and commercial properties. From April 2012 to March 2013, international transactions tallied $68.2 billion, accounting for 6% of all U.S. home sales in dollars and more than 4% of total transactions. 63% of these are all cash deals and international buyers spend more, too – an average of $354,000 per home compared to $228,000 for their domestic counterparts.
What does this all add up to? Great news for luxury homebuyers, who are in position to take advantage of the perfect storm of market factors to obtain their dream home. And for sellers, don’t try to stick a sign in your front yard and hope that high-end homebuyers show up to your open house – luxury homes should be listed and marketed differently than just any house. Buyers are more tech and Internet savvy, put far more diligence into their decisions, and negotiate aggressively. It takes an experienced agent who specializes in the luxury market to sell your home effectively and for top dollar.
Contact us if you're interested in buying a high-end home or selling your luxury property.