Throughout the U.S., luxury homes are the fastest-selling sector of the market, up 41 percent year-over-year in the first quarter of 2021, according to a recent Redfin report. That far surpassed the 7 percent rise for affordable homes and 5.9 percent for mid-priced homes.
“The pandemic turned the switch on the luxury market, thanks to the work-from-home phenomena and low mortgage rates,” says Lawrence Yun, chief economist and senior vice president of research, National Association of Realtors®. “Nationwide, the luxury home inventory is the lowest since the 1970s.”
Yun was a featured speaker at a May 19 webcast hosted by Luxury Portfolio International (LPI) the luxury marketing division of Leading Real Estate Companies of the World®. “Demand for prime property is far outstripping supply, and we see that trend continuing as vaccinations ramp up,” says Mickey Khan, LPI president.
A long-term trend
In the webcast, Marci Rossell, chief economist, Leading Real Estate Companies of the World, said the tight luxury market is the result of two long-term trends that were in place before the pandemic. “Home building simply has not kept up with population growth,” she says. “In addition, a wave of Millennials is entering the market and they are accustomed to spending a higher percentage of their income on homes than the Boomers.”
One of the intriguing aspects of U.S. luxury homes market is the rapid pace of sales without significant demand from international buyers, according to Yun. “We expect the international segment will pick up as vaccinations increase around the world,” he says. “That will support the recovery of urban markets like New York City, as many foreign buyers want to own in downtown locations.”
In the Midwest, a majority of luxury homes with space to accommodate large families and lifestyle changes are selling above list price, according to webcast panelist Kristine Burdick, president Midwest, Howard Hanna Real Estate Services. Michael LaFido, founder/CEO, Marketing Luxury Group and a luxury listing specialist in the Chicago suburbs added, “A decade ago, downtowns were booming, but now executives are coming out to the ‘burbs.”
Tips for brokers and agents
In a recent interview, Latham Jenkins, luxury real estate broker, Live Water Properties in Jackson Hole, WY, noted that luxury properties are particularly scarce in popular vacation destinations such as Las Vegas and Miami, as well as Wyoming. “This stems from luxury buyers’ interest in finding new, co-primary residences in tax-friendly locales, coupled with their diversification away from equity markets,” he says.
For brokers and agents to succeed in a persistently low inventory environment requires a focus on gaining listings, says Jenkins. “I have switched my marketing campaigns to only focus on home sellers,” he adds. “I am using specific messaging to distinguish my experience with managing multiple offers and creating successful outcomes in a frenzied market. I also make a point to call numerous colleagues every day to ask if they are working on any listings. This practice just produced a large sale for me that I would have missed, had I not asked about listings at the end of a call.”
Burdick also emphasizes the importance of reaching out to past customers and contacts in order to identify potential listings through referrals. She adds that real estate professionals need to understand and use all available tools when making a presentation to sellers. That includes knowing local market data, including pricing trends, and demonstrating the ability to market luxury properties to targeted buyers, including social media, public relations and international magazines.
LaFido recommends using video applications for listing presentations as a way to differentiate agents from their competitors, while dedicating time for prospecting every day. “When a past client knows a friend thinking of listing, you want to be the top-of-mind agent,” adds LaFido. “People do business with someone they like and trust, so be likeable and show how you bring value to them.”