Sotheby’s annual outlook on the luxury market tier may offer agents insights into helping luxury buyers accomplish their goals.
What’s Ahead for Luxury Home Consumers
Luxury homebuying has remained strong throughout the ongoing two years of the pandemic. Second home purchasing in resort/exurb/rural communities, updating primary residences with more outside space and closing discounted deals in city centers that experienced price drops were just some of strategies luxury buyers and agents employed during 2021.
Going forward, Sotheby’s International Realty’s annual outlook on the luxury market was just released. This outlook may help luxury agents and consumers accomplish their collaborative goals in 2022.
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Fiercer Competition Anticipated in 2022
Agents! Sotheby’s just blew through its previous global sales volume record by +36% y/y to $204B in 2021. You may want to pay particular attention to advice offered by Sotheby’s.
Several Sotheby’s franchisors were quoted in this year’s outlook report. One said, “A true buyer’s market isn’t likely, as people continue to move, and real estate is considered a hotter investment than ever.” Another franchisor said, “…there are two major issues keeping the market on the side of sellers: low inventory and material supply shutdowns.”
The consensus bottom line from Sotheby’s: luxury homebuying in 2022 is likely to see fiercer competition than ever. Four consensus tips to help luxury agents and consumers achieve their 2022 housing goals are below:
Insights from Sotheby’s
Stop Waiting – Home Prices Not Expected to Fall
Jonathan Woloshin, UBS Wealth Management Head of Real Estate and Financials, said, “If you look over the course of decades and centuries, luxury real estate – with all its ups and downs – has held value and even grown in value.”
SIR Chief Marketing Officer Brad Nelson told Inman that only a “2008-esque financial event” could switch this solidly strong seller’s market to a buyer’s market…and even then, consequences of such an unlikely shift from a seller’s market to a buyer’s market would not “be worth a dip in home prices.”
Nelson concluded by saying, “Today’s appreciating (home) prices are the new normal, and in fact, buyers should be prepared for prices to continue to rise.” Nelson substantiated his words by referencing a recent Goldman Sachs prediction that US home prices will increase another +16% by the end of 2022.
Even Luxury Offers Are Not All About Money – Be Creative
According to Sotheby’s annual housing outlook report, lux buyers are exhausted with seemingly endless bidding wars.
Nelson and other Sotheby affiliates believe that increased demand from all over the world in perpetually desirable US cities such as New York City (ranked #1 in the world with ultra-high-net-worth-households internationally via the most recent Wealth-X report), Los Angeles and San Francisco remains stable. Nelson said, “This increased demand, coupled with rising interest rates, encourages a buyer to purchase sooner rather than later.”
Nelson advises lux buyers and agents to “…discuss the risks and potential benefits of waiving inspection contingencies or offering flexibility with closing dates or rent-back provisions.”
Why? Because these more creative offers, “…aside from price, may be very attractive to a seller who is processing their own emotional and logistical realities of moving.”
Include Luxury Condos as Potential Housing Options
Inventories among luxury second-home and vacation markets are experiencing a severe drought. Additionally, custom-built new-home luxury construction is more costly than ever imagined due to skyrocketing material costs, supply chain slowdowns and labor shortages. (Check out this week’s companion article on exploding material costs, etc. for new builds and renovations on resale homes.) A house that would have cost $1.2M pre-pandemic now costs $1.3M.
One solution to this escalating supply-demand imbalance in the new construction luxury sector is the development of more serviced, luxury condominiums to accommodate the pending shift of Boomers who will be wanting to downsize since the ultra-affluent tend to “move in packs.”
Nelson said, “Project currently under construction, like The Mill District in the popular California Wine Country, couldn’t be coming at a better time.”
Lux Buyers Skipping Suburbs & Moving to Exurbs
Sotheby’s Nashville-based managing broker Jenny Telwar explained that ultra-lux buyers are purchasing homes in exurbs such as Williamson County, consistently ranked among the 20 wealthiest counties in the US. Telwar said, “This is where we’ve seen our craziest market – the houses selling in a day or a a weekend with 30 offers, the $200,000-over-asking bids, and buyers waiving everything under the sun.”
In Austin, tech workers who’ve flocked to the city for work opportunities are attracted to the exurbs of Dripping Springs and Cedar Park. Sales in these exurbs are up +21% y/y, 5% more than sales in Austin proper.
Remote workers based in New York City for one or two days/week are “…more inclined to live full-time in the Hudson Valley and take Amtrak to the city as needed…” despite the two-hour commute each way.
Nelson said, “These affluent buyers will bring their spending power to exurb communities, so expect new restaurants, boutique luxury hotels and gourmet markets to follow. At the very high end, buyers are also more likely to bring their ‘celebrity’ architects and interior designers with them, which may upgrade the ‘significance’ of housing inventory long-term.”
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Thanks to Sotheby’s International Realty and Inman.