2020 Luxury Market Forecast
By the end of the last decade – specifically 2019 – many homeowners found themselves with more equity than they knew they had, while simultaneously, job stability was sound and wages were increasing. When those factors unite, homeowners begin to dream – dream of upsizing and/or purchasing a second home. During the past two years, many homeowners have realized this improved financial status and are now seeking homes in the luxury space.
The U.S. economy is strong today, with buying opportunities throughout the luxury end of the market. Thomas Veraguth, Strategist at UBS Global Wealth Management, says in Barrons.com,
“There’s a good link between luxury real estate prices and [economic] growth.”
Available inventory is a key element that can impact home prices. At the upper range, the inventory is greater in comparison to the entry-level market, making moving up to a luxury home a growing reality for many buyers right now. While many economists consider the US to be in the depths of a ‘guarded luxury market,’ global economic events seem to have nearly removed the ‘guarded’ from the conversation during the past 2 years.
2. Activity in the Market
With more buying opportunities at the higher end, we should start to see an increase in activity. The same article states,
“Affluent homebuyers will start to come out of the woodwork as they find rising luxury rents less appealing and sellers get even more negotiable on price.”
Buyers looking in the luxury market are taking the opportunity to negotiate on price in a segment where there are more choices, too. According to the Luxury Market Report, homes sold for an average of 96.94% of the list price in December, 2019.
Buyers are also getting more for their money with greater purchasing power due to the current low interest rates.
Migration to New Markets
As a Guild member of the Institute for Luxury Home Marketing, trends and data are always interesting to follow. Each market is vastly different and, as evidenced by the most recent data, 2019 saw a continuation and escalation of real estate investment into 2nd and even 3rd tier markets. Dallas, Houston, Denver, Seattle, and Las Vegas, previously on the luxury second home radar (2018), last year (2019) saw cities, including Jacksonville, Charlotte, Nashville, Cincinnati, Boise and Kansas City, added as markets of significant growth in the luxury space.
Luxury properties are now more than stopping-off locations for a second home, a week here or there… Second homes in the luxury market must offer the full-home experience allowing executives to live, play and work – and bring their family (humans as well as fur babies) and friends with them too!
New Groups of Influence
Okay, we all focus on a well-rounded business and seem to be inundated with information on millennials of late. There are some important nuggets in these reports about different segments of society. This year, there has been a growing acknowledgement of the power of the millennials. This group is a generation set to inherit the greatest wealth by 2030 from their baby boomer parents. According to a recent global luxury report, this figure is estimated at nearly $68 trillion.
Due to the recession and the propensity for millennials to carry large student loan balances, this group may have been slower to accumulate wealth and partake in homeownership than previous generations. Research shows that over 92% of millennial millionaires are now homeowners who wisely recognize that real estate is a way to build wealth. Their influence will continue to be profound and is already being translated when we look at the significant changes in the types of properties, locations, and amenities in demand.
3. Buyers Are Coming Back
Homeowners with an entry-level home can now take advantage of their equity and the inventory shortage at the lower end of the market, driving their sales prices higher on their current homes. For those homeowners, the stars have aligned for those who are ready to make a luxury move.
“We’ve already seen buyers who’ve been on the sidelines for two years trend back into the market.”
Whether it be a first, second or third home, if you’re considering entering the luxury market, 2020 is expected to be a great year to do so. For those who are ready to make that move, let’s talk! Let’s set a time to meet with your financial planner and put a solid real estate investment plan in place – whether new or expanded. Call or text (704) 491-3310.
© Debe Maxwell | The Maxwell House Group | RE/MAX Executive | CharlotteBroker@icloud.com |Three Things that Make 2020 a Great Year to Make a Move into the Luxury Housing Space