May 12, 2023
The US luxury real estate markets are in a state of perpetual change. That is why keeping an eye out for dominant trends can be a genuine make-it-or-break-it factor that will make selling or buying a home so much easier. These changes frequently result from global shifts and events that influence spending behavior. In that sense, the year 2021 was a surprisingly lucrative year for all stakeholders for several reasons. Consequently, there are many top luxury real estate trends to expect in the foreseeable future.
In 2021, the Covid-19 pandemic affected the global economy in that many people sought ways to invest capital in foolproof equity. Namely, luxury real estate saw significant buying activity since the appearance of the virus in 2020. This resulted in a widespread reduction of luxury real estate inventory in the US, given the increased demand for properties that provide space for work, play, and relaxation all at once. In addition to this, big-time wealth growth stemming from cryptocurrency gave way to increases in stock markets, housing prices, and widespread investments all across the board.
Demand for large and comfortable luxury real estate has been on the rise since 2020. The trend is likely to continue into the foreseeable future.
Interestingly, the heightened purchasing activity that started in 2020 has not yet subsided in 2023, but the areas of interest changed. In 2020, buyers moved to rural and suburban areas due to restrictive lockdowns and other preventive measures. In contrast, 2022 marked a comeback to urban real estate markets and major commuter towns.
Based on this, it is highly likely that 2023 will also be a big year for luxury real estate in most of the Bay Area and other centers of major economic activity and trade. On the other hand, luxury real estate in the countryside should also retain its appeal in 2023 and beyond as most rural properties come with land which has become a very desired commodity. Let’s take a closer look at the luxury real estate trends we can expect in 2023.
In September 2021, 36% more luxury homes were sold than listed for sale. Only one month later, this figure jumped to a staggering 55%. This indicates that luxury properties are in high demand. Industry experts predict this trend is unlikely to change As a result, the coming year will be a year of very competitive, high stakes, and high priced luxury properties.
As we mentioned, the inventory of luxury real estate properties has diminished due to growing demand. As a result, interest in luxury real estate has never been more pronounced. Interestingly, this is seen even in real estate markets dealing with ‘specialty’ properties such as properties in private communities, spacious and well-preserved historical properties, properties outside city centers, and even second properties.
Furthermore, the pandemic has also influenced building activity, thus impacting the luxury property supply chain. Mandatory lockdowns and infections have slowed down construction due to the unavailability of skilled workers and comprehensive hygienic regulations. What’s more, this has affected the time and costs of constructing new luxury homes. With postponed construction timelines, soaring cost estimates, and pronounced competition, it will be much more challenging to acquire a luxury home without paying large premiums.
As a solution to these problems, some homebuyers interested in buying luxury real estate decide to remodel their current homes while they’re searching for their new luxury home. Aside from increasing the market value of their old home, this decision allows them to prepare for moving into their new home. So, until you close the sale, you can take care of your designer furniture by renting a storage unit that will help you manage the remodel and relocation.
As the government urged people to stay at home whenever possible, many families began to see the benefits of owning larger properties offering a range of features. However, finding spacious properties in larger cities has always been formidable.
In light of this, most homebuyers express interest in luxury properties in up-and-coming areas far from urban centers. In fact, the majority of purchases of luxury real estate are likely to come from residents of major US cities such as LA, Miami, and New York City as they are willing to pay extra for luxury home features. Not to mention that buying in less saturated real estate markets allows the buyer to get more square footage in addition to luxurious features.
The migration from large cities to the country subsided in 2021, but in terms of large luxury properties, it is likely to continue well into the future. Of course, until you manage to score a luxury property of adequate size and price, there are ways to compensate for the lack of space.
The price thresholds continue to skyrocket as the current luxury inventory cannot satisfy demand. Median prices at which luxury properties were being sold in October 2022 increased by 43% for single-family homes and 24% for attached homes compared to 2020.
Although this may not seem like a significant change, consider that the statistics for homes sold in the price range from $1-5 million showed a 68.9% increase in the first ten months of 2021 due largely to the pandemic in comparison to 2019. As a result, the pricing thresholds for luxury real estate continue to increase all across the country.
Accordingly, it is not unreasonable to expect the continuation of this demand for luxury real estate, land & the bigger is better philosophy to luxury home ownership!
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