Luxury Real Estate Market: What Sellers and Buyers Need to Understand

Demographics and the New Realism of Luxury Real Estate

The dominant theme of the post-Great Recession luxury real estate market has been the gap between buyer and seller expectations. This new realism is driven by demographics.

LandVests average seller is shifting from the Silent Generation to the Baby Boom generation. For both groups, housing prices have been on an almost continuous rise for most of their adult lives.

Our average buyer is 45. These Gen Xers have been buffeted by the 1989 recession, the 2001 tech bubble and even more so by the Great Recession. Not at all a smooth upward path for real estate or asset prices.

To boot, there are about a third less Gen Xers than there are baby boomers.

Combine a lot of downsizing boomers, fewer Gen Xers, and plenty of millennials moving up no wonder urban markets are on fire, while suburban houses and rural second homes are sluggish.

What does this mean in a global context?

Christies publishes an annual Luxury Defined white paper. This years edition focused on the New Realism of the luxury market. Key messages are:

• Prices of prime properties are set by location, features, size, rarity, provenance andmost importantly by supply and demand conditions that determine what the market will bear.
• Todays new luxury landscape is increasingly a tale of misaligned expectations, characterized by a widening disparity between what buyers and sellers consider fair market value for prestige properties.

Given the gap in experience between boomers and Gen Xers, and the weight of boomers selling vs. Gen Xers selling, this makes sense.

What to do?

Take the advice of the best in the business. Again, from the white paper:

Expert brokers are counseling some overly aspirational sellers to rethink their pricing strategies to match the more cautious attitude of buyers today. "We do have some instances where the buyers have not stepped up to the plate to meet sellers expectations," says Jeff Hyland of Hilton & Hyland Real Estate in Beverly Hills. "Were working with sellers now to get more attuned to where the market really is." Hall Willkie of Brown Harris Stevens (NY and Palm Beach): "There is never a market for overpriced listings. If you havent had offers or are not getting the proper amount of showings, the market is telling you there is not interest, and you have to reduce the price." "This cycle has been characterized by a sharp attention to value, a desire for the known versus the adventurous, and the almost complete retreat of older baby boomers as buyers. Gen X is a tough-minded, value-oriented bunch, and there arent as many of them who are buyers as there are baby boomers who are sellers." Ruth Kennedy Sudduth, LandVest

 

For the full white paper, click here. For expert guidance on how to navigate todays challenging real estate environment, contact Ruth Kennedy Sudduth, Director, Residential Brokerage Division.