As with other sectors of the housing market, sales of luxury homes in the U.S. plunged in late March and April as most of the country came under stay-at-home orders. Domestic clientele decided to hold back, and with many other affluent countries facing similar restrictions, including bans on air travel, the pool of international buyers and investors soon evaporated.
Sellers quickly began to pull their properties off the market, further reducing opportunities for sales. In recent weeks activity has begun to revive, however, and industry insiders anticipate that sales will start to rebound by early summer.
At the outset of the economic shutdown, some real estate experts predicted luxury home sales would drop dramatically, perhaps by as much as 30 to 40%, relates the Institute for Luxury Home Marketing (ILHM). The Institute’s latest market analysis finds instead that sales were down probably between 20 and 25% compared to those of April 2019. At the same time, real estate agents in various luxury markets around the country are sensing pent-up demand on the part of buyers and believe that will result in a surge of new sales once buyers regain their confidence.
Signs of a possible resurgence have appeared in recent weeks. Barron’s reports that while total U.S. housing inventory for sale was down 4% in the week ending May 16 compared to April 1, the inventory of homes asking $1 million or more rose 1% during that same time frame.
Sellers, encouraged by an unexpected demand for properties, especially in highly desirable markets, are starting to list their properties once again. Real estate firms in Colorado and Texas, for example, are seeing buyer traffic for $1 million-plus homes returning to 2019 levels.
In part, the uptick in activity is a result of wealthy buyers wanting to make a change as a result of the pandemic. According to the ILHM, some are moving out of densely populated city centers to more open suburban communities. Others are shopping for a second or vacation home that can serve as a safe haven from environmental threats. Real estate agents are reporting increased interest in beach front, waterfront and mountain area properties. More livable, second-tier cities with thriving economies — such as Austin, Nashville and Boise — also are attracting affluent buyers wanting a more relaxed lifestyle and higher quality of living.
Along with a change in location, these buyers now are looking for larger properties with sufficient space for a home office, gym, entertainment and relaxation spaces, and room for outdoor recreation activities. They also want the latest and best in safety and wellness systems. Consequently, more are opting for single family homes and estates rather than luxury condominiums and townhouses.
Many of these buyers prefer properties that are move-in ready, with contemporary design and integrated smartphone technologies. For that reason, according to the 2020 Global Luxury Market Report from Coldwell Banker Global Luxury, sellers are undertaking extensive updates before buyers move in. Buyers may choose to do additional changes and upgrades as well. As these properties change hands, that should bring more business to interior designers.
At present, multimillion properties are not attracting as much attention as those in the $1 to $2 million price range. But agents are hopeful that will change as cities and countries begin to open up and economic activity revives, perhaps in the third quarter of the year.
Much depends on whether the public’s safety and health can be maintained. Observes the ILHM, “it’s probably safe to assume that we will see a rollercoaster of highs and lows in luxury sales over the next 6 months, especially if a community becomes impacted by a rise in reported cases.”