How the Luxury Housing Market Became Invincible in 2021

  • Inman
  • 10/11/21
Original article published by Inman
Written by JIM DALRYMPLE II
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We all know the story at this point. Coronavirus pandemic, a hit in 2020, everyone started looking for another type of home. Urban people flocked to the suburbs looking for cheaper prices and home offices, near or in a completely different state. And the people of the suburbs went to the countryside in search of more land.

This process has been a major housing story for the past year and a half — Zillow executives called it “great reorganization” — And it has changed real estate significantly in every price range. But perhaps no market segment has been as affected as luxury. In the rush to the lush meadows of New York City, San Francisco got cold. Meanwhile, in comparison to backwaters such as Idaho, it has become a luxurious destination.

This week, Inman scrutinizes the luxury markets, investigates the year’s biggest sales, and categorizes the markets by popular segments such as mountainous and seaside escapes. This is your chance to explore a home that sells in 8 and 9 digits and offers high-tech moguls, entertainment magnets, and tips for the life of a global oligarch.

But what does this really mean?

To answer that question, Inman contacted a handful of industry professionals and practitioners focused on the luxury segment. And the pictures that emerge from these conversations are generally good. High-income consumers are still buying and selling homes, often more aggressive than other niche people, and in some cases, luxury-focused real estate professionals have reached a record year. Not all markets are equally lucky, but looking forward to next year, a small number of luxury industry members look forward to continued strength.

Market so far in 2021

Each market is different, but Michael Altneu — Vice President of Coldwell Banker Global Luxury — He told Inman that the overall high-end residential segment was particularly strong in 2021.

“The luxury sector continues to outpace itself,” said his company. Genblue event said. “That’s extraordinary.”

Altneu said the luxury market generally continues to thrive, thanks to the widespread choice to work at home. Many have benefited the type of consumers who are considering housing in the luxury segment. And as a result, those consumers are looking for more traits that can improve their lifestyle and their health.

“Health is the latest amenity,” Altneu added.

The rise of home offices has been widely debated over the past year and a half, and Altneu states that it is one of the features luxury homebuyers want. However, he also said that popular facilities include home gyms and theaters. Zoom room specially configured and integrated for video conferencing smart home technology. And in the end, the buyer at the highest end of the spectrum simply “wants everything,” he said.

“They want a home with horse riding characteristics,” Altneu explained. “They want it on the beach. They want it all, not just in one house. They want it in multiple properties.”

Beyond the wide stroke of consumer taste, it can be difficult to pinpoint what is happening in a luxury space, as there is no clear and quick definition of what defines luxury. A $100 million home in Beverly Hills is clearly a luxury, but what about a nearby condo that costs $1 million? Or is it a $600,000 home in Idaho or Texas?

To bring order to the turmoil, Inman spoke with Gay Cororaton, a senior economist at the National Association of Real Estate Agents (NAR). Cororaton looked at homes that sold for over $1 million. And she found something interesting. The share of homes in this price range jumped from just 1.8% in 2012 to 6.61% in 2021.

More interestingly, much of that increase occurred only last year. In both 2019 and 2020, the overall share of homes over $1 million was only 3.48 percent. This is almost half of 2021.

“The data shows that housing share is increasing at the top of the market,” said Colorado.

Credit: Jim Dalrymple II based on NAR data

According to Cororaton, “the entire market is shifting upwards due to supply shortages.”

Although selected by Cororaton, it’s happening in much of the United States, especially in the west. And she said part of what was happening was an increase in demand for larger homes, often in the suburbs, partly caused by a pandemic.

For clarity, $1 million will buy something different from Phoenix than in Park City, Utah.

But these numbers show that the high end of the market seems to be on track. Overall, the data show that the United States has a desire for expensive real estate, even if relatively pedestrian homes in expensive areas are pushed into the $1 million segments. Altneu is right that this sector is outperforming overall.

Property preview:

This year’s most expensive luxury property (actually two units in the same skyscraper) were handed over to Jo Tsai, the founder of Taiwanese Canadian Alibaba and the owner of the Brooklyn Nets. The building is on the edge of Central Park in New York City. Check back in the coming days for more information on this property and other top luxury listings in 2021.
 
 
220 Central Park South Courtesy
 

Case study: New York City

Of course, not all markets have worked equally well.

Inman’s list of top luxury sales to date in 2021 includes three properties in New York City, but Manhattan-based luxury agent Lucian Serifovich has capped her region’s price range. Some real estate, especially some buyers, fled the city during a pandemic. The market could have fallen 12 to 15 percent compared to before the pandemic, according to Serifovich.

On the other hand, recent contract activity has actually increased compared to last year.

Her claim was that the New York luxury market could have been hit a bit, though probably not as serious as widely assumed.

“Looking at everything and the big picture, it’s not as affected as I expected,” she added.

Serifovich has also compiled several reports for Inman that provide snapshots of the Manhattan condo market for prices ranging from $5 million to $10 million. According to the report, pending sales for that segment plummeted in the summer of 2020. However, from September to July of this year, pending sales for that segment surged. It then fell again but remains higher than at any point between 2011 and 2020.

According to another report provided by Serifovich, the supply of mid-upper-end condos is currently on the rise in Manhattan, but has fallen from levels recorded last fall and is a pandemic.

The price per square foot of such a condo in September 2021 was $2,191 — down 11.8% year-on-year but increased 2.6. Compared to 1 month ago.

The point of all this is that the Manhattan luxury market seems to be experiencing some seasonality and pandemic resistance, but overall it seems to be growing at this point.
 

Property preview:

One of the most expensive cities in 2021 was sold in May when Swiss financier Jacqui Safra offloaded his triple penthouse on 2 East 88th Street. Check back in the next few days for more information on this property and the list of other luxury cities in 2021.
 
 
Credit: 2 East 88th Street and City Realty
 

Case study: Los Angeles

Michael Nourmand, president of Nourmand and Associates, told Inman the luxury market in Los Angeles where he practices has essentially been on fire over the past year.

"Twenty twenty-one is a record year for luxury sales," he said. "An absolute record year. All price points are doing well."

The fastest-selling homes in Nourmand's area have included those with abundant natural light and which are often done in a modern, traditional, or Cape Cod style. Regardless of the style, he has seen surging interest in remodeled or newly built homes, beach-front properties, and homes on L.A.'s more expensive west side.

"I think the hottest luxury market in L.A. is still beachfront property," he said. "Malibu is more of a second home market but it almost became a rite of passage if you were wealthy and you live in L.A. Instead of going to Paris or Italy, you did weekend trips to your house in Malibu."

Nourmand has also seen growing interest in his area for units in full-service condo buildings. On the other hand, he said that it has been more difficult to sell once-popular Mediterranean homes from the early 2000s.
 

Property preview:

One of this year's priciest beachfront properties appears to have gone to none other than rapper Kanye West, who picked up a 3,665-square-foot house on Malibu's Puerco Beach. Check back in the coming days to learn more about this property, and other luxury beach listings of 2021.
 
 

What will the luxury of 2022 look like?

No one who talks to Inman imagines that the luxury market will slow down next year. For example, Altneu pointed out that many people at the top of the income spectrum are actually getting out of the pandemic more wealthy than they originally were. They need to continue to drive demand for high-end homes, along with consumers of “new power players” who have entered the luxury segment for the first time.

“None of us sees many signs that it slows down,” he said. “I don’t think I’ll see these things disappear.”

Altneu also speculated that some areas that had some difficulty during the pandemic could be revived. For example, in 2022, urban areas could be more attractive in two years.

“We expect to see a greater resurgence in denser areas,” said Altneu. “People may have missed the culture for some time.”

Another trend that could shape the luxury market in 2022 is the return of people to the expensive coastal market. Nourmand said many people who moved from places like California to cheaper states like Texas and Florida may begin to crave their first hunt. They may find that the new location does not have the same network of family and friends. Or you may simply miss the culture and the weather.

“I think you’ll see many of those people coming back,” he said. “and I think 2022 will be another flag year.”

Another major upcoming trend in luxury mentioned by almost everyone was the resurgence of foreign buyers. During the coronavirus pandemic process, travel restrictions made it difficult, and in some cases impossible, for foreign buyers to visit the United States. Some have responded by buying an invisible home, but experts who spoke with Inman believe that the end of the travel ban could unleash a flood of international demand.

While only 2% of home sales in the country are for overseas buyers, in some markets (such as certain areas of Florida), foreigners make up 15% of buyers.

“In those places, I think they move the needle,” Cororaton added.

Serifovich agreed. She had already worked with several international buyers during the pandemic and recalled one case where a Canadian client struggled to cross the border. Serifovich was generally optimistic around 2022 but said the luxury market should gain even more momentum when foreign real estate consumers no longer have to jump over such hoops.

“I definitely believe,” she concludes.


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