Sentiment from top Luxury Portfolio International® affiliates in the U.S. and Canada indicates a strong close to 2013 and a rising tide in the affluent segment of the housing market for 2014.
Recognized luxury leaders in Beverly Hills, Santa Barbara, San Francisco, Vancouver, Newport Beach, Vail, Houston, Dallas, Atlanta, the New York City suburbs, Washington, Sarasota, Miami and Boston are consistent in their year-end analysis of the 2013 luxury market, citing sales increases of 10 to 30 percent, depending on location, due in part to price appreciation.
As the year closed, the $1 to $2 million tier of the market was very active, and most anticipate it will continue to be so due to a shortage of inventory, often with multiple-offer situations driving prices upward. The higher tier of the market—more than $5 to $7 million in most areas—generally is still experiencing longer days on market.
In most luxury markets, a healthy number of sales are all-cash transactions, as high as half or more in some markets. Wealthy consumers have ready access to cash and are willing to use that as leverage to negotiate well-priced real estate purchases, while foreigners from countries with less economic and political stability also see U.S. real estate as a safe harbor to invest cash.
International buyers continue to be active, particularly in San Francisco, Los Angeles, Vancouver and Miami, where 60 percent of all luxury real estate is being sold to non-U.S. residents, mainly Latin Americans and Europeans. The mix of foreign buyers includes those from Saudi Arabia (Orange County and Texas oil-and-gas markets), South America (Florida and Texas) and the EU, while Asian buyers—particularly the Chinese—continue to be a significant force, especially in San Francisco, Vancouver and Southern California. Luxury Portfolio International brokers report a trend in Chinese buyers gravitating toward properties in the $1 million range, prefering new construction, though those investing for children attending U.S. colleges generally are looking for lower priced properties. Agents who go the extra mile for these buyers are earning significant residual sales through repeat business and referrals to friends and family.
Interestingly, Chinese buyers may do research on the Web, but they do not necessarily make contact online, preferring to keep confidential their desire to invest in foreign markets. This concern for privacy is borne out in Manhattan, where the condo market is being driven more aggressively by international buyers than the co-op market, in part due to the rigorous interview process and requirements for financial transparency.
In recent recessionary years, many affluent buyers became more focused on design/interiors, privacy, security and family lifestyle features rather than ostentatious displays of wealth. According to Luxury Portfolio brokers, these values remain prevalent. While many still search for bargains, most are willing to pay for certain features that are “worth it” to them.
“The mood of our Luxury Portfolio brokers is upbeat as we move into 2014,” comments Luxury Portfolio International President Paul Boomsma. “They believe that well-priced luxury homes will continue to be in high demand, resulting in increases of 10 to 20 percent in volume in most of their markets, with unit sales rising 5 to 10 percent. Compared to a few years ago, that represents a significant improvement.”