Real Estate

How The Luxury Housing Market Became Invincible In 2021

October is Luxury Month at Inman, and this is the first in a 5-part series looking at the high end market. Check back tomorrow for the biggest luxury mountain sales of 2021, and stay tuned all week for more, including the year’s top luxury beach and city sales. Then join us for Luxury Connect at the Aria Hotel (Oct. 25-26, 2021) and the live presentation of the Inman Golden I Club honorees for this year.

We all know the story at this point: When the coronavirus pandemic hit in 2020, everyone started looking for a different type of house. Urbanites flocked to the suburbs, nearby or in entirely different states, in search of cheaper prices and home offices. And suburbanites went rural in a chase for even more land.

This process has been the dominant story in housing for the past year and a half — Zillow executives have dubbed it the “great reshuffling” — and it has substantially changed real estate at every price point. But there is perhaps no segment of the market more impacted than luxury. Amid the rush to greener pastures, luxury-dense markets such as New York City and San Francisco have cooled. Meanwhile, comparative backwaters such as Idaho have turned into luxury destinations.

This week, Inman will take a deep look at the luxury market, exploring the biggest sales of the year and breaking down the market by popular segments, such as mountain estates and beachfront escapes. It’ll be a chance to explore homes that have sold for eight and nine figures, and which offer hints into the lives of tech moguls, entertainment magnets and global oligarchs.

But what does all of this actually mean?

To answer that question, Inman reached out to a handful of industry experts and practitioners who focus on the luxury segment. And the picture that emerged from these conversations is generally a good one. Higher-income consumers are still buying and selling homes, often more aggressively than people in other niches, and in some cases real estate professionals focusing on luxury have seen record years. Not every market has been equally fortunate, but looking forward into next year a handful of industry members who work in luxury expect continued strength.

The market so far in 2021

Every market is different, but Michael Altneu — vice president of Coldwell Banker Global Luxury — told Inman that overall the high end home segment has been particularly strong during 2021.

Michael Altneu

“The luxury sector continues to outperform itself,” Altneu, who spoke to Inman in conjunction with his company’s Gen Blue event, said. “It’s extraordinary.”

Altneu said that the luxury market generally continues to thrive thanks to widespread work-from-home options — many of which have benefited the types of consumers that would be considering homes in the luxury segment. And as a result, those consumers are looking for properties than can enhance their lifestyle and their health.

“Health is the newest amenity,” Altneu added.

The rise of home offices has been widely discussed over the past year and a half, and Altneu said that remains one of the features that luxury homebuyers want. But he also said popular amenities include home gyms and theaters, Zoom rooms that are set up specifically for video conferencing, and integrated smart home technology. And ultimately, he said, buyers at the highest end of the spectrum simply “want it all.”

“They want a home that has equestrian properties,” Altneu explained. “They want one on the beach. They want it all and they don’t just want it all with one house. They want it with multiple properties.”

Beyond the broad strokes of consumer taste, it can actually be difficult to pin down what is going on in the luxury space because there isn’t one hard and fast definition of what defines luxury. Obviously a $100 million home in Beverly Hills is luxury, but what about a nearby condo that costs $1 million? Or a home in Idaho or Texas that costs $600,000?

Gay Cororaton

To bring some order to the chaos, Inman spoke with Gay Cororaton, a senior economist for the National Association of Realtors (NAR). Cororaton examined homes that sold for more than $1 million. And she found something interesting: The share of homes in this price range has jumped from just 1.8 percent in 2012 to 6.61 percent in 2021.

More interesting still, much of that increase happened just over the last year; in both 2019 and 2020, the overall share of homes costing more than $1 million was just 3.48 percent. That’s almost half what it was in 2021.

“The data shows that there has been that increasing share of homes in the upper end of the market,” Cororaton said.

Credit: Jim Dalrymple II via NAR data

According to Cororaton, “the whole market is shifting upwards because of the lack of supply.”

It has also happened in much of the U.S., though Cororaton singled out the West as particularly impacted. And she said that part of what’s going on is increased demand for bigger homes, often in the suburbs, driven in part by the pandemic.

To be clear, $1 million buys something different in Park City, Utah, than it does in Phoenix.

But what these numbers show is that the high end of the market appears to be doing well. Even if some relatively pedestrian houses in pricey areas have squeezed into the $1 million segment, the data indicates that overall there is an appetite in the U.S. for expensive real estate. Altneu is right that the sector is on the whole outperforming.

Property preview:

The year’s most expensive luxury property — actually two units in the same towering building — went to Taiwanese-Canadian Alibaba founder and Brooklyn Nets owner Joe Tsai. The building sits at the end of New York City’s Central Park. Check back in the coming days to learn more about this property, and other top luxury listings of 2021.

Courtesy of 220 Central Park South

Case study: New York City

Not every market has done equally well, of course.

Though Inman’s upcoming list of top luxury sales so far in 2021 will feature three properties in New York City, Manhattan-based luxury agent Luciane Serifovic observed that real estate on the upper end of the price spectrum in her area has famously cooled somewhat, especially as some buyers have fled cities during the pandemic. Serifovic said the market may have dipped by as much as 12 to 15 percent compared to before the pandemic.

On the other hand, more recently contract activity is actually up compared to last year.

Luciane Serifovic

Her point was that the New York luxury market may have taken a bit of a hit, though perhaps a less severe one than is widely assumed.

“When you look at everything and the big picture,” she added, “it has not been impacted as much as I thought it would.”

Serifovic also compiled several reports for Inman that offer a snapshot of the market for Manhattan condos priced between $5 million and $10 million. The reports show that pending sales in that segment plummeted during the summer of 2020. However from September through July of this year, pending sales in that segment skyrocketed. They’ve since dipped back down again, but remain higher than at any point between 2011 and 2020.

Other reports provided by Serifovic indicate that supply of mid upper end condos is currently inching upward in Manhattan, but has fallen back down from the record levels it hit last autumn and is now comparable to where it was in the weeks immediately preceding the beginning of the pandemic.

Price per square foot of such condos in September 2021 was $2,191 — down 11.8 percent year over year but up 2.6 compared to one month prior. 

The point of all of this is that Manhattan’s luxury market appears to be experiencing a little bit of seasonality and a little bit of pandemic drag, but overall appears to be growing at this point.

Property preview:

One of 2021’s priciest urban listings sold in May when Swiss financier Jacqui Safra offloaded his triplex penthouse at 2 East 88th Street. Check back in the coming days to learn more about this property, and other luxury urban listings of 2021.

Credit: 2 East 88th Street and CityRealty

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.

Michael Nourmand

“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 Cap 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 beach front property,” he said. “Malibu is more of a second house 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 luxury look like in 2022?

No one who spoke to Inman envisions the luxury market slowing down in the coming year. Altneu, for instance, noted that many people at the upper end of the income spectrum are actually emerging out of the pandemic with more wealth than they had at the beginning. They, along with “new power player” consumers who have made the jump into the luxury segment for the first time, should keep driving demand for higher end homes.

“None of us see many signs of it slowing down,” he said. “I do not anticipate that we’re going to see these things disappear.”

Altneu also speculated that some areas that struggled somewhat during the pandemic could see a resurgence. For example, urban areas may become more attractive in 2022 than they were over the two proceeding years.

“I anticipate we’re going to see a greater resurgence in places that are more dense,” Altneu said. “People may have missed that culture for some time.”

Another trend that could shape the luxury market in 2022 is the return of people to costly coastal markets. Nourmand said that many people who moved from places like California to cheaper states such as Texas and Florida may begin to long for their original haunts. They may realize they don’t have the same network of family or friends in their new location, or they may simply miss the culture or weather.

“I think you’re going to see a lot of those people coming back,” he said. “And I think 2022 will be another banner year.”

Another big upcoming trend in luxury that nearly everyone mentioned was the return of international buyers. Over the course of the coronavirus pandemic, travel restrictions have made it hard — and in some cases impossible — for foreign buyers to visit the U.S. Some have responded by purchasing houses sight unseen, but the experts who spoke with Inman believe that the end of travel restrictions could unleash something of a deluge of international demand.

Cororaton said that among international buyers, 10 percent of sales are for homes costing $1 million or more — a much higher share than the overall national average. And while nationally only 2 percent of home sales are to international buyers, in some markets — certain areas of Florida, for example — foreigners make up as much as 15 percent of buyers.

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

Serifovic agreed. She has already worked with some international buyers during the pandemic, and recalled one instance in which a Canadian client struggled to make it over the border. Serifovic was overall optimistic about 2022, but said that when foreign real estate consumers no longer have to jump through those kinds of hoops the luxury market should gain even more steam.

“I definitely believe,” she concluded, “the pent up demand will come once the borders open up.”

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