June 16, 2020
May Luxury Real Estate Market Update: It’s a Pause, not a Panic.
While it’s no secret that the ongoing pandemic has made some major changes to the Real Estate market, the real question we’re asking is whether these changes will be permanent or temporary.
According to the Institute for Luxury Home Marketing, “The May Luxury Market Report reflects some of the immediate changes in trends agents are seeing in the high-end housing market, begging the question of whether or not these changes will sustain once lockdown requirements are lifted.”
While we wait to find out whether these changes will dissolve with the lockdown, one fact is evident. The Luxury Housing market’s response to this widespread crisis is much different from any previous crisis.
Throughout the 2008 recession, both the luxury and traditional housing markets received an extraordinary blow. In comparison, the current situation has not made any significant impact in buyer or seller confidence in the high-end housing market. While home inventory did experience a decrease, experts had predicted a much higher 30-40% drop in inventory. The caveat to this is that in more densely populated U.S. markets (for example, New York City and LA), because there were more reported cases of COVID-19 there was a bit more pause in luxury buying and selling than other areas.
While reviewing the statistical data regarding inventory, sales, and prices to understand why there has been relative stability in the Luxury housing market and what to expect in the coming months, this is the information we were able to find:
Median Sale Prices are Soaring
While new listings and sales are down significantly, the median sale price of homes has jumped $43,000 over the last 30 days. The highest prices have been seen in Los Angeles Beach Cities, Vancouver, Mountain Cities, and San Francisco.
This jump in price is assumed to be contributed to buyers’ increased desire for beachfront and mountain properties. As lockdowns continue, people crave easier access to open, natural spaces to cope with quarantine restrictions.
Larger Properties in the High-End Housing Market are Attracting More Interest
In 2019, the luxury market saw a shift in the trending size of homes. Houses were getting smaller, transitioning the McMansion the affluent typically would purchase to luxury condo properties. While the draw-in of these smaller properties is seen in their minimal upkeep and flexibility, agents are now seeing those same Buyers opt for larger homes. This trend of “bigger is better” is most likely a temporary response to local restrictions and lockdowns.
The larger spaces give homeowners extra space for amenities such as a home office, yoga studio, or simply some extra space to relax while the entire family quarantines. Even those staying in luxury condos/ townhomes are seeking units with an extra bedroom to create additional at-home work and relaxation spaces.
Lifelong City Dwellers are Moving to Suburban Areas
Another notable shift is that some lifelong city dwellers are migrating towards the nearest suburbs. Due to the nature of the virus, cities with the most dense populations were hit much harder than more spaced-out towns. This is creating a draw-in for city dwellers to be able to escape from the figurative petri dish that they’re residing.
Another factor is that many workers are now working remotely due to the pandemic. Without the need to commute to work, people have one less reason to live in a big, dense city.