Every luxury real estate agent must know the needs of wealthy buyers to successfully break into the market. By adequately understanding buyer trends and recent statistics, luxury realty professionals can create a rock-solid plan to meet the rising demand for luxury listings.
Luxury homes have defied the general demand dip seen in more affordable homes. But with demand for luxury homes outweighing the current inventory, home prices will remain on an upward trajectory.
In this comprehensive guide, we'll examine the top luxury home buyer statistics that realtors and investors in the United States must know in 2023.
Notable mentions include:
Luxury Homebuyers to Likely Return to the City
One word that stands out for the luxury real estate market in 2023 is adaptation. A State of Luxury Real Estate (SOLRE) 2023 report by Luxury Portfolio International says that the average lux home buyer is moving past pandemic-inspired trends. Instead, they're considering moving from country homes to the city center for their subsequent purchases.
The survey, interviewing 3,000 individuals in the top 5% income in 28 countries, discovered that wealthy consumers are leaning into new real estate markets, especially the cities.
For context, 37% of primary home buyers and 47% of investment buyers attested to the continuous improvement in the city’s investment value. Meanwhile, all buyers affirm that investment value is their priority when considering a new purchase.
Leading property markets for international investors include New York, Beijing, and Singapore. However, over half of the world's hottest markets are in the US. Fortunately, wealthy buyers have the funds to invest in cities, as global wealth increased by 13% in the previous year (2022).Meanwhile, 80% of respondents say their personal financial situation has improved over the last three months. As such, the chances of them keying into luxury real estate are high.
Affluent Buyers Are Thinking Long Term
The SOLRE report also shows buyers consider the future when considering new listings. It highlights that 66% want to purchase a home where they can retire with multi-generational living spaces and wellness features. That said, 61% take their long-term thoughts even farther, seeking to leave a legacy behind.
Some of the top priorities for these buyers include natural beauty, family-oriented spaces, wellness, and sustainability features. The report also noted that the respondents are highly aware of the world’s uncertain political and financial landscape. Yet, they still prefer to invest in high-end real estate markets to reap the long-term benefits.
Luxury Homebuyers Are Adapting to Global Issues
Affluent luxe home buyers are looking inwards to their financial, intellectual, emotional, and social strengths to build resistance against the uncertainty inherent in the global markets.
Expert analyses reveal that luxury buyers are becoming more effective homebuyers, a sign that they're adapting to the market. In 2023, these individuals are paying keen attention to vital facts and figures about investments alongside their intuition.
Respondents in a State of Luxury Real Estate 2023 report by Luxury Portfolio International outlined their significant needs and wants when considering a high-end property.
Their motivating factors, in order of relevance, include:
- Investment quality
- Good for the world
- Good for themselves
While each buyer has their priority order, these factors represent what luxury home real estate buyers consider most important. Meanwhile, luxury buyers below 50 are more likely to buy properties without seeing them beforehand or after only previewing them online.
A Millennial-Led Luxury Housing Market
A lux real estate report from Engel & Volker shows that millennials are the demographic interested in purchasing a luxury home. The report surveyed consumers seeking a house worth over $3 million and discovered 59% were millennials. Lux real estate professionals must note these stats as they target the luxury housing market this year.
The report also states that two-thirds of prospective lux home buyers have remote jobs and can choose to work from almost anywhere. This flexibility is a major reason why most of these homeowners currently own or intend to purchase a second property.
First-time homebuyers with emerging affluence, mainly Gen Z and millennials earning $100,000, are bound to relocate to a new city in 2023. The top factors driving interest in the latest high-end property include proximity to restaurants and work, walkability, and neighborhood vibe.
45% Dip in Luxury Home Sales
According to a Redfin report, luxury home sales sank by 44.6% in a three-month timeline that ended in January 2023 — the second-lowest level ever recorded. Similarly, a report from The Real Deal, a real estate website, shows that luxury home market sales are still falling.
Leading factors possibly behind this sales drop include low supply, high prices, and a general unease surrounding the US economy. Due to these issues, affluent Americans are beginning to fund other assets.
Global Wealth Keeps Increasing
Despite the toughening economic and political climate worldwide, global wealth rose last year by 13%. Experts predict we'll keep seeing robust growth in global wealth throughout the middle of the decade. Also, this global wealth increase means that the number of high-and ultra-high-net-worth-individuals (HNWI) will reach all-time highs.
The millionaire's club is set to grow by 40% by 2026, taking the number of HNWI to 87 million. Countries experiencing the highest number of HNWI growth include The United States, China, the United Kingdom, Canada, Australia, and New Zealand. Conversely, countries like France, Germany, Japan, and Italy witnessed a decline.
With these values, realtors in the lux market can uncover jurisdictions to invest in and make decent profit margins.
A new 2023 luxury outlook report from Sotheby's International Realty predicts that more Americans will buy luxury homes abroad, especially where the strong dollar has an enormous impact.In 2022, 40% of Sotheby's International Realty's luxury buyers in Mexico City were foreign. However, the report predicts the number will reach 60% in 2023. Currently, buyers in this region are facilitating luxury home buying transactions valued at $5 million to $30 million.
More Cash Transactions
Due to the rising interest rates in the lux real estate market, more buyers are considering several alternative payment methods. The affluent are paying more cash for real estate deals. Meanwhile, all-cash sales — a scenario where homebuyers pay more than the property's actual value up front instead of paying in installments — are poised to increase.
A National Association of Home Builders report says that nationwide cash sales represented 11.2% of all transactions for new homes in Q4 2022, the highest since 1990. Cash transactions are increasing, despite the rise in median prices for luxury and non-luxury homes in most markets.
With mortgage rates predicted to exceed the 6% mark in 2023, realtors can expect more home buyers to make cash payments when acquiring new properties.
A Buyer’s Luxury Real Estate Market to Largely Continue
85% of respondents in the SOLRE report say they rely on facts and figures about their investments. Meanwhile, 89% say they rely on their gut feelings when making investment choices.
Both methods have informed 72% of affluent buyers that they're ready to buy a new property. Meanwhile, 53% say they're also prepared to sell. As such, we can expect home price increments and inventory shortage in the lux realty market.
However, the disparity between demand and supply has recently been reducing. Based on the SOLRE 2023 report, 22% of buyers intend to buy over the next three years, while 16% are fixated on selling. Whereas in 2021, 25% said they planned to buy, while 13% intended to sell.
Frequently Asked Questions on Luxury Real Estate Market
The following answers some common questions about US luxury homes:
The three most common factors affecting people's choice of cities to buy luxury homes include:
- Job growth
- Affordability; and
- Population growth
Investors looking to purchase second homes in the US should consider these cities (in this particular order):
- Washington County, UT
- Osceola County, FL
- Nevada County, CA
- Indian River County, FL
- Napa County, CA
- Kauai County, HI
- Cape May County, NJ
- Sante Fe County, NM
- New York County, NY
- Whatcom County, WA
- New York
- Hong Kong
- Los Angeles
Going forward, prices are unlikely to fall in the US, as numerous emerging luxury market insights show that inventory isn't catching up with demand any time soon due to buyers outweighing the number of sellers.
However, with reports suggesting that mortgage rates are likely to fall throughout 2023, luxury home buyers lucky to cash in on a home will enjoy reduced monthly payments on their mortgages.
As a real estate agent or investor, the trends highlighted in this article should point you towards the right markets or investments. But with newer trends bound to appear before the year ends, staying updated with happenings in the real estate market is non-negotiable.
As an agent armed with the aforementioned luxury homebuyer statistics, you must make concerted efforts to get your services in front of prospective clients. However, this is easier said than done.
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