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Redefi ning Luxury Sponsored by ERA Real Estate

Redefi ning LuxurySponsored by ERA Real Estate

Redefining Luxury Sponsored by ERA Real Estate

Redefining Luxury: Lifestyle, Distinction and DestinationLuxury homes used to be the purview of the wealthy, the so-called 1 percent. In the last five years, an emerging client niche is not only expanding the pool of luxury buyers, but changing how we think about living in luxury.

As we emerge from the Great Recession, it is clear that the ultra-wealthy – those with more than $30 million in net worth – continue to value real estate as an investment and remain an important part of the luxury real estate client base. That base is expanding thanks to a Millennial mindset, which values social interactions, a connected community and a focus on experience, along with an increasing number of downsizing Baby Boomers which has resulted in an expanded definition of luxury living. Price points are no longer the defining characteristic of high-end homes.

Luxurious lifestyles, unique opportunities, historic detail, stunning views, iconic locations and favorite pastimes are now fully in the consideration set of the “distinctive properties” client who sees the home as an integrated component of a luxurious lifestyle.


Demographics and Economics

Expanding the definition of luxury real estate reflects a number of recent demographic and economic shifts. In terms of economics, there is a growing segment of what global market research company Ipsos calls “affluents” – people aged 18 and over living in a household with at least $100,000 in annual household income. That segment is growing rapidly – in the past two years the share of American affluents has increased 6 percent. That translates into more potential clients. Indeed, in just four years, there has been a nearly three-fold increase in affluents. In 2009, there were 23 million affluents, while in 2013, there were 62.5 million.

But we are not only seeing more people become affluent, they are also becoming more affluent. Compared to 2012, affluents’ average income rose 4.6% to $200,200, and their net worth rose 2.0% to $1.01 million.

Using standard mortgage-to-income guidelines that recommend spending approximately one third of monthly income on housing costs, households with incomes of $200,000 qualify for $1 million homes. At $100,000 annual household income, $500,000 homes are within reach. Consumers’ perception of luxury has altered as well. According to a recent Realtor.com survey, for much of the country, a luxury price point begins at $500,000.

Most popular price points at which surveyed consumers stated that luxury housing begins, by U.S. region:

• Northeast (ME, VT, NH, NY, NJ, MA, CT, RI, MD, DE, PA) $1 million +• Pacific (CA, OR, WA, AK, HI) $1 million +• Mountain (MT, ID, WY, CO, UT, NV, AZ, NM) $1 million +• South Central (AL, MS, TN, AR, LA, TX, OK) $500,000 +• North Central (KY, OH, IN, IL, MI, WI, MN, IA, NE, KS, ND, SD) $500,000 +• South Atlantic (VA, WV, NC, SC, GA, FL) $500,000 +


Limited SupplyTraditionally, luxury homes comprise approximately the top 5% of any market, based solely on price point. According to the Institute for Luxury Home Marketing, there were about 23,000 homes for sale at $500,000 and above in the spring of 2014, a similar amount compared to 2013.

Market trends over the last year indicate an increasing number of sales of homes priced $1 million and above. According to NAR, year-over-year sales in October of 2013 were 31% higher, representing 8,900 units. The gain was higher in September of 2013 as sales in that price category climbed nearly 40% to 9,000 units from September of 2012.

Clearly, as the number of affluents interested in real estate increases, they face a limited supply of inventory. Expanding the definition of luxury homes to move beyond price point and include other characteristics that reflect a luxurious lifestyle allows the industry to supply inventory for this segment, provided the properties are marketed appropriately. Price may not be the primary attribute, but the homes must still reflect a distinctive quality that is related to location, lifestyle or leisure.

The Psychology of LuxuryAs attitudes and thresholds about income, relative wealth and luxury have evolved, so has the high-end real estate consumer. Two of today’s largest demographic segments seem to be influencing some of these shifts. Market research firm Nielsen recently released a report titled “Millenials: Breaking the Myths.” that identifies some characteristics of Millennials that may come to bear.

How do these characteristics play out in housing preferences? Affluent Millennials will favor communities over privacy and desire homes that are both conducive to entertaining and feature flexible living spaces that can accommodate the integration of everyday living for all members of the household.

Another important demographic segment that is influencing the shifts in luxury real estate is Baby Boomers, many of whom will be retiring in the coming years. They will likely want to maintain a high-end home, but on a smaller scale. Downsizing affords the opportunity to live closer to a desired lifestyle: golf, mountains, beach, city offerings, where price points may be high, but a smaller footprint will be more economical to maintain.

83% LIFESTYLE

17% STATUS SYMBOL

Among their key findings, Millennials are...

• Diverse, Expressive and Optimistic• Driving a Social Movement Back to the Cities• Struggling, But They Have an Entrepreneurial Spirit

• Deal Shoppers and Desire Authenticity• Connected and Want the Personal Touch

PREFERENCE THAT A HOME REFLECTS


Serving the Distinctive Properties ClientERA Real Estate’s Distinctive Properties program tailors to this emerging clientele comprised of up-and-coming Millennials and ready-to-retire Baby Boomers and speaks to their changing attitudes and preferences. A recent ERA Real Estate survey of sales professionals serving the high-end segment further explores this evolution.

Size Doesn’t Matter (As Much)In line with a general trend towards smaller homes, as reported by the NAHB, high-end clients aren’t necessarily looking for bigger, just better. Better can include smart technology, energy efficient features and proximity to desired geographic locations like the beach, the mountains or the city.

Open Floor PlansWith less of a focus on square footage comes a corresponding decrease in the importance of the number of rooms. Two decades ago, compartmentalized spaces with specific purposes were popular. Today, open floor plans allow for increased interaction among family members, increased views and more natural light to permeate the home, giving the illusion of more space by reducing the number of confined areas. In addition, open floor plans encourage the integration of everyday living.

Preferred Amenities Reflect Changing PrioritiesThe most desired amenity for luxury clients is a high-end kitchen. As the heart of the home, kitchens have evolved from back of the house, utilitarian rooms to expansive, integrated spaces that can accommodate cooking, entertaining and homework. This heavily weighed preference reflects the lifestyle and attitudes of both Millennials and Baby Boomers. Millennials value social interactions and the creation of communities, making these expanded kitchen spaces the perfect backdrop to cook a meal with friends, host a cocktail party or neighborhood gathering. Baby Boomers, many of whom are retiring, now have time to entertain and develop new culinary hobbies.

LocationReal estate is local and by extension luxury is local as well. According to the Institute for Luxury Home Marketing, the luxury price point in Cleveland is $500,000 while in New York City and San Francisco, that number leaps to $4 million. But today’s distinctive properties client is looking beyond zip code.

An analysis of search behaviors of visitors to ERA Real Estate’s luxury property website reveals that consumer preferences are changing. ZIP codes are no longer the primary search term. Instead, visitors are increasingly interested in finding a home based on attributes, such as riverfront, golf community or equestrian.

This shift reflects insights from ERA Real Estate’s survey that indicate brand names are not as important as craftsmanship when it comes to possessions and amenities. Applying this attitude shift to a home’s location, it appears that affluent home buyers are increasingly open to “under the radar” locations that offer desired amenities without ZIP code mark up.

BRANDS/LABEL

CRAFTSMANSHIP

25%

77%

18%26% 7%9%23%

HIGH-END KITCHEN

POOL HOME THEATER WINE CELLAR DOCKSOLAR PANELS/ENERGY EFFICIENT FEATURES

OPEN FLOOR PLAN OVERSIZED GARAGE OUTDOOR KITCHENLOCATION(ie. close to beach,mountains)

OTHER: 6%

37%64% 50% 28%41%WHAT TYPES OF AMENITIES ARE

IMPORTANT TO THE DISTINCTIVE PROPERTIES

CLIENT?


7 Under the Radar Luxury Locations Seafarers and Nature Enthusiasts: Explore Rockland, MaineA quick flight from Boston, Mass. and drivable from New York City, Rockland, Maine offers that comfortable New England vibe, including 14 local lighthouses and numerous maritime activities, similar to Martha’s Vineyard, Mass. Waterfront homes, riverfront condos and island living are all available here.

Lake Lovers: Try Door County, Wis. Wisconsin’s Door County offers five state parks, 11 lighthouses and 300 miles of shoreline extending into Lake Michigan. Lake lovers can stroll along the water’s edge or explore one of 13 islands for an experience reminiscent of Lake Minnetonka, Minn. The Door County market is comprised of various real estate options from hotel-style condos to spectacular waterfront properties.

Outdoor Adventurers and History Buffs: Check out Sheridan, Wyo.Midway between Yellowstone National Park and Mount Rushmore sits Sheridan, Wyo., home to Buffalo Bill and Little Bighorn Battlefield. Named a “Top Place to Live in the West“ by American Cowboy magazine, Sheridan is affordable and offers many of the highly- prized amenities of Jackson Hole, Wyo.

Wine Connoisseurs: Sample Chautauqua Lake, N.Y. Wine lovers, foodies and families will love Chautauqua Lake, N.Y. Known as the world’s oldest and largest Concord grape growing region, lakeside and vineyard-side properties offer proximity to 22 wineries along the area’s wine trail.

Florida’s Fantasy Island: Sarasota, Fla. Sarasota, Fla., a great metro area surrounded by the Gulf of Mexico and several barrier islands, includes the white sands of famed Siesta Key Beach. Perfect for surfing, shopping, sun worshipping, sightseeing and boating, the area is replete with a variety of waterfront and island properties.

The South’s River Walk: San Antonio, Texas One of the fastest growing cities in the United States, San Antonio is famous for the Battle of the Alamo and its River Walk – a two and a half mile cobblestone path along the San Antonio River lined with unique shops, outdoor and fine dining and a sophisticated nightlife. Just as in Paris, one can roam along the river, visit galleries, historic cathedrals and well-kept parks, then dine in splendor.

The Alps of America Alpinists rejoice! Here in the United States the quiet city of Sandy, Utah, a Salt Lake City suburb, is etched into a picturesque and adrenaline-pumping landscape without a high altitude plane ride and features breathtaking scenery, a challenging terrain for mountaineers and 42 feet of powder a year.


More than 80 percent of ERA Real Estate agents serving high-end clients reported that their clients prefer experiences over possessions. Research demonstrates that experiential purchases, rather than material purchases, result in increased well-being because they provide connectedness and vitality. This is clearly reflected in the types of amenities distinctive properties clients desire, specifically chef’s kitchens, outdoor kitchens and open floor plans, all of which promote social interactions and connection to nature and the environment.

In thinking about well-being as it relates to the home, an interesting underlying psychological component of the human hierarchy of needs emerges. According to famed psychologist Abraham Maslow, shelter and food are basic needs, with social connections and self-actualization higher order needs.

While Maslow’s theory of psychological health postulated that people satisfied their needs in a specific order, the expanded definition of luxury living and the amenities and attributes that are becoming more important mean that multiple needs can be addressed simultaneously. With high-end-kitchens, open living spaces and proximity to geographic attractions, this new class of distinctive properties satisfies ascending needs seamlessly, resulting in a blurring of possession and experience.

77%EXPERIENCES

WHICHDO THEYPREFER?

23%POSSESSIONS

Cultivating a Luxurious Life

you are also acquiring a lifestyle that you consider luxurious because it not only complements the life you lead, it creates the opportunity for you to experience a fulfilling, self-actualized life. As the psychology of luxury living evolves, it becomes clear that homes are no longer static status symbols, they are dynamic stages for living.

WHEN YOU PURCHASE A

DISTINCTIVE HOME…

Redefining Luxury

What’s New with ERA Distinctive Properties?

In order to reach a growing segment of affluent home buyers with distinct preferences and attitudes about luxury living, ERA Real Estate recently unveiled an expanded luxury platform with a number of unique features.

• Expanded Criteria – From location to lifestyle, historic detail to high-end amenities, ERA Distinctive Properties reflect more than a price tag.

• Attribute Search – A suggested search capability tailored for luxury clients quickly directs visitors to properties they are interested in.

• Curated Listings – Properties priced under the traditional luxury threshold are carefully evaluated to be inclusive as well as distinctive.

• Virtual Staging Tool – If distinctive properties are dynamic stages for living, wouldn’t it be great to change the scenery, room by room? This interactive tool allows clients the opportunity to design rooms to their liking as they imagine living in a potential home.

• Specialized Marketing – Relationships with luxury and location experts provide access to an expanded clientele for sellers and buyers.

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