redefining luxury: era real estate

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Luxury 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. 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.

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  • 1. Redefining Luxury Sponsored by ERA Real Estate Redefining Luxury Sponsored by ERA Real Estate

2. Redefining Luxury Sponsored by ERA Real Estate Redefining Luxury: Lifestyle, Distinction and Destination Luxury 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. 3. Redefining Luxury Sponsored by ERA Real Estate 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 + 4. Redefining Luxury Sponsored by ERA Real Estate Limited Supply Traditionally, 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 Luxury As attitudes and thresholds about income, relative wealth and luxury have evolved, so has the high-end real estate consumer. Two of todays 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%STATUSSYMBOL 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 PREFERENCETHATAHOMEREFLECTS 5. Redefining Luxury Sponsored by ERA Real Estate Serving the Distinctive Properties Client ERA Real Estates 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 Doesnt Matter (As Much) In line with a general trend towards smaller homes, as reported by the NAHB, high-end clients arent 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 Plans With 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 Priorities The 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. Location Real 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 todays distinctive properties client is looking beyond zip code. An analysis of search behaviors of visitors to ERA Real Estates 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 Estates survey that indicate brand names are not as important as craftsmanship when it comes to possessions and amenities. Applying this attitude shift to a homes 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%WHATTYPESOF AMENITIESARE IMPORTANTTOTHE DISTINCTIVEPROPERTIES CLIENT? 6. Redefining Luxury Sponsored by ERA Real Estate 7 Under the Radar Luxury Locations Seafarers and Nature Enthusiasts: Explore Rockland, Maine A 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 Marthas Vineyard, Mass. Waterfront homes, riverfront condos and island living are all available here. Lake Lovers: Try Door County, Wis. Wisconsins Door County offers five state parks, 11 lighthouses and 300 miles of shoreline extending into Lake Michigan. Lake lovers can stroll along the waters 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 Yellows