While the end of the homebuyer tax credit has left most real estate markets begging for buyers, the luxury and second homes markets may be in for a boost in 2011. Interest in real estate is picking up among the wealthy including real estate according to a new survey by a luxury market consulting firm
Purchases by the super affluent,those making more than $300,000 a year,m could rise in the months to come as the percentage of those who plan to build or buy a new home next year rose to 11 percent from 3 percent in 2008. Interest in buying or building a second or vacation home the coming year is also up over 2008 according to the survey conducted July 3-8, 2010 among 1,349 luxury consumers with an average income $306,000.
“Not only do the market-leading affluent consumers express an increased likelihood to buy or build a home, but those consumers at the highest income levels ($250,000 and above) have a stronger itent to build a new home in the coming year than those with incomes from $100,000-$249,900,” said luxury market expert Pam Danziger, president of Unity Marketing.
The survey found that the market for luxury homes is particularly strong right now,. A majority of affluents (52 percent) surveyed were involved in a major home remodeling or decorating project in 2009 and first half of 2010 and they spent on average 40 percent more than home remodelers surveyed in 2008. An equal percentage of affluent owners plan to make home improvements in the second half of 2010 and through 2011.
Though Unity Marketing has not surveyed home purchase intentions since 2008, the latest findings seem to contradict the firm’s warnings over the summer that luxury consumption had stalled as affluent consumers reflected uncertainty about prospects for the economy in the next three months. “Because the Luxury Confidence Index has proven a reliable predictor of consumer behavior, this stalling is reason for concern,” said Unity in a July report.
“Without a doubt the luxury consumer market is in a much better place today than it was a year or so ago, but the latest survey warns marketers not to ease up or be over-confident that the recession’s effect on the luxury market are over,” said Danziger in July. “Nearly three out of four luxury consumers surveyed believe that the recession continues, which in turn impacts spending on luxury goods and services. Marketers are advised to continue to position luxury as a value proposition, by keeping luxury connotations and image up front in advertising, packaging and service, but communicating in a very subtle, almost one-on-one way, affordable pricing.”
With values in high end properties easy to find, Unity’s forecast for luxury property sales may already be a reality. High end home sales may be faring better than other real estate categories over the past year. According to The National Association of Realtors (NAR), for 2009 million-dollar and above home sales were just 1.2 percent of total sales or about 61,500 sales nationally. In July 2010, million dollar plus market share was up to 1.9 percent. While sales of homes in the $500,000 and above range rose dramatically in June, the million-dollar-plus market segment was the only price range in July showing positive growth compared to last year.
“Luxury homebuyers have been buying this summer,” said Laurie Moore-Moore, CEO of The Institute for Luxury Home Marketing (ILHM). “After waiting in the wings, many affluent buyers spent the summer shopping for value and snapping up trophy properties.”
“While I wouldn’t say the luxury market is in recovery,” said Moore-Moore on August 30, “the growing market share of luxury sales relative to total sales, a slight downward trend in inventory, and sellers who are more realistic about price are factors shifting the affluent into a buying mode.”