Engel & Völkers Luxury Homebuyer Report

Luxury Homebuyer Report

Engel & Völkers

Introduction

The real estate landscape is ever evolving. Changing work environments and the continued prevalence of remote work have impacted buyers whose needs and wants are continuing to develop and change. Over the past year, we’ve seen a new class of buyers emerge. From the Crypto Visionary to the New American Rancher, each of 2022’s luxury homebuyer personas poses a variety of distinct needs unique to their lifestyle and personal definition of luxury.

The Homeward Bound Millennial

Millennials have emerged in the real estate market as an undeniable force, responsible for 43% of all homebuyers in 2022.1 However, those aged between 25 and 41 are establishing trends outside the precedent set by previous generations. Having entered a seller’s market, with record-low inventories and record-high prices, the wealthiest millennials are taking their big city salaries and heading to the suburbs. Here, they can skip the starter home, take advantage of modern work arrangements, and enjoy life as a homeowner with closer proximity to friends and family.

A major inflection point in the trajectory of millennial homeownership has been the pandemic. What followed was a shift in values: millennials challenged their reputation for avoiding homeownership and its respective responsibilities. Higher salaries, the opportunity to increase personal wealth, and built-up savings (from spending time at home, inheritances, etc.) are pushing millennials to reconsider their decision to continue renting. Further, and the desire to start a family or keep

up with friends is an attractive incentive to purchase a home. Once that decision has been made, millennials have unique habits during the homebuying process. They use the internet for all that it has to offer—increased transparency of home prices and information, excessive home browsing, and even virtual tours. However, that does not mean that they don’t see the inherent value of real estate professionals. 81% of younger millennials are first-time homebuyers and are aware of their lack of knowledge when it comes to real estate transactions— unlike previous generations who may have already purchased, sold, and bought another home by this age. 2 As such, millennials are increasingly looking for real estate professionals to help find their future home, set up tours, assist with paperwork, and be reachable by text and email throughout the entire process.

Despite the desire to relocate from major coastal cities, millennials expect to find the same amenities they’ve become accustomed to—bars, restaurants, and a lively,

At 54.4%, Greene County, Georgia, led the nation in year-over-year luxury home price growth. 3

up-and-coming artsy neighborhood scene. With their newfound financial and professional freedom, they are capitalizing on the opportunity to choose where they want to live, not live where they work. The homes they are finding in burgeoning markets are smart homes with a boutique feel—fully equipped with features that align with modern, luxury lifestyles and living. This may include environmentally friendly features such as solar panels, energy-efficient HVAC systems, luxury, eco-friendly home building materials, and electric car chargers.

Millennials have come out in numbers, equipped with the wealth and buying power to establish themselves as premier players in the real estate market. They are ready to purchase a dream home and own something entirely for themselves, while also making a smart investment. With plans to own the property for at least ten years, this home is as much a dream home as it is an opportunity to grow their personal wealth. 4

Homeward Bound Millennial Web Searches:

§ What small town should I move to?

§ How can I find an agent?

§ Duplex homes for sale in [city/neighborhood].

Desired Markets

States such as Texas, Florida, and Colorado were among the most popular for relocating millennials:

Dallas, Texas

Oklahoma City, Oklahoma

Austin, Texas

Denver, Colorado

Topeka, Kansas

Greene and Putnam Counties, Georgia

Charlotte, North Carolina

Tampa, Florida

The New American Rancher

Aged between 56 and 65, the New American Rancher has the most savings and the highest budget. They are in search of a unique western property that represents celebration of their successful career and hard work, while also establishing a home base for friends, family, and future generations. This transitional period in the New American Rancher’s life—when careers are less demanding—has enabled their relocation to the west and midwest states of the United States. Here, the New American Rancher and their family can enjoy the outdoor lifestyle and all the amenities of the turn-key properties being developed in these burgeoning communities. It is their lifelong “Wild West” dream, actualized.

However, the New American Rancher is not necessarily looking for the responsibility and cost of agriculture and livestock. The properties that they are in search of are move-in ready, have porous boundaries between indoor and outdoor living areas, and boast considerable entertaining spaces. While the property may incorporate or function within agricultural production, the New American Rancher is not looking to personally take on that lifestyle

themselves. In fact, the New American Rancher sees this property as a “bubble-proof” investment that will provide personal and familial stability. This home epitomizes the luxuries of modern living—beautiful architecture and interiors, gorgeous views and landscapes, the highest quality amenities, a heightened sense of peace and privacy, and the feasibility of a sound financial decision.

Further, boomers already account for 44% of the total real estate wealth in the US (making them the wealthiest of any generation).5 Unlike their predecessors, boomers are not retiring or moving into retirement communities. They plan on maintaining an active lifestyle—whether that be in the surrounding outdoors of their new home, taking their expertise to a non-profit, or traveling. As such, their western property needs to represent an upgraded lifestyle and the practicality their life needs. The privacy and luxury of fewer neighbors and more space must not come at the cost of their connection with the rest of the world. Proximity to amenities, attractions, and health care facilities are of equal importance to the New American Rancher.

44% of the total real estate wealth in the United States is held by baby boomers— making them the wealthiest of any generation.

The New American Rancher is looking for a trusted and experienced real estate professional who provides highquality service and a work ethic to which they can relate. Real estate professionals become a premier resource for this buyer when they can supplement and support the New American Rancher’s knowledge every step of the way, from finding properties to negotiating prices. While they are comfortable using online resources to see

available listings in the area, the New American Rancher is reliant on their real estate advisor to find the house that they will ultimately call home. They could likely be adding their western property to a growing real estate portfolio and as such, want to know detailed property information. This will ensure them that they will not be blindsided by a house that ends up requiring a significant amount of work, money, and attention.

New American Rancher Web Searches:

§ What are the best neighborhoods near Jackson Hole, Wyoming?

§ What are the property taxes in Wyoming?

§ New construction developments in Nevada.

Desired Markets

Proximity to amenities, attractions, and health care facilities is still important to this segment. Neighborhoods within an hour of popular resort destinations are common. Western states such as Wyoming, Nevada, and South Dakota all boast friendly tax policies for the ultra-wealthy:

Jackson Hole, Wyoming

Teton County, Idaho

Sun Valley, Idaho

Bozeman, Montana

Aspen, Colorado

The Crypto Visionary

Crypto Visionaries are bringing their newfound wealth to the real estate market. The source of that wealth is one of the most up-and-coming topics within real estate and the world at large. To the Crypto Visionary, being on the precipice of the newest technologies, practices, and processes is of the utmost interest and importance. Cryptocurrency may be just the latest iteration of a lifelong interest in technology, investing, and politics. In a similar fashion, the Crypto Visionary will be drawn to a new, city construction that is both innovative in design and processes. They are in search of builders, contractors, and sellers that already have the infrastructure in place to complete transactions in cryptocurrency (or as seamlessly as possible). Wherever their next property may be, part of the appeal for the Crypto Visionary is that the transaction will likely make headlines for setting new precedents in real estate.

Cryptocurrency is infamous for being volatile investment. As such, it has become particularly unattractive to older investors, leaving the Crypto Visionary to be somewhere

between 29 and 35 years old. They fall into the younger years of the millennial generation, and as such, share some of the common traits, behaviors, and characteristics— with a visionary edge. The Crypto Visionary struck big in this one area of the financial sector, and they are ready to use this property to diversify their portfolio. Similar to their generational counterparts, they are interested in skipping the starter home and purchasing a dream—and with it, all the amenities of modern and luxury living. Pools, courts, fitness facilities, generous outdoor entertaining spaces, and proximity to lively and cultured social establishments are must-haves of their next home.

Despite what it may seem, the Crypto Visionary isn’t traditionally a “bookworm” holding multiple degrees. Rather than bringing masters and doctorates to the table, the Crypto Visionary is bringing street smarts—the intuition that led their investing decisions and strategies. In fact, nearly 55% of crypto investors have no college degree at all. 6 Further, their is little research to show that cryptocurrency investors come from wealthier

86% of Americans have heard of cryptocurrency and 16% have either invested, traded, or used one.7

backgrounds; it is possible that a Crypto Visionary could be experiencing this level of wealth for the first time in their life, skipping the High Earnings, Not Rich Yet (HENRYs) category that many of their generational counterparts fall into. This home could be seen as a further chance to establish the validity of their interest and success in cryptocurrency—as the industry itself continues to be met with skepticism in regards to its long term value.

Perhaps more so than any other buyer, the unique interests and needs of a Crypto Visionary require a specific skill and knowledge set on the behalf of the

real estate advisor. The Crypto Visionary will depend on their real estate professional to guide them through the community-specific regulations and practices regarding transactions in cryptocurrency and real estate. Whether that be securing a traditional loan and using the buyer’s crypto assets as proof of wealth or directly exchanging from a cryptocurrency to a traditional one, the Crypto Visionary will require the specific knowledge and expertise of a real estate professional who is an expert in the matter themselves.

Crypto Visionary Web Searches:

§ Best cities for crypto jobs.

§ Best countries for crypto wealthy.

§ Developers accepting cryptocurrency.

Desired Markets

Crypto buyers are looking to establish themselves in the cities that are as on the forefront of embracing cryptocurrency as they are. It is less about the geographical location on the map as it is the presence of other people, companies, and infrastructures they see as being equally as forward-thinking as themselves.

Vancouver, British Columbia

San Francisco, California

Toronto, Ontario New York, New York

Miami, Florida The Bahamas

Cayman Islands

The Eager International Buyer

The pandemic has impacted each buyer persona—none so heavily as the Eager International Buyer. As the name suggests, the Eager International Buyer is keen to buy real estate in the Americas after international mandates and travel restrictions have limited their buying power. The National Association of REALTORS® (NAR) reported that the dollar volume of foreign buyer purchases was $54.4 billion USD from April 2020 to March 2021, a 27% decline. NAR’s data also reveals a 31% decline in sales volume.8

This story changed, however, throughout the end of 2021 and the beginning of 2022 as travel restrictions were lifted globally. The Eager International Buyer became just that—eager (and now able) to buy property around the world. These buyers purchase properties for a number of reasons, most commonly to rent out the property, live there, or use it for business purposes. Rentals and vacation homes led the pack, accounting for 42% of international sales in 2021.9

Many of these foreign buyers originate from China, Canada, the United Kingdom, India, and Mexico and are looking to invest in industrial real estate, multifamily properties, apartments, and offices in central business districts—with a preference for new construction.10 While some of these buyers are looking for personal residential properties, a large number are searching for investment properties for themselves or on behalf of their employer. These investment properties provide a stable, consistent, passive income for an individual or organization, and given the economic fluctuations that have characterized these past few years, a “bubble proof” investment is more important than ever.

The Eager International Buyer will be knowledgeable about property buying and selling processes in the United States. After a year on the sidelines, they are one of the best-prepared buyer personas as they actively and extensively research the Americas’ real estate landscape to identify markets with the greatest investment potential.

On average, 9-12% of all US homes sold to foreign buyers were purchased in Texas. Austin and Dallas remain popular, particularly for international buyers from Mexico and India.11

Once specific markets have been identified, investors look for top real estate talent to provide local expertise.

Real estate advisors working with international buyers, should understand the intricacies of international property transactions, as well as have a comprehensive understanding of their local market. In 2021, personal contacts, former clients, and referrals from former clients and business contacts accounted for 65% of leads and referrals among real estate professionals who worked with foreign clients who purchased residential property. Website and online listings accounted for 17%.12

As frequent travel may not be plausible, the Eager International Buyer relies on their real estate professional to

visit property sites for them, cementing the importance of digital property showings. Real estate professionals should be prepared to share their observations and insights on home features that may not have been noticeable through a virtual tour. Once several potential properties have been identified, the Eager International Buyer may make the trip to the Americas to view their options in person. Often, however, this is not plausible given the competitive nature of these purchases. In these cases, the Eager International Buyer will purchase the property sight unseen.

Eager International Buyer Web Searches:

§ Top real estate agencies in [city/neighborhood].

§ Market growth and ROI in [city/neighborhood] real estate.

§ Emerging US real estate markets.

§ US cities by economic growth.

Desired Markets

Typically, international property buyers are known to invest in cities like New York, Chicago, and Los Angeles. In 2022, international real estate investments have shifted to secondary markets. These markets have the potential to become the next luxury hot-spot and international buyers are purchasing homes left and right to ensure they are in on the latest trend. The following cities have been identified for their investment potential or were noted to be popular markets among international buyers:

Boise, Idaho

Seattle, Washington

Austin, Texas

Dallas, Texas

Bentonville, Arkansas

Atlanta, Georgia

Phoenix, Arizona

The Renaissance City Dweller

After a pandemic-induced move to the suburbs or rural areas, the Renaissance City Dweller is returning to their previous urban lifestyle—often to the same neighborhoods and cities from which they left. While the Renaissance City Dweller’s isolated, rural home was a good fit for a pandemic, to this buyer, outdoor adventures are no match for the excitement of city life.

During the Renaissance City Dweller’s time away, however, prices in major cities have jumped up to 30% from pandemic lows—indicative of the increase in demand for urban residences.13 The Apartment List National Rent Report states that rents have rebounded to be more expensive than prior to the pandemic, meaning the Renaissance City Dweller may have a shock coming to them when they look at prices in their desired neighborhoods.14

The Renaissance City Dweller returns to urban life with a newfound appetite for apartments, condos, or single-family homes with access to the outdoors or private outdoor space. A spacious residence with room for a home office is

also on this buyer’s list of requirements. The Renaissance City Dweller will often purchase a luxury condominium priced over $1 million USD as housing inventory remains low. Condominiums priced over $4 million USD have also surged in popularity among this buyer group.15

These buyers’ first choice is to return to the neighborhood from which they left; however, with a desire for more square footage and outdoor spaces, they may have to compromise and explore other, similar neighborhoods that offer more space and amenities for less money.

The Renaissance City Dweller is particularly interested in neighborhoods with an active nightlife scene, lively restaurants, and professional sporting events, as well as multiple cinemas, galleries, and theaters. Their other priority when selecting a neighborhood is safety—showing a preference for secure apartments and condominiums with doormen.

To ensure they are able to quickly tour and place an offer on their desired home (and return to city life early), the

30% increases from pandemic lows have led to historic, record-setting prices in major cities.

Renaissance City Dweller will book a short-term rental or hotel during the time of their property search. An in-person tour is essential for this buyer group as they look to take in amenities, space, and neighborhoods for themselves.

In order to find the perfect property, the Renaissance City Dweller will look for a real estate professional who

is constantly available and able to place an offer quickly. As fast-paced as city life is already known to be, the redhot real estate market has made things move even faster, especially within the lively neighborhoods in which this buyer is interested.

Renaissance City Dweller Web Searches:

§ Apartments in [city/neighborhood].

§ Top neighborhoods in [city].

§ Outdoor space in [city/neighborhood].

§ Things to do in [city/neighborhood].

Desired Markets

The Renaissance City Dweller is looking to move to one of the Americas’ most active and popular cities. They want to be where the action is, be it theater, music, sporting events, or any number of unique experiences exclusive to urbanites. Most Renaissance City Dwellers will look into moving back to the city they once left, with a preference for neighborhoods they have already lived in and are familiar with.

Vancouver, British Columbia

Austin, Texas

Chicago, Illinois

Atlanta, Georgia

Toronto, Ontario

New York, New York

Los Angeles, California

Tampa, Florida

Miami, Florida

The Year-round Vacationer

As remote work options have maintained their popularity despite pandemic restrictions lifting, it has become more viable than ever to live (and work) wherever you want. Instead of being tied to the city where they are employed, the Year-round Vacationer has the opportunity to prioritize their preferred lifestyle above all else when buying their first home. This preferred lifestyle could be anything from skiing or surfing to wellness and healthy living.

High urban home prices have led these buyers to purchase their second home first. The Year-round Vacationer may actually live in their property year-round, or they may rent out the property while maintaining their original rental property, creating a passive cash flow through their investment. In the United States, vacation rentals are projected to reach $17.66 billion USD in 2022, a testament to how lucrative renting a vacation home can be.16 Usage of these homes is entirely flexible to the owner’s schedule. Some Year-round Vacationers rent their homes consistently, and some like to use the property for themselves more frequently. That

flexibility is important to this buyer group, who want their home to be surrounded by their passions and interests.

When buying a property, each Year-round Vacationer will have a different set of priorities. You don’t need someone to tell you that a skier looking to live in Aspen will have incredibly different requirements than a surfer from Hawaii. What essentially remains the same, however, is the desire to feel like every day is the perfect vacation. Additionally, most Year-round Vacationers will be looking for a property with a home office as they plan to work remotely, as well as a suburban or rural environment typical of most vacation homes.

The Year-round Vacationer will be incredibly knowledgeable about their lifestyle of choice and will often seek out a real estate professional with similar interests and knowledge. The real estate professional should have an understanding of the intended lifestyle and the amenities that are essential to it. The Year-round Vacationer will

$17.66 billion USD is the current projected value for vacation rentals in 2022.

have an idea of what amenities they are looking for, and the real estate professional will have an understanding of what those amenities cost locally and in which neighborhoods and homes they are available.

As the Year-round Vacationer researches to find which market best fits their lifestyle, they may choose a destination that is quite far from their current residence—

as most vacation homes are. Real estate professionals should be prepared with virtual tours and highresolution images as they review properties with this buyer. Once options have been discussed, this buyer will make the trek to their desired market and see these homes in person.

Whistler, Bristish

Columbia

Year-Round Vacationer Web Searches:

§ Vacation homes in [city/neighborhood].

§ Average vacation rental price in [city/neighborhood].

§ Weather in [city/neighborhood].

§ Best places to [surf, ski, hike, etc.] in [city/neighborhood].

Desired Markets

The Year-round Vacationer will explore markets that are known to cater to their lifestyle of choice. Often, these markets depends on which lifestyle the buyer is pursuing.

Aspen, Colorado

Vail, Colorado

Austin, Texas

Raleigh, North Carolina

Huntington Beach, California

Jackson Hole, Wyoming Ski

Hawaii

Los Cabos, Mexico

evrealestate.com

©2022 Engel & Völkers Americas, Inc. All rights reserved. Each Engel & Völkers brokerage is independently owned and operated. Engel & Völkers is an Equal Opportunity Employer and fully supports the principles of the Fair Housing Act. This advertisement is not an offering. An offering can only be made by prospectus filed first with the Department of Law of the state of New York. Such filing does not constitute approval by the Department of Law. Additionally, depending on where you are located, an offering may require filing with your respective state authorities. Minnesota Registration Number: F-5339.