Not All Luxury Is Equal

It's important to note that not all luxury markets are exhibiting the same conditions.

Single-family Homes

As of August 2022, the majority of single-family home markets we analyzed were still considered seller's markets. However, a shift could be ahead.

For example, Denver and Greater Seattle are currently seller's markets that appear to be moving into a transitional phase since housing supply increased between May and August 2022 compared to the first four months of the year. By contrast, conditions in Coeur d'Alene, Idaho, and Miami have moved from balanced markets to being more favorable to buyers in recent months. On the other end of the spectrum are Greater Boston and Cincinnati, where the seller's advantage actually got stronger by the end of August.

Transitional – Seller to Buyer

Transitional – Balanced to Buyer

Transitional – Seller to Balanced

Stable Seller's Market – Demand Trending Down

Stable Seller's Market – Demand Static

Transitional – Balanced to Seller

Strong Seller's Market – Demand Trending Up

To demonstrate varying market statuses and the direction they’re shifting, sales ratio was analyzed in 21 singlefamily markets from January to April vs. May to August 2022. Sales ratio measures the monthly sales against the remaining active listings at the end of each month. If the sales ratio is 15% or less, it is a buyer’s market. If it is greater than 15% and less than 21% it is a balanced market. Over 21% it is a seller’s market.

Equally, there are significant differences across property types. Although both single-family and attached luxury markets are currently still favoring sellers, there are more dramatic changes for single-family properties, which are offering buyers opportunities not seen a year ago.

Attached Homes

Indicators are present for more favorable buying conditions in the luxury attached sector, but inventory levels would need to increase to be considered a true buyer’s market.

Among the markets with the strongest potential to turn buyerfriendly, three are in Florida: South Walton, Miami, and Palm

Beach County. Other markets with potential include two resort mountain communities, which saw heated demand during the pandemic as people snapped up vacation homes: Summit County, Colorado, and Lake Tahoe, California.

On the flip side, several markets on the East Coast are trending the other way for attached product and becoming even more favorable to sellers as condo and townhome inventory stays low: Brooklyn, Greater Boston, McLean and Vienna County in Virginia, and South Shore in Massachusetts.

Mass Affluent vs. Ultra Affluent

A mixed dynamic can also be seen across luxury home price segments. In the top 10% of the market or the “mass affluent” sector, buyers tend to be more rate-sensitive and may be holding off on big-ticket purchases (like houses) in the short-term to see how the economy lands with inflation. In the top 5% of the market, however, purchasing might have slowed for slightly different reasons. With the pressures of the pandemic largely behind them and abundant cash reserves, ultra-wealthy individuals may be able to take their time to find the perfect home but are finding that their choice of desirable properties is severely limited.

“I have multiple buyers looking to purchase a luxury oceanfront home in Pebble Beach,” shared Tim Allen, a Luxury Property Specialist affiliated with Coldwell Banker Realty in Carmel-bythe-Sea, where prices for oceanfront properties often top the $25 million mark. “They are ready to pay a premium to secure the property of their dreams, but we simply have no homes for sale that fit their criteria.”

Lack of desirable inventory has plagued several other well-known ultra-luxury property markets, including New York City and Aspen. Properties valued over $10 million saw very little change in their inventory levels during the first eight months of 2022, compared to the same period in 2021. If there was a slight increase in inventory, there was often a corresponding increase in sales. “You can’t buy what is not available,” added Allen.

Not all ultra-wealthy buyers are waiting on the sidelines to make their move, however. Some are willing to purchase smaller properties to secure a foothold in the right location. While the mass affluent tend to be more strategic in their buying as they weigh the costs of selling, buying, and financing, ultra-wealthy individuals’ deep pockets allow them to make decisions to suit their current requirements.

“There is an interesting shift happening in locations such as Carmel-by-the-Sea,” said Allen. “[Mass affluent] buyers during the pandemic purchased smaller luxury cottages as second home escapes, but now that many have decided not to go back to the city, they are looking for larger homes. Recognizing this will come with a significant price increase, they are now ready to move further inland. This has opened the door for the ultra-affluent to step in, especially if the [smaller] home is move-in ready to the level of their expectations.”