Affluent Buyers Remain Bullish

Regardless of an affluent buyer’s financial profile, there is still significant confidence in the luxury real estate market.

According to our survey, nearly 90% of respondents believe in the stability of owning property. Even if some buyers have dropped out of the real estate game due to fatigue, frustration, or even hesitation this year, they may be primed to return as inventory levels improve.

“The reality is, we are coming out of one of the best real estate markets in history,” said Gary Gold, a Luxury Property Specialist affiliated with Coldwell Banker Realty in Beverly Hills. “But that level of demand and price appreciation wasn’t sustainable. The difference between the last two years and today is that prices are not going up 20% every year. Instead, they may rise 5% a year. That’s still a really good market.”

9 in 10 Almost high-net-worth respondents think that the real estate market in 2023 will be better or the same as 2022 for investment.

40% of respondents who are planning a home purchase in the future plan to do so in 1-3 years.

Puttin G It In Pe R Spective

M. RYAN GORMAN, Chief Operating Officer, Coldwell Banker Real Estate LLC

It’s important to look beyond one or two annual data points to have a complete understanding of what this new kind of buyer’s market will mean for buyers and sellers alike. A more nuanced view of local markets and varying luxury price segments is needed. And one cannot discount the bullish sense of optimism among affluent buyers as they navigate these new dynamics.

While the luxury home market may be in flux as it finds its footing after two years of soaring prices and demand, the overall market fundamentals are historically strong. The law of supply and demand applies. With luxury housing supply still low in many markets across the U.S., home prices are expected to remain stable. At the end of the day, people of certain means prioritize their surroundings, choosing to live where and how they wish. In periods of great market volatility, the tangible and enduring value of real estate often holds even greater appeal.

Some affluent buyers may be rethinking the pandemic musthave of a big primary residence. Higher prices, rising interest rates, and a shortage of larger properties may be contributing factors. Affluent buyers also appear to be turning their sights toward buying smaller secondary and investment properties.

During the pandemic, homes suddenly needed to be centers for working, living, playing, and learning. Buyers responded to these lifestyle changes by purchasing bigger homes in further-out locations and helped by low interest rates, they were willing to pay top dollar to get these dream homes.

Between 2020 and 2021, prices for single-family homes with over 3,500 square feet in over 100 markets shot up 27.4%. Compared to what was happening for attached homes under 1,500 square feet, the trend becomes more clear: prices fell by 1.5% by June 2020, and took until the end of 2021 to rebound.