This is a terrific interview with insightful answers to a number of questions about the luxury market in 2011. Laurie Moore-Moore, Founder and CEO The Institute for Luxury Home Marketing, has been in the residential real estate business for 30 years. She has sold luxury real estate, managed a large real estate office, and has run two divisions of the nation’s third largest real estate company.
2010 saw the beginnings of a recovery for luxury overall. What do you see happening in 2011 with luxury in general, including retail sales and demand for other luxury items?The number of “money millionaires” (those with a million or more in investable assets — not including real estate) has rebounded after the drastic decline of 2008 and global wealth has returned to 2007 pre-crisis levels. In addition, we’ve seen a recent resurgence of consumer confidence on the part of the affluent. The growing number of wealthy who are feeling better about the economy (and feeling better about their own portfolios!) bodes well for luxury purchases next year. In fact, luxury hotels and many high end retailers have already reported sales gains in 2010.
Will the recovery of wealth continue?
Unless we have some “wild card” economic event that sends everything spiraling down, the wealth recovery will continue and it will continue to be more global. North America and Europe will enjoy increasing numbers of wealthy, but China, Russia, Turkey, Brazil and many other countries will see an even greater percentage growth in the number of wealthy households.
Has the global recession affected attitudes and buying preferences of the wealthy?
Attitudes of affluent consumers appear to have undergone some changes since the economic meltdown. At least for now, “whispering wealth” rather than “flaunt it if you have it” seems to be a common philosophy. Although some propose that this is the result of feelings on the part of many of the wealthy that the current economy demands some restraint, research actually shows that only a small percentage of the affluent report this as a reason to spend differently. Instead, this new attitude may be driven by a growing desire for quality and exclusivity over bling.
Expect the search for quality at a bargain to continue to make the Internet a stronger distribution channel for luxury goods and services. Private online sale sites offering quality at a savings will grow in number and sales volume. Quality, fine design, artisanship, and bespoke items will sell across categories from leather goods to women’s shoes and men’s clothing. Since the use of the internet rises as wealth increases, also expect the luxury homebuyer to gather housing information and check out listings online.
How will changing attitudes affect luxury homebuyers in 2011?
- Are demanding more and better information about the market and the property
- Are demanding more and better information about the market and the property
- Are looking for value, will negotiate price, and are looking for prices well below those of 2006 and 2007
- Are skeptical of pre-construction offerings
- Are often looking for lower-key, less flashy properties
- Want neighborhoods with available health care, low cost of living, and safety (especially if they are boomers)
- View green as desirable; however, maybe not, if price is higher
- Want seamless service which saves them time
- Are looking for lifestyle experiences and stories to tell
- What do you see happening with luxury real estate in 2011?
Nationally, the luxury market has already started to outperform the overall housing market. According to NAR, the market segment which has seen growth in the number of transactions in 2010, is the over $1million price point. This is true nationally and in every region. However, recognize that this million dollar plus niche is small – somewhere between 2% and 2.5% of the total housing market. The affluent are revaluating where to invest. Many are putting their money into residential real estate. My best guess is that the luxury housing market will lead the housing recovery. Markets will have to work through existing inventory including luxury short sales and foreclosures, so the rate of recovery will vary across metro areas, but look for the number of high end home sales to rise slightly in 2011, even though prices will remain generally depressed. This assumes that we don’t have another economic meltdown. Real recovery may be a couple of years ahead.
What about international buyers in the U.S.?
U.S. purchases by international buyers will be important in 2011. The growth in wealth around the world will help fuel demand for foreign buyers to purchase in the U.S. The U.S. is still viewed as a safe haven for investment. Visa challenges and other governmental issues may moderate international demand, but the potential is strong. The U.S. second home market will benefit from this. Some foreign second home markets are still overbuilt (Dubai) or dealing with ownership issues (Spain). Economic problems in Europe and the resulting austerity problems will dampen recovery in 2011. Prime property in prime locations (especially waterfront with private docks or marina access) will lead the rebound when it comes.
Is there any one thing that will be the big luxury housing story of 2011?
China! China! China! The growing number of very affluent Chinese already makes them significant players in the luxury travel and high-end consumer goods categories. Watch for them to move into U.S., Canadian, and other luxury home markets in a bigger way in 2011. While this obviously won’t affect every community, major markets which attract international buyers may see increasing numbers of Chinese prospects.
What Strategy should a luxury agent use in 2011?
Four important strategies for building a strong position in the luxury market (regardless of the year):
Position yourself as THE luxury expert. Do the research to define exactly what’s happening in each price band within your luxury market and compile that research on a monthly basis in a luxury market report. Today’s affluent consumer wants to understand the market and will gravitate to the source of valuable market information.
Know your competition and network with them. Analyze luxury listings and sales for the past year and determine which firms and agents really do the business in various price ranges (don’t assume you know). This will not only identify your competition, it will give you a “hit list” of agents to target for networking. Be sure you know what other firm’s luxury programs offer so you can build a competitive offering. Work to build necessary competencies and make sure you have the right “marketing toolbox.” An agent’s success is dependent upon understanding who the affluent are, how to reach them, how they choose their Realtors, what they expect in a marketing plan, etc. You must also understand how to market a luxury property using lifestyle marketing and the concept of “best prospects.” Know your inventory.
How does one define luxury in the U.S. housing market?
At The Institute for Luxury Home Marketing (ILHM), we define luxury as the top 10% of a market’s residential sales (as determined by price) in the last 12 months, but never less than $500,000. This formula recognizes market differences. For instance, the top 10% in New York City may be in multiple millions of dollars, while in Dallas, it will be in the $500,000 range. What you get for your money from one location to another differs, so we believe the definition of luxury should be specific to the marketplace.
- Should Luxury Marketers Focus Their Efforts on the Wealthiest 1%? (luxurysociety.com)
- 2010′s Luxury Real Estate Market: What Sold And What Still Hasn’t? (huffingtonpost.com)
- Real Estate Stats and Beautiful Holiday Views! (chicagonow.com)
- Where Do China’s Luxury Purchases End Up? (blogs.forbes.com)
About the AuthorOcean Home Guru searches far and wide for interesting news and items on the luxury coastal lifestyle.
View Author Profile