- Demand surprised
- Prices soared
- Time-on-market shrunk
- Inventory evaporated
Up next in 2022? Owners are incented to sell. The mass of buyers has gotten smaller but still outnumbers the available market. Psychologically the game is still on. The market for luxury real estate remains strong after a record year of sales in many locations. Supply, demand, and price are all showing signs of normalizing, suggesting the year ahead will be an active one.
For luxury sellers, the strongest motivators are economical. They expect their home to be at-or-near peak value and that economic conditions are stable enough to move forward with a deal and yet unpredictable enough to make it worth their while to cash out.
The luxury buyer POV, the market is even more competitive than last year, with backlogged, delayed, and frustrated buyers chomping at the bit to buy their next property. The buyer who is planning to spend the most also fears they missed their opportunity to participate in this market. This fear of missing out (FOMO) will bring psychological pricing into the mix beyond what normal market conditions may demand.
Buyer demands have not changed on the basics: location, quality, and well-run, family-friendly places to live. Remote work and the accompanying frustration and stress of being in the home a lot continue to play a significant role in the purchase decision process. COVID-19 remains a significant concern and is a motivating factor for buyers looking to purchase in the next 12 to 15 months, but the market has already accounted for its effects. It no longer appears to be a significant driver of behavior, even if it is the underlying reason for the change. People are managing their daily lives to remain productive and happy; they are not, in general, making hasty decisions as they may have a year ago. Buyers, therefore, are looking at sustainability as a differentiator in luxury homes. Most consider it a criterion in a next luxury home purchase, and many expect to pay a premium to have the features and amenities that prepare them for the future.
The battle between traditional luxury real estate brokerages and online upstarts is intensifying. As consumers learned to go online for everything last year, a growing number see the value in buying a home this way. Fueling that trend is the increased comfort with buying a sight-unseen home, which is especially true for international buyers and long-distance purchases like a vacation home.
With experiential technology, brokers and agents ahead of the curve will develop more resilient relationships for years to come.