From Gretchen Rosenberg:
Many luxury consumers have purchased their dream home in the past 24 months and have also purchased second and third homes. They may be content to enjoy those homes for now, and step aside from trading real estate while they see how the economic transition shakes out. Luxury sellers will need to carefully present their homes as beautiful spaces and price them more aggressively than they would have in 2021. Time on market will increase. The luxury market waxes and wanes like any market, but not always in tangent with mid- and entry-level home markets. Luxury will always have a place, and luxury consumers love beautiful statement homes.
At Kentwood over the past two years we’ve seen an average of 20-25% of our sales be cash, month in and month out. These are buyers who have big jobs and saved, inherited wealth or traded equities for a real estate investment. We don’t anticipate this to dramatically change for two reasons: if price increases flatten or decline, buyers will want to “buy the dip” knowing that long term, real estate will remain a good investment; and as the equities markets correct, more people are cashing out and will want a place to invest that cash.
Luxury consumers’ demands have increased since the pandemic. They expect the highest service and immediate attention. Service providers in the luxury space who anticipate customers’ needs and address them proactively will create long-term relationships and loyalty.
Luxury is a large amount of sales volume, but it’s a smaller percentage of annual sales. While we anticipate the real estate markets to cease being such an insane buyer’s market, we don’t anticipate a pendulum swing over the next few months to be an extreme buyers’ market. We anticipate a shift to more balance, more time on market (one weekend was uncomfortably fast for buyers to make a decision) and more negotiating from both sides.
From Dierk Herbermann:
While there may be a shift in the luxury market in most other major metros, we are not seeing that impact in the Denver Metro region yet. Through May we have closed 33% more luxury listings (over $1 million) with an increase of price per square foot of 8.7% and sales prices at an average of 5.2% over the list price.
While it is too early to tell what true impact the increased mortgage rates will have on the luxury market looking at the first half of June where 104 new listings over $1.8 million have hit the market, over half of those listings are already under contract (66). We are starting to see some price reductions, but of the 75 luxury listings (over $1.8 million) that have closed since June 1, only 10 of those were at a price below the list price.
Colorado, and the Denver Metro market in particular, continue to experience an influx of companies from California, New York, and Europe looking for our educated and talented workforce, relatively affordability and lifestyle. As was the case during the 2007-8 recession, this will help to insulate the Denver Metro Area from the downward housing pressures that were experienced in most of the U.S. While there will be some decrease in demand and potential price corrections in certain areas, we feel that Colorado will continue to be a strong luxury market.