What constitutes a luxury home, if we don’t know one when we see it? The range of luxury homes is definitely subjective. Luxury homes are described by the Institute for Luxury Home Marketing as any property “falling within the top 10 percent of an MLS area’s annual home sales, but never less than $500,000.”
In its new Coldwell Banker Luxury Homeowner Profile, the Coldwell Banker Real Estate Corporation sets the entry fee to the exclusive club of luxury homeowners at $1 million.
According to the report, what these homeowners have in common is financial clout, similar career paths and middle-age. Top findings are that:
31 percent are cash buyers; 17 percent who took out a mortgage put down 50 percent
- 68 percent are considered “new money”
- The No. 1 profession among these home buyers is classified as “large business executives”
- 66 percent are from the “baby boom” generation (between the ages of 35 and 55)
- 88 percent of luxury homebuyers are married
Luxury homebuyers often live in communities where the housing values are outsized such as California or New York. According to the U.S. Census, California has 41 percent of the nation’s million-dollar houses, but only has 2.33 percent of the nation’s housing supply. While California has 127,000 million-dollar mansions, New York has 22,300. Nationwide, there are 313,800 million-dollar plus homes, or less than 0.6 percent of the total stock.
When they buy, luxury buyers want impressive digs. Eighty-nine percent of luxury homebuyers request a four or five-bedroom home, and nearly half of the homes sold by Coldwell Banker sales associates were between 4,000 and 6,000 square feet. And they don’t like things as they are – 41 percent of these luxury homebuyers plan to do major renovations on their million-dollar properties.
The top priority to the luxury homebuyer is a “designer” kitchen. Other top-rated amenities in order of importance to the luxury homebuyer are:
- Media/entertainment room with theater-style seating
- Wine cellar
- Tennis courts/basketball courts
- Indoor pool and ballroom/cigar room.
Interestingly, bigger isn’t always better. While 12 percent of luxury homebuyers wanted over 6,000 square feet and 49 percent opted for 4,000 to 6,000 square feet, over one-third, 37 percent, went for 2,400 to 3,999 square feet. This is a trend worth noting, as other surveys have noted the growing vacation and second home market, a natural migration for the luxury homebuyer. What is not known is if these second homes are deliberately smaller than primary homes.
The National Association of Realtors in its Second Home Report found that one out of seven homebuyers own a second home, and that 78 percent of all second homes are used primarily for recreation.
“Right now, the business for vacation homes and investment property is very brisk, and prices are rising with a low inventory of properties available in many areas,” said David Lereah, NAR’s chief economist. “Demographics will drive this market over the next decade with baby boomers in the peak years for buying a second home.”
Not surprisingly, it is the baby boomer demographic that is driving the luxury home market, too. Two-thirds of these homeowners are from the “baby boom” generation (between the ages of 35 and 55) born between 1946 and 1964. Twenty-eight percent are moving into luxury properties as they approach their retirement years (56 years and older). Only four percent of luxury homeowners are under 34 years of age.
They are home boys and girls, too. Seven out of 10 luxury homebuyers (72 percent) hail from the same state where they buy their new home, and 55 percent are from the same city. Twenty-four percent come from out of state, while three percent come from another country.
And there’s a reason why they have money. Coldwell Banker found the luxury homebuyer to be a tough customer. “In terms of negotiating style,” found the report, “the top luxury homebuyer’s tactic was described as “close to the vest, minimum divulgence” (63 percent), versus “hardball” (24 percent) and “money is no object, I just want it” (13 percent). Additionally, it seems these homebuyers use these negotiation tactics successfully to get the best price as the survey indicated that only six percent actually paid over the asking price.”
