The uptick in sales (and prices) isn’t surprising, of course: America’s real estate market has been turbocharged on all levels — average prices are up 20 percent year over year — thanks to a combustible combination of low interest rates and shutdown-related savings. relevance. Umansky and his company explore this boom and other trends in their second annual Red Paper. The report provides a snapshot of luxury real estate trends around the world, releasing data from its network of offices from Los Angeles to Amsterdam. Some of the results are not surprising: The six million homes sold in the United States last year were the highest tally since 2006, before the Great Recession, for example. Others even caught experts like Umansky by surprise: What caused the double-digit growth in Boston, for example, especially in the luxury sector? “I’m not sure,” he laughs after pausing.
Umansky is clear, however, on the many emerging trends that will shape the luxury home market over the coming years. The world’s supply chain problems persist, of course, even long after since when The cargo ship was pushed out of the Suez Canal – clogging the roost – and even luxury properties were affected. Demand is high, Umansky notes, outpacing existing housing stock. The cost of materials and the scarcity of labor increases, as it discourages the construction of new palaces. Compare a 10,000 square foot prefab house on the market for $25 million. He says the cost to buy and build the lot exceeded about $15 million 15 years ago. These supply issues mean the custom home now costs about $23 million. Few who are able to afford such a home would consider $2 million a useful savings to the trouble of (and delaying) starting from scratch. No wonder, then, that Umansky says that even the wealthiest choose not to opt out of ad hoc construction. Instead, they accept the comfort – and settlement – of a turnkey home. Of course, a construction slump like this prepares the market for a second boom, once existing inventory is completely sold out.
There’s only one category of transition-ready mansions struggling right now, according to the agency: SoCal’s classic, open-plan, airy proliferation is no longer worth the desire, thanks to widespread remote work. Buyers need to allocate private spaces for each family member, no matter how large the area of \u200b\u200bthe house. Umansky says the company is now rotating these open-plan mansions differently, dividing the space to show how it can be reconfigured. “We use virtual presentations a lot,” he says, “showing the house a little differently on an iPad—showing it with walls.” The company sometimes asks clients to do some construction to help reduce large areas. Even with current supply chain constraints, he says, it pays to achieve a higher final price.
Most mortgage watchers know that luxury real estate is now trading pretty much all cash. “I just made a deal this week for $40 million, and it was all cash, and we’re seeing it for the first time across the country, not just Los Angeles but Florida or New York or Aspen Farm,” Umansky says. Despite the impressions, most of them are not tech brethren who have been cashed in and their likes. The agency’s research shows a demographic difference: Millennials were the majority of home loan applicants, while richer baby boomers were able to borrow against their existing assets to pounce on mortgage-free bids.
The biggest shift, according to Umansky, isn’t in how homes are financed — it’s the number of properties in a buyer’s portfolio. Many well-to-do families have long owned two homes, a primary property, and a vacation getaway. The collection of homes was once reserved for the very wealthy. This is no longer true. In 2022, third or fourth homes are now the standard for most of the 1 percent. “Now they have the money to buy three or even four homes, and they can think: What lifestyles do I want to be in? A mountain, beaches, an urban environment, maybe a golf community in the desert,” says the broker.
Buyers know there are big pluses to dumping more money into more homes: Vacation rentals remain strong, with Americans who have abandoned hotels during the pandemic remain eager to rent a standalone property. “And I can tell you from my personal experience, I’m paying for the entire house from four weeks of rent – that’s a wonderful lifestyle,” Umansky admits, noting that this business model has expanded from areas where it was traditionally used – the Hamptons, for example. For other luxury holiday markets, whether it’s Mexico or the upmarket islands of the Caribbean like Turks and Caicos. Many also use real estate to hedge against looming inflation and frantic indicators. “If I have cash in my bank account, and I don’t really like the stock market, and I can rent the property to earn 6 percent of my money, and then use the house whenever I want – why not have a bunch of them?”