The luxury market has endured throughout the recession, as buyers will never lose their tastes for high-end finishes and beautiful homes in premium locations. But while it survived, the market was not unchanged by the difficult economy. Agents in the luxury market have had to work harder and market more extensively to attract buyers, many of whom continue to want quality homes but at reduced prices.
By Meghan Boyer
As the economy starts to improve, the luxury market is also starting to show signs of life. Interest has increased slightly, though it is not at the same level as roughly four years ago, notes Milena Birov, a real estate consultant with The Heritage team at @Properties North Shore. “We are better than we were at the same time last year. I think people are more confident than they were last year,” she says.
Indeed, much of the fear in the market is subsiding, says Gregg Bernadette, a sales associate with Baird & Warner in Palatine. Luxury shoppers, however, increasingly are seeking quality over quantity with smaller homes that better utilize space but still include high-end features.
Luxury is in the minds of the buyer, agrees Meladee Hughes, a broker associate with Sudler Sotheby’s International Realty in Chicago. Depending on the buyer, luxury can be a $500,000 one-bedroom apartment with views of the lake or a $28 million home in Winnetka, she says. “Luxury to them is something far better than what they are currently living in; it’s their dream home,” says Hughes.
While buyers continue to want luxury, the altered real estate market has caused them to expect it at lower costs, says Bernadette. “Buyers certainly have an expectation that for $1 million-plus they should be getting more for their money, especially in the resale market,” he says. Roughly five years ago, the same price point would have gained buyers the “bare essentials,” he notes.
While the market is starting to return slowly and prices are stabilizing, there are no guarantees the upswing will continue, which is why it is important to stay optimistic, says Hughes. “If you are gloom and doom, you won’t sell anything.”
What’s Hot In Luxury
Luxury is a measure of consumer standards and expectations, and as such it “has certainly changed from the past as society and technology has changed,” says Bernadette. There always are new innovations in style, design and technology that luxury buyers look for in a home, he says.
The kitchen is one area where buyers expect top-of-the-line equipment and design, as it is a focal point of luxury, says Bernadette. “The chef’s kitchen with commercial-grade appliances is now very popular,” he says, noting kitchens also are getting bigger to accommodate families and to entertain guests.
The overall trend in kitchens is clean and simple lines with an emphasis on practicality, says Birov. “We usually do side-by-side refrigerators with four freezer doors on the bottom,” she says. These kitchens also usually have multiple dishwashers.
Kitchens and bathrooms “govern everything,” agrees Hughes. Buyers “will put up with almost everything, but they absolutely demand the finest in the kitchen and bathrooms,” she says. Often, buyers will remodel a kitchen that is 10 years or even five years old because they want the latest features.
Media rooms also continue to be popular among luxury buyers. “Home theaters have become replications of the full movie-theater experience,” says Bernadette. Media rooms can include sound proofing, high-end electronics, a projector and movie screen and theater-style seating, he says.
Luxury consumers also expect technology integrated into their homes, says Birov. “They are using technology to control everything in the house through key pads,” including temperature, lighting and the security system, she says. Backup generators also have become a standard feature because buyers do not want to worry about losing power if they are away from the home for a long period of time, she says, which happens often, as these types of buyers tend to have multiple homes.
With all of the high-end features luxury homes typically include, it is important to price a property properly. “The more realistically a home is priced, the better the chances it will sell,” says Vera Purcell, a broker with Koenig & Strey. “If buyers feel something is well priced and it’s a value and they love it, then they will decide to go for that property,” she says.
Unfortunately, a specific equation does not exist for Realtors to use in determining a luxury property’s perfect price. “You try your best based on the comps and your experience and the market conditions and interest rates. You try to pool it together and come up with the price,” says Purcell. Every community has an upper bracket of homes and prices, and they all are priced differently based on the cost of land, construction and finishes in that area, she says.
Typically, there is a significant drop in sales numbers once a home passes the $1.5 million price range, says Bernadette. In the Gold Coast, many buyers want to look at homes less than $3 million, says Hughes. Even if a buyer is wealthy enough to afford a home priced at more than $3 million, “there’s a lot of resistance,” she says.
Today’s Luxury Buyer
Pricing a property properly also is important because today’s luxury buyers are educated about the market and know quality. “The buyers coming in are very educated and very technology and Internet savvy,” notes Purcell.
Many buyers also are younger than the industry previously has seen, and many buyers have young families. “We are seeing a lot of young families,” and the majority of consumers looking for luxury homes are between 40 and 60 years old, says Birov.
Increasingly, buyers also are coming from outside the communities in which they are buying homes. Real estate has “gone global” because of Internet listings, says Purcell. “You don’t know if this buyer is going to come from around the corner, the next state or the next country,” she says.
Agents can find luxury buyers using social networking, “and I do not mean Facebook,” says Hughes. “Your personal network is the most important network you have.” Person-to-person networking in social clubs and through business associates and friends is one of the best methods of locating buyers, she says, noting that most of her business is done through referrals.
The difficult economy and housing market, however, has forced many agents to increase their efforts. “I have had to do more, more, more,” says Purcell. “It takes longer to sell a home in this economy. To speed that process up, I have had to do more of everything: more Web sites, more advertising, more open houses,” she says.
Indeed, an agent must combine multiple elements to remain successful in a down economy, says Bernadette. They must communicate with sellers regarding the market and pricing, promote the property to ensure maximum exposure and be present throughout the sales process, he says.
Entering the Market
Knowledge is one of the most important aspects of the luxury industry. Agents that want to break into the market should familiarize themselves with high-end properties, says Birov. “It is important for them to understand what the luxury items are and what the need for those items is,” she says.
Luxury-market agents should be able to recognize quality workmanship and high-end finishes, says Bernadette. They also must understand how such finishes translate into value and what potential renovations may cost.
Agents also need to know about the communities surrounding luxury homes, adds Hughes. They should be able to walk around the neighborhood and tell potential buyers all the things that happen there, from local attractions and restaurants to schools and services, she says.
Most often agents must work their way up to luxury price points, says Hughes. In high-end areas, it is especially important to have credibility. “You have to live in the Gold Coast or Streeterville. You have to have a history of selling there,” she says, noting it is hard to get started in the market if an agent has not already sold a luxury property in the area.
Hughes estimates roughly 25 Realtors truly specialize in selling in the Gold Coast. “They’ve been there a long time. They know the area,” she says. Agents who want to break into such an area “need to be in every open house in the area that is for sale” to educate themselves, she says.
The luxury market will continue to improve, but the process will be slow. “You have to go on a five-year plan,” says Hughes, who estimates it will be another two years before the market is back to where it was two years ago.
“There always will be a demand for something above and beyond,” and certain aspects such as location, architecture and finishes always will be important, says Purcell. Yet the market is unlikely to return to its former state, instead remaining “toned down” with a focus on quality over quantity. C.A.
Baird & Warner
Real Estate Consultant
The Heritage team at
@Properties North Shore
Sudler Sotheby’s International Realty
Koenig & Strey
Lake Forest, East