The luxury home market may be diminished in our current economy, but it is by no means gone. Buyers and sellers might not be in a rush to make any decisions, but there are still potential clients out there continuing to seek high-end amenities in luxurious surroundings.
By Meghan Boyer
Recent financial and housing market difficulties have caused consumers overall to hold their pocketbooks more tightly and forgo many large-scale purchases, from cars to homes. Yet despite the turbulent economy, buyers and sellers in the luxury housing market continue to transact — albeit on a reduced scale when compared with past years.
“There will always be a luxury market,” says Marsha Ulbrich, a broker associate with RE/MAX Unlimited Northwest. “The luxury buyer still wants what they want,” and their drive for comfort persists even in a tough market, she says. “There will always be luxury.”
Bob J. Satawake, a luxury agent in the KW Luxury Home Division of Keller Williams Gold Coast Realty, agrees. The housing market has suffered, and the luxury market has been affected, but the overall meaning of luxury has not changed, says Satawake. “There will always be a market for a more refined product,” he says. These buyers are also still seeking upscale amenities, such as home theaters and “green” technologies, says Ulbrich.
Though luxury still exists, both luxury buyers and sellers are more hesitant, which creates a greater challenge for builders and agents in the market. To exist in this luxury market, agents need to be more diligent and patient, and also revise their business strategies to achieve success.
Whether it’s a booming real estate market or a contracted one, the definition of luxury essentially remains the same: “Luxury is still defined by the fact that the product is not common and competes with a segment not available in the general marketplace,” says Satawake. Price point, amenities and square footage are all considerations in the definition of luxury, though to varying degrees.
The emphasis in luxury is on service and the amenities of a property, says Satawake. Square footage is the least important aspect of luxury, he says.
In the recessionary market, luxury is no longer defined by the idea that bigger is better, agrees Ulbrich. Market players are more focused on upscale amenities, quality and efficiency as status symbols. For example, a luxury condo that overlooks the lake on the top floor of a building may not have as much space as a suburban luxury home, but it can be loaded with amenities, she says. “Luxury is a tier above,” she notes.
Luxury buyers are now expecting certain amenities, agree industry insiders, and Satawake believes technology is one of them. “Every luxury buyer has an expectation that the property will be provided with the latest in entertainment and media technology,” he says. Buyers also look for brand names from high-end providers, he adds.
Buyers look for different and varied amenities, says Ulbrich. “It’s whatever the hot button is for that buyer,” she says. Audio visual and home theater components in homes are popular. She also has seen many homes with customized closets, sports courts and lavish fitness centers.
Each buyer has his or her own individual demands for features, “from something as simple as a first-floor laundry room to something more specific like proximity to public transportation and a certain school district,” notes Joan McGowan, a real estate associate with Koenig & Strey GMAC in Northbrook.
Upscale details are important in the definition of luxury, says McGowan. “Luxury is really defined by the quality of the details, custom appointments, curb appeal and landscaping that enhances the residence,” she says. It’s about “rich surroundings in sumptuous living conditions,” she adds.
The specific definition of luxury also changes from area to area, says Ulbrich. Luxury “means selling or purchasing a home of size, amenity or price point well above the average for the area,” she says. In Barrington, where Ulbrich specializes, she thinks luxury is still defined as $1 million. However, “that’s not to say that another area could” have luxury defined at $500,000, she says.
A Revised Plan Of Attack
In the current luxury marketplace, many optional buyers are hesitant to make decisions and are “still in the wings,” says Ulbrich. “Many are choosing not to go in the market with the resale of their own home in order to move up because they don’t choose to sell against the market,” she says.
Another problem is an overabundance of inventory at all levels in real estate, says James Buoy Jr., president and CEO of J&B Builders Inc.
“Over the past year, the upper-bracket buyers have become even more selective in their choice. With such a large inventory of homes, these buyers know they can be extremely selective,” says McGowan.
To continue selling successfully in a luxury market with hesitant buyers and sellers and a lot of inventory, many builders and agents have had to alter their business plans.
As a builder, Buoy has changed the scope of his business to succeed in the current market. His company has not started a spec house in more than two years and has transitioned from solely high-end residential construction to commercial construction as well. J&B Builders has not expanded much in recent years “except to go from high-end residential to the very nice commercial developments,” says Buoy.
Luxury agents also have had to alter the way they go about business. Ulbrich is focusing on educating optional buyers about the market “because it should be looked at as a conglomerate picture.” Buyers may lose money on the sale of their homes, but they also may gain value in the purchase of new homes that are priced lower because of the market. “You have to be patient and ride it through,” she advises.
Ulbrich also has reevaluated how much she can accomplish in a down market. “Success in the luxury market is based on production,” she says. “By my past standards, I would have to say I am disappointed in the pace of sales.” Yet, Ulbrich remains among the most successful agents within her company and territory.
McGowan also has downsized her expectations because of the current economy. While she has been successful at securing high-end listings, turning over the properties is a much greater challenge.
To combat the market, Satawake is reaching out to a much broader audience. “I have dug deeper into my sphere of influence than ever before,” he says. Satawake also is arranging purchases for buyers in any location they want to purchase in, “not just in Chicago and not just in the United States.” Despite his best efforts, Satawake also realizes that he may not move as many units and has revised his expectations accordingly.
Finding Clients, Breaking In
Success in the luxury market comes from remaining aware of the goals for both buyers and sellers. “In the luxury market, it’s not just about prices,” says Satawake. Ulbrich agrees: “Most luxury buyers still want to buy a home that they like, that they are emotionally attached to,” she says. “I don’t see people buying just the house that is an amazing deal. It has to fit and reflect.”
There is no “typical” profile for a luxury buyer, says Satawake, who notes that the age bracket for buyers is broadening on both ends of the spectrum.
“I see a lot of people in their late 30s, 40s and 50s who are looking at the market. Many are self-employed or entrepreneurs or work for a big company,” says Buoy.
Luxury buyers don’t fit into a “compartment,” agrees Ulbrich. “They’re all analytical, all successful, all a little cautious,” she says. “They’re not driven by investment; they’re driven by desire.”
At the moment, the only buyers in the market who have to purchase new homes are those who are transferring locations, say Ulbrich. To catch those luxury buyers and others, she is focusing on search optimization, enhanced listing and the best Internet presentations of her products. “When a transferee accepts a position in a new part of the country, they go immediately to their computer,” she notes.
Enhanced presentation also is more important now than ever for luxury agents. Buyers’ desire to purchase a home either rises or falls with each step in a property, says Ulbrich, who is relying more on stagers to create visual appeal. “Most homes on the market are products of lavish interior design. Stagers are professionally trained to capture a look through the eyes of the buyer,” she says.
Agents who wish to enter the niche luxury market need to first widen their knowledge base, notes Ulbrich. She recommends Realtors speak with high-end builders and learn about construction quality. They also should have a luxury mentor, one who is able to teach them the “unspoken way of succeeding in luxury,” she says.
While luxury home sales are not at the level that they existed at a few years ago, buyers and sellers are continuing to transact, which is good news for luxury market agents. Industry insiders agree that with a little patience and persistence, luxury Realtors will continue to succeed in today’s market. C.A.
James Buoy Jr.
J&B Builders Inc.
RE/MAX Unlimited Northwest
Bob J. Satawake
KW Luxury Home Division
Keller Williams Gold Coast Realty
Real Estate Associate
Koenig & Strey GMAC