A year of living cautiously has caused luxury buyers and sellers to come down with pandemic fatigue. Symptoms may include rethinking your lifestyle and feeling the sudden urge to move. A burning desire for more space to participate in activities for which you previously headed to the office, school or gym has beckoned buyers to the closing table and made agents optimistic for spring. Plus, historically low interest rates have welcomed new entrants into the market, ushering in more opportunities to pump up the volume.
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To update you on all the exciting new changes, we went directly to the source: luxury brokers. With much candor, they reveal how the luxury market held up this past year, the types of properties that are moving, how the city compares to the suburbs, buyers’ evolving needs and their exciting predictions for the post-COVID world.
A snapshot in time
Business has fluctuated during the pandemic for broker Tim Salm, senior vice president of sales at Jameson Sotheby’s International Realty. “During the initial lockdown period last spring, there was essentially nothing going on,” he said. “Everyone was hunkered down at home in fear, with a few exceptions.” It was a complete turnaround from the previous few months. “I had multiple high-end transactions under contract before lockdown,” Salm said.
He used the downtime to organize his office, reconnect with past clients and participate in virtual networking events and seminars with agents from across the globe, which opened new doors for everyone involved. As restrictions slowly lifted last summer, activity returned to the market, albeit sporadically. “But it’s coming much more alive this spring than it has been in a long time,” Salm explained. “People are hungry for more space. Between that need, the weather breaking and the vaccine becoming more widespread, it’s really opening up the market in a big way.”
Joanne Nemerovski can relate, for her business has also fluctuated. “In the very beginning of the pandemic, we were super slow, like the world was closing down,” said Nemerovski, a luxury real estate advisor with Compass. But then she eked out some business from people living in high-rises, who wanted to move into houses. She also ran around a lot less, since every initial showing was like a third or fourth one, because buyers already viewed the properties online and drove around the neighborhoods themselves. “They showed up ready to buy,” she said. To limit contact, she hosted virtual open houses via FaceTime and Zoom and answered prospective buyers’ questions in real time.
While 2020 wasn’t the best year — Nemerovski remembers that luxury prices were down and homes weren’t selling in November and December — it wasn’t horrible. Thankfully, the market is rebounding and demand for new construction has returned. “Building is continuing, and buyers are spending a lot of money for land again,” said Beth Burtt, a broker associate with Baird & Warner in Hinsdale. “The luxury market is hitting new highs.”
Burtt is grateful the market has turned around. Early in the pandemic, her business slowed down tremendously. “People were backing out of transactions, fearing the unknown,” she said. “It started to pick up at the end of May and has been accelerating ever since.” Nonetheless, she is seeing markets in Florida — Naples, Palm Beach, Sarasota, Jupiter and Marco Island — outperforming the Chicago area because home values there are rapidly increasing and demand is high. Nemerovski blames Chicago’s lagging behind on its seasonal weather and the fact that all of the benefits of living in the city have been inaccessible. Now that summer is approaching and the city is opening up, she predicts it will be one of the best real estate markets we’ve seen.
Pandemic changes “must-have lists”
While finishes are still important to luxury buyers, the pandemic has made functionality a top priority. “People want home offices, Zoom rooms and space for their kids to have privacy for remote learning,” Salm said. Also at the top of must-have lists are fabulous kitchens, since buyers are at home cooking all the time; an exercise room or nook for a Peloton; large, private outdoor spaces; saunas; and steam showers. At the high end, if a home doesn’t have these features, a buyer won’t see it, Salm explained.
Exodus to the suburbs: Myth or reality?
Salm has seen a push to the suburbs for some families who were forced to rethink their lifestyles after being “trapped” in a condo, working remotely with kids nearby attending Zoom school and pets begging for attention. “In a typical city-centric lifestyle, people just aren’t home a ton, as they are out living, working and enjoying the city,” Salm said. “Clearly that lifestyle changed overnight.”
With the city essentially closed, the tight quarters inspired some of them to immediately search the suburbs for as much space as they could find. “The less-is-more downsizing mentality of recent years reversed very quickly, and all of a sudden, people want big again,” Salm said. “The suburbs have definitely seen a great benefit from this, as have the vacation areas of Lake Geneva, Wisconsin, and Harbor County, Michigan — where the markets have been insatiable.” In those vacation areas, most buyers kept their city homes with every intention of returning to them, Salm explained. They simply chose to wait out the pandemic in a country house that they were thinking about buying for years anyway.
Pre-pandemic, Lake Forest had a glut of inventory on the market, Nemervoski recalled, noting there were about 24 luxury homes priced over $2 million not moving. Once the pandemic hit, a lot of people kept their places in the city but moved to Lake Forest for more land and space, she said, pointing out, “There is very little left on the market now compared to what it was a year ago.” She said suburban markets soared last year because people were afraid of getting sick in densely populated areas, they didn’t have to go to the office and they wanted a big backyard for home schooling their kids. But she knows the trend won’t last. “It’s a pendulum of time,” she said. “It will all swing back.”
Burtt is still seeing buyers willing to live farther from the city to attain larger homes, increased amenities and more land. “I had the highest sale for a resale home in Hinsdale that closed in January, at just under $8 million,” she said. “I think the pandemic has increased the value people place on enjoying their homes.”
Despite appearances, Salm did not witness a mass exit from the city. Many times, the clients who headed to the suburbs would have left the city at this point in their lives anyway. However, he did see housing sales flourish more than high-rises, because people wanted more outdoor space. Salm said they were finding it farther from the city center, in Bucktown, Wicker Park and Logan Square.
“Buyers are creating ultra-luxury spaces in areas they may have not done so previously, to get larger, more unique spaces with a big backyard,” he said. “In general, some people think ‘luxury’ and only associate it with an exclusive building in the Gold Coast or a Lincoln Park mega-mansion. These are great examples of the luxury market, but there are fabulous, high-end properties in every neighborhood in Chicago.”
Interest in high-rise living returns
Although the pandemic put the luxury high-rise market on pause, it is starting to move now that buyers are more comfortable with communal spaces after they’ve been vaccinated, Salm said. “We are seeing demand come back. At the end of the day, many people love amenity-oriented high-rise buildings with views, security and the ease of living that comes with it.” In this market segment, new construction is more desirable than resale, Salm explained, because buyers feel the need to put their own stamp on a property. But they still want to limit contact and don’t want contractors coming into their homes. As a result, Salm has sold several furnished units at One Bennet Park, a new boutique luxury high-rise. Still, he said resale sellers are motivated, some of them dropping prices while others understand this is a blip in time and are holding tight, waiting for a recovery.
A bright future
While Burtt is not seeing bidding wars over luxury homes, because there aren’t too many buyers at the top of the real estate pyramid, she is noticing that there are buyers in the marketplace who weren’t there before. “I feel like the luxury seller is savvy enough to realize that with the buyers now present, they should take advantage of it,” she said. “The luxury market has had an increase in activity it hasn’t seen for years. Home prices are up, but sellers are still negotiating.” Optimistic about the future, she anticipates the market will continue to do well throughout the year. “We’ve had an increase in the number of sales,” Burtt said. “And there are sales at the highest level that we’re seeing—over $6 million.”