Is Luxury Homes is Growing Market?

The luxury homes market was once a tiny percentage of overall sales but today is a fast growing market segment that has gained increasing momentum over the past several years.  Real estate professionals who once may have dabbled in the market are now beginning to view this niche as an opportunity to build a career path.

But what is a luxury home?

Certainly we can all imagine in our minds eye the enormous castle or a fabulous estate on the hill, complete with butlers and maids, but is this an accurate definition of today’s Luxury Home?  Luxury homes are often described as expensive homes. But cost is only a measure of luxury, a way to measure the differences in any community.  Cost can also vary greatly between areas of the country. A luxury home price in the one part of the country may not be able to buy a modest home in another.  So price alone is a poor description of a luxury home.

Looking at it another way, luxury homes also include many types of properties from ranches, town homes, condominiums and apartments, to custom homes, villas and brownstones. But one area that all luxury home specialists seem to agree on is that location is a key ingredient to desirability. Location is often a reflection of lifestyle, a key component in the luxury homeowner’s decision making process.  And therein rests the key ingredient that needs to be understood for real estate professionals that want to move into this growing market niche.  According to John Brian Losh, publisher of Who’s Who In Luxury Real Estate, “When luxury buyers look for a home … they look for a lifestyle change – and they want the home to reflect the lifestyle of the area.”

If this is a market segment that holds some appeal for you, you’re not alone.  There is a growing interest all across the country as more and more agents are enrolling in Luxury Home Courses.  While each course is different and reflects the subtle aspects of the market and the author, they all agree that most every market has its luxury segment.  This is often generalized as a sales price that is 2 times the current market average.  While this is not a hard and fast rule it provides a starting point … and just that … a place to start.

One important distinction as noted by Thomas Stanley, author of the Millionaire Mind, “Homes are not like automobiles, and millionaires are not like most other people. New does not necessarily translate into better…or…improved.” A luxury home is not necessarily by definition always going to be new construction, or even a newer home. The most critical aspect to a luxury home is quality. Luxury homeowners demand and deserve the very highest quality home that money can buy. A luxury home then can be best described as a home that offers the highest quality location, floor plan, amenities and lifestyle to owners within their community. 

What kind of person owns a luxury home? How do they accumulate the assets needed to purchase a luxury home? What demographic profile do they fit into? These are key questions to understand when attempting to obtain a foothold in the highly specialized field of Luxury Home Sales.

According to Zhu Xiao Di in his 2004 study of  “Million Dollar” Homes and Wealth in the United States, “When looking at who buys luxury housing it’s wise to not just look at million dollar sales but also at “half million dollar plus” homes when studying who can afford to own affluent housing. This larger demographic takes into account the full range of high end home owners who may live in areas of the country where home prices which might not be comparable to coastal states.”

There are many factors that have aligned over the last several years to create an expanding luxury home market. These forces taken individually may not seem significant but when added together have created a powerful wave of interest in high end housing. Three key factors examined in the ALHS course from RealtyU are: 1) Record low interest rates, 2) Baby Boomers and 3) Wealth management.  Of these, Wealth Management continues to be at the top of the list as household net wealth is the cornerstone for most Americans. Half of homeowners hold more than 41% of their household net wealth in the form of home equity, and half of all American households have at least 27% of their net wealth in the form of home equity. 

The bottom line is that there is no single definition for the luxury home market.  It varies from market to market and even within individual market segments.  What is certain, however, is the opportunity that awaits the dedicated professional that is willing to dig in, explore, learn and understand today’s luxury home buyers and sellers.  A great place to do just that is the Accredited Luxury Home Specialist (ALHS) course and designation managed by the Luxury Home Council and now offered in a rich, interactive online format from RealtyU. 

For more detailed information visit www.BecomeaLuxuryAgent.com