The following article is an excerpt from our 20 page Luxury Property Report. The entire report is available by visiting our report page.
Shifting demographics will lead to some long-term changes in the luxury market. The customer for these properties is changing, and with this change comes the need for a different kind of property.
These new customers are comprised of high-earning millennials, and their interests and uses in a property differ from previous generations. They look for less square footage (according to one builder we spoke with, 5,500 square feet is the sweet spot). They want more open floorplans and less space to care for. Many also have a desire to maintain a smaller environmental footprint. These buyers are also less likely to host multi-generational gatherings than more mature buyers of large homes.
These younger, luxury buyers usually come from business backgrounds where they have experienced rapid financial gain, and often a couple’s combined income enables them to make purchases in our luxury market.
A second group also entering the market are the children of baby boomers. According to economists, as baby boomers pass on, our country will see the largest transfer of generational wealth in history.
In the longer term, these two factors will help the luxury market. These new buyers however, may be looking for something a bit different and curated more to their taste.
The younger buyers are more likely to finance a purchase. A financial shift that comes with this, is that fewer of these younger affluent buyers are expected to be cash buyers, so financing contingencies are more likely (another valuable reason for having an appraiser on the front end of a listing). Over the past six months 52 percent of homes in the area priced above one million dollars sold for cash.
The new buyers, although wealthy, may not be as cash-rich as those who have had more time to accumulate wealth. These buyers will be turning to more conventional types of financing, seeking Super Jumbo loans. For the seller, this translates into several issues. First, look for longer closing times.
Cash buyers can usually purchase a home in a relatively short time, but, when a buyer needs financing, closing times get extended, and often dramatically. If buyers are borrowing a significant amount towards the home purchase, the financial institution will require an independent appraisal report that supports the price.
If your home is older, some remodeling could reap big dividends in the future when you are ready to sell. This new group of buyers is looking for brighter colors, designer-styled kitchens with all the latest chef quality equipment, and smart home technology.
Homes with complex Crestron systems with proprietary software and mega remote-controls that still have a “VCR” button, won’t help attract these buyers. If you can’t control many elements of the home, such as thermostats, lighting, video feeds or music from your smartphone, anywhere in the world, you might benefit from an equipment upgrade which will help when you go to market.
In our market in Scottsdale, Paradise Valley, and Carefree, we are seeing demand for theater rooms, exercise rooms, outdoor entertainment areas, or anything that adds an entertainment component to a home. New buyers are also looking for master bathrooms and closets that are living spaces of their own.
We are finding now more than ever, luxury properties that show well and are priced to the market move, and move quickly.
If you would like more insight into the North Scottsdale luxury market, we have prepared an extensive 20 page report with data on key zip codes and major subdivisions. You can read a copy by visiting our Luxury Report page.