A rising tide lifts all boats, and up till the Great Recession, the market for luxury homes was enjoying high waters, but the tide has turned. Unity Marketing just released a new report for real-estate professionals catering to the ‘carriage trade’ to capture what will be an increasingly competitive and challenging market.
Toll Brothers, the home builder and real estate developer, is cleaning up in the high-end housing market. With $3.9 billion in revenues in 2014, up 46% from previous year, in February Toll Brothers improved its guidance, promising to deliver more homes (5,200-6,000) at a higher- average price ($725,000 to $760,000), after a gangbuster 1Q2015 reporting a 76% jump in profits on 33% increased revenue from previous year.
Without a doubt, Toll Brothers is targeting the fastest growing segment in the new housing market. While new home sales increased only 2% from 2013 to 2014, sales were up 31% in the $750,000 and above new home segment. But behind the numbers, what appears as a market on fire isn’t necessarily raging, but rather doing a slow burn.
Overall sales of new homes fell sharply from 2006 and didn’t start to recover from the recession free fall until 2012. Yet with 437,000 new homes sold in 2014, today it remains below levels from 2008. And while the new home market has seen ups and downs since 2002, today’s new home sales remain half that of 2002, when 973,000 were sold.
The high-end segment of the market accounts for only about 5% of the total, or 21,000 new homes. With Toll Brothers adding 5,000-6,000 new homes in that price range per year, we need to ask….
How many new high-end homes can the market absorb?
A new trend report from Unity Marketing, Marketing Real Estate in New-Luxury Style, reveals several key trends challenging marketers selling high-end real estate.
- Slow rate at of household formation. Last year fewer than half-million new households were formed, less than half the rate of 1.3 million new households from the previous two years. Further, most of these new households are renting, rather than owning.
- Baby Boomers downsizing as they reach retirement. Some 10,000 or so Boomers will be retiring every day through 2029 and with retirement comes new housing needs. Boomers bought their homes in the 80s and 90s, when bigger was better and ‘McMansions’ the then American dream home. But many Boomers will have to tap the equity in their homes to finance their post-retirement lifestyles. Net/Net: They will be leaving behind a mounting inventory of big, expensive homes that the much smaller GenX cohort can’t absorb.
- Changing preferences and priorities in homes. The Millennial generation, as large in size as Boomers, but delayed in getting married, setting up new households and investing in home ownership, brings a whole new standard into the housing market. Many of them grew up in the Boomer McMansions that will be coming on the market, which may well not be the kind of home they want. The “Tiny House” movement” is more than a reality television show and the “Not So Big House” popularized by Sarah Susanka offers an environmentally and financially responsible way to live for the responsibly-minded Millennial generation.
A rising tide lifts all boats, and up till the Great Recession, the high-end real-estate market was enjoying high waters. But the tide has turned. Redfin, a Seattle-based firm that tracks purchases of the most expensive 5% of homes sold in America, just released a report that found in the first quarter 2015 the prices for luxury homes grew at their slowest pace in three years, and that it took longer for such homes to sell.
Yes, there was a rebound from 2012-2013, but the high-end real estate market, with few regional exceptions, looks to be settling down into a ‘new normal.’ Real-estate professionals catering to the ‘carriage trade’ will have to work harder, work smarter and simply be better than the rest to capture what will be an increasingly competitive and challenging market.
To give real-estate professionals insights to succeed in a ‘new normal’ more competitive high-end housing market, Unity Marketing has published a new trend report, Marketing Real Estate in New-Luxury Style: A one-size-fits-all strategy won’t work. This report includes eye-opening statistics, powerful analysis and spot on take aways about the high-end consumer and how to thrive selling to a new more value-oriented luxury home customer.
More about Marketing Real Estate in New-Luxury Style report
To understand the luxury home real-estate market, you need three perspectives:
- Demographics of customers who can afford to buy luxury homes
- Purchase behavior of those ‘qualified’ buyers
- Consumer psychology reveals how to talk and communicate with each special luxury home buyer segment based upon their special needs and desires in their homes.
This report provides all three. Plus, it includes a special section devoted to the next generation of luxury home buyers – the Millennials – and their aspirations about the homes they have in their future.
Success in luxury real estate begins with understanding the needs and desires of luxury home buyers. Let Unity Marketing be your research partner for the affluent housing market.