Luxury Home Trends 2023

Luxury Home Trends 2023
The luxury market is being shaped by several trends in 2023, according to an article published in the NAR (National Association of REALTORS®) Magazine. In their survey, nearly 90% of respondents believe the 2023 real estate market will be better or the same as 2022 for real estate investments.
 
Currently, a lack of available inventory is keeping home prices from dropping. While the Fed raised its interest rate by .25 basis points at the beginning of May, Powell indicated that we may be seeing the end of raising rates to ease inflation.
 
The luxury market is not as influenced by rising interest rates. Many luxury buyers use cash or sell stocks when purchasing their second or third home, and do so as an investment. However, other factors are shaping their buying decisions.
 

Demand for Smaller Homes

During the pandemic, children required more inside space and many people chose to work from home, leading to a demand for larger houses. Affluent buyers are now seeking home sizes between 2,500 and 3,500 square feet. These smaller properties sold 19% faster than the super-sized homes.
 
Because schools have re-opened and people are returning to normal outdoor social activities, the appeal of larger homes has diminished. The report also indicates that downsizing may also be a factor in avoiding higher home prices.
 
Lower up-front costs for cash purchases are also a factor driving this trend.
 

Growing Desire to Move

The real estate frenzy that drove 2021 and early 2022 purchases has led many homeowners to feel that they may have made a hasty choice. Many feel that a lack of neighborhood amenities and lifestyle changes have led them to regret their home purchase.
 
Luxury buyers see advantages in the current market because of less competition and may be more inclined to move. Many indicated that they would decide to keep their current home as an investment property when choosing to move.
 

Return of Global Buyers

The survey also tracked international buyers in the U.S. by dollar volume. One of the largest groups of luxury buyers is from China, purchasing roughly $6.1 billion in U.S. properties. Canadians, too, are a large group of international buyers, measured at $5.5 billion in sales volume purchases.
 
Many buyers from India are purchasing U.S. properties, with a sales volume of $3.6 billion. This is followed by Mexican buyers at $2.9 billion.
 
The top U.S. destinations for foreign buyers are California, Florida, and Texas.
 

Investment Stability

Almost half of those surveyed believe that real estate is the safest long-term investment. Many feel that real estate holdings provide more security when compared to stocks, bonds, cryptocurrencies, and pensions.
 
Diversifying one’s investment portfolio also ranks highly for those seeking a safe investment. Additionally, many are considering the legacy and inheritance value for loved ones that income from real estate investments can provide.
 
Not only are luxury buyers finding financial and emotional stability in their real estate investments, but many are returning to traditional hubs for luxury home purchases. Areas that have traditionally offered long-term appreciation, such as New York, Chicago, and San Francisco are back on the luxury buyer’s radar.
 
Another factor that is driving the luxury buyer’s decision is climate change. When considering a second or third home as a vacation purchase, many are avoiding the boom and bust markets affected by the extreme weather in the southern U.S.
 

Cash Purchases Rise

Because of higher interest rates, luxury buyer is leveraging additional cash in their home purchases. Many are moving money from stock holdings into real estate transactions.
 
In 2022, almost 26% of all transactions were all-cash purchases compared to only 24% in 2021. Many believe that this number will increase into 2023. As buyers look for alternative financing because of higher interest rates, some are using margin or stock portfolio loans in their purchases, rather than traditional financing.
 
Sales in the Lake Tahoe and Truckee luxury market have remained relatively stable. Most of the transactions during the winter and spring of 2023 have been in luxury markets such as Martis Camp, Lahontan, and Grey’s Crossing.
 
As summer brings more listings onto the market, we expect to see sales numbers increase across the board.
 
Contact me today for more information about the luxury market at Lake Tahoe and Truckee.

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