By Louise Bolger
Luxury housing market grows as boomers age
sun staff writer
Happy New Year and welcome to 2007, one of the most anticipated
years in the history of real estate. With everyone sitting
on pins and needles waiting to see how the normally busy winter
buying season will trend, there is one segment of the housing
market that hasnt missed a beat. Nationally, the luxury
housing market may be the only silver lining in an otherwise
The Luxury Home Council reports several hot spots around the
country where sales and construction of luxury homes are growing.
They report that the fundamentals are still strong for affluent
buyers. They have a strong economy, strong GDP growth, low
unemployment, a booming stock market and are less affected
by increased interest rates.
Phoenix, Ariz., had 32 homes sell for $5 million or more in
the first 10 months of 2006. Manhattan, a price leader in
almost every area, now boasts the average purchase price for
a condominium at more than $1 million, and in the upper 20
percent of the New York market, the average sales price has
surged to $4.5 million. California luxury home prices are
up in all the regions, Los Angles, 12.8 percent; San Diego,
6.4 percent; and San Francisco 4.8 percent.
In addition, luxury home developers show no sign of being
influenced by the slow down in the general real estate market.
From Utah to Denver to New York City there are construction
plans catering to the super-luxury market. Even Canadas
luxury market is strong, especially luxury downtown apartments
and condos in urban areas.
Naturally, the driving force behind the continued success
of the luxury real estate market is the aging baby boomers.
Baby boomers are a 78 million strong demographic force, becoming
the target market of choice for luxury home builders and developers.
Almost one in four baby boomers, or roughly 19 million of
them, have a high net worth of $500,000 or more, and this
is expected to rise as the generation ages. Virtually all
of these high-net-worth households are homeowners and 47percent
own more than one home.
According to the National Association of Realtors, boomers
want more than just four walls and a roof when buying a home.
They also want amenities, including cultural activities, and
the luxury home developers are giving them what they want.
In addition, Architectural Digest and Sothebys International
report that 36 percent of affluent families plan to invest
in real estate in the next 12 months.
Trading up, a relatively new phenomenon among buyers of all
products, has had an important impact on the luxury home market.
The theory is that consumers when given the opportunity and
ability will almost always choose to trade up to a higher
standard product. In addition, this growing trend seems to
be largely unaffected by national economic issues and instead
is being driven by socio-economic influences. Once consumers
have met their basic needs and still have disposable income
available, they will trade up to products and services that
are emotionally meaningful to them. Sounds like keeping up
with the Jones, for the millionaire.
Even if your home isnt in the luxury home category,
you can still benefit from the good news coming out of this
marketplace. Super-rich people spending a lot of money eventually
has to trickle down to us mere mortals. And since Anna Maria
has quite a few properties that could be considered luxury
homes, this could happen sooner rather than later. In the
meantime, keep your eye on the real estate ball in the upcoming
year. It will undoubtedly be an interesting one to follow.