Luxury home market — and millionaires — on the mend
Millionaires took a hit in 2007 and 2008 as the housing and financial markets cratered, but they are on the way back — and so is luxury housing.
In the nation's top 20 markets, million-dollar property sales rose 18% in 2010 with a 21% increase in California, said Laurie Moore-Moore, CEO of The Institute for Luxury Home Marketing, a Dallas-based firm. Moore-Moore teamed up with Scott Sambucci of San Francisco-based Altos Research on Thursday to host a webinar on the status of the luxury residential real estate market.
In 2007, there were about 9.2 millionaires in the country, Moore-Moore said. The level dropped 27% in 2008 during the height of the financial crisis.
The millionaire count rose 16% in 2009 and 8% in 2010, return back to more than 9 million this year, Moore-Moore said, adding, "We may even be ahead of where we were before the crash."
High-net-worth individuals, for example, are on the upswing, according to the 2011 Merrill Lynch CapGemini World Wealth Report. Overall wealth for this group grew 9.7% last year to $42.7 trillion, bringing it to pre-crisis levels, according to the report.
A high-net-worth individuals is one with investable assets of $1 million or more, excluding their primary home, collectibles, consumables and consumer durables.
Still, attitudes have changed since the downturn with some portions of the wealthy segment exhibiting more concern about quality than bling, Moore-Moore said.
"Bling is now limited to the 'flamboyants' and the 'strained affluents,'" she said, describing flamboyants as the "look at me" über rich who buy trophy multimillion-dollar homes.
She defined strained affluents as "ultra consumers" with substantial incomes who buy as much house as they can possibly afford, send their children to private schools and focus heavily on lifestyle. Strained affluents were a key driver in the mass luxury market before the economic crash, and their numbers haven't yet snapped back, she said.
Still, anecdotal evidence and market-to-market data show considerable improvements in the luxury housing market.
This spring, Russian entrepreneur and billionaire tech investor Yuri Milner bought a $100 million mansion in Silicon Valley, the most expensive luxury home sale this year.
Also this year, the 22-year-old daughter of sports entrepreneur Bernie Eccestone bought an $85 million Los Angeles home. Trophy properties from $34 million to $50 million also sold this year in Bel Air, Calif., Greenwich, Conn., and Corona del Mar, an affluent area of Newport Beach, Calif.
In Miami, 517 properties sold for $2 million or more during the first seven months of 2011, up nearly 16% from a year earlier. In July, nearly 63% of the luxury properties exchanging hands did so in cash — an indication of foreign buyer involvement, Moore-Moore said.
Sambucci said a number of markets, including Boston and New York City, are seeing a rise in median prices for the top 25% of properties (based on price).
Days on the market in NYC are still about one year for these properties, but Sambucci notes luxury buyers are a more patient bunch, realizing the market for such high-end properties is limited. They also have the cash reserves to take their time with a sale, he noted, than other less-wealthy homeowners who might be in financial distress or who need to move for a job change.
Improvements were also noted in markets such as Aspen, Colo.; Miami Beach, Fla., and the California markets of San Francisco, Los Angeles, Orange County, and Newport Beach.
Some 30% of the über rich plan to invest in real estate this year, according to the Institute for Private Investors survey.
Write to Kerry Curry.
Follow her on Twitter @communicatorKLC.
Don’t miss out: get HW delivered via email
- Current Chg.
- NASDAQ 3498.97 33.722 ^ixic
- S&P 500 1655.35 -13.81 ^gspc
- Volatility Index 13.82 0.45 ^vix
- KBW Mort. Financial Index 32.19 -0.72 ^mfx
- MSCI US REIT Index 1042.89 -27.49 ^rmz