We’ve never lived through a year like 2021 – an astonishing statement, considering we were all expressing a similar sentiment around this time last year.

The luxury real estate buying boom that began in 2020 escalated in 2021. Insatiable demand depleted inventory across the U.S. and put upward pressure on prices. Driving the real estate surge was a combination of factors: 1) shifting consumer values caused by the Covid-19 pandemic, 2) historic wealth growth due to cryptocurrency gains, soaring stock markets, rising house prices and increased savings and 3) the idea of home became paramount. As people searched for safe places to put their wealth and re-envisioned ‘home’ as multi-functional spaces for work, play and sanctuary, they sought out bigger and better living environments. Many luxury real estate professionals will look back on 2021 and be able to say that it was their best year yet.

The question now is: will 2022 build on this unprecedented momentum, or will there be a deceleration of demand as some experts are predicting? There are a number of unknowns that will dictate the future market direction, but here are five key trends to watch:

1. Low inventory

Low inventory continues to constrict the top 10% of the market. In September 2021, there were 36% more luxury homes sold than new inventory entering the market. One month later, that figure ballooned to 55%. Coldwell Banker Global Luxury® Property Specialists from across the country have told me that they do not see inventory levels improving any time soon.

2. New luxury price thresholds

Declining inventory levels, combined with a lack of desirable properties, have pushed prices up across all luxury price points. Median luxury sold prices* as of the end of October 2021, compared to the full year of 2020, have risen 23% for single-family homes and 14% for attached properties, according to recent stats compiled by the Institute for Luxury Home Marketing, the partner who helped us prepare our 2021 “A Look at Wealth” report released this fall.

As a result, luxury price thresholds rose across the U.S. In Los Angeles, the entry-level luxury home price hovered around $2 million for many years but is now closer to $3 million. Even in a small resort market like Hilton Head Island, S.C., the barrier to luxury entry has increased nearly 40% since 2019, from about $550,000 to $779,000.

3. High demand for turnkey properties and new construction

Turnkey properties are still sparking bidding wars and fetching the highest prices. Recent supply constraints in the construction industry — from labor shortages to materials like lumber, concrete, and paint — have only amplified demand for turnkey and newly built properties.

4. The migrations continue

The mass migrations of 2020 were still in effect for much of 2021, except partly in reverse. Whereas in 2020, people were fleeing densely packed cities and pandemic hotspots to small-town hidden gems, suburbs, and popular second-home destinations, people returned to cities in 2021. Other buyers were also making moves to small and midsized cities with more affordable home prices and reasonable commuting distances to major employment centers.

5. The rise of co-primary ownership

Happening concurrently with The Great Migration, as remote work became the norm, was the rise of co-primary ownership. Some affluent buyers did not fully migrate to other locations; rather, they simply swapped a secondary residence for a primary residence or chose to own two primary properties in different locations and split their time based on lifestyle preferences.

Looking ahead and learning from where we’ve been

What will 2022 bring? Inflation, mortgage rates, and construction supply constraints are all economic factors to watch. Our Luxury Property Specialists are also keeping an eye on what wealthy international buyers will do now that U.S. travel restrictions are lifted. And, with low inventory levels and turnkey properties commanding a premium, will we see some wealthy buyers pivoting to adjacent “aspirational” markets or adjusting their expectations and purchasing properties that need a little work?

All of these elements will be in play in 2022. The Coldwell Banker Global Luxury team will analyze it all in our forthcoming “The Report,” due out in February 2022.

Read the original, full-length version of the article on the Coldwell Banker Global Luxury blog.

Michael Altneu is the vice president of luxury for the Coldwell Banker brand and leads its elite Coldwell Banker Global Luxury® program.

^{* Defined as the top 10% of any given market}