Boise. Raleigh. Salt Lake City.
Global wealth surged in 2021, leading to a gilded year for luxury housing markets nationwide and a spillover into secondary housing markets from Idaho to North Carolina, according to Coldwell Banker’s 2022 Global Luxury Report.
New price thresholds and the spread of luxury into those smaller markets, among other factors, could position 2022 as another healthy year for luxury, the report indicates.
“This extraordinary wealth growth led to a real estate expansion like we’ve never seen before,” Michael Altneu, vice president of Coldwell Banker Global Luxury, wrote in the report’s introduction. “A new map for luxury opened up new locations and multiple homeownership in greater numbers. Home as a safe haven became the rallying cry for our time.”
Hailed as “the year of reconciliation,” 2021 saw record low inventory, quick-pace price gains, global wealth gains, and trends toward digitization transform the luxury realm, the report noted. Asset gains of high-net-worth individuals were strong over the course of the year as investments in stocks, real estate and cryptocurrencies performed very well, allowing investors to quickly increase their net worth.
In 2021, global wealth increased 20.4 percent year over year while U.S. wealth increased by 24.8 percent during the same period. In total, the global millionaire population rose 10 percent year over year to 56 million.
Affluent buyers branched out to secondary cities in 2021, with those smaller cities experiencing an increase of 5 to 10 percent in the number of affluent home purchases compared to the previous year.
Meanwhile, the number of second-home purchases also increased, with 32 percent of Coldwell Banker’s global luxury property specialists reporting affluent buyers purchasing second homes, up from 23 percent in 2020.
Nearly 40 Coldwell Banker luxury agents were polled for this report under the Coldwell Banker Vision Survey conducted at the end of 2021, well before war broke out between Russia and Ukraine. Therefore, the uncertainty that now enshrouds much of Europe may stand to impact some of the international buyer forecasts made in the report. Altneau did acknowledge the conflict in his opening note without suggesting specifically how it might impact the global real estate landscape.
“The last two years, as well as the current crisis unfolding in Ukraine, have profound lessons for our present and future,” Altneu wrote. “I wish to take this moment to acknowledge this rapidly evolving situation. Although. we do not understand at this time what the full impact will be on the global community, our thoughts are with everyone impacted.”
Looking forward, here’s what agents of the global luxury brand anticipate for 2022.
Buyers who want ease and amenities
“Trending in 2022 will be move-in ready homes,” Jade Mills of Coldwell Banker Realty in Beverly Hills said in the report.
Other agents surveyed by the brand echoed that this would be a top demand for luxury buyers this year. Nearly 38 percent of agents surveyed reported that move-in ready luxury properties were the highest in demand, ahead of properties based on location, properties with large square footage, properties with acreage or land and properties within a certain price range.
That said, amenities that topped buyers’ lists included large yards and pools. Nearly one-quarter of agents polled each noted that these items were at the top of buyers’ wish lists, in terms of amenities.
More balanced supply and demand
With the market being less intense than it was at its peak in late spring 2021, Coldwell Banker reported that more confident sellers and increased construction could potentially lead to a more balanced market in 2022.
“With their agent’s guidance, sellers may recognize that they have a few market conditions in their favor,” the report states. “1) less competition, 2) prices still have room to increase in some markets, and 3) the window of opportunity for sellers could be closing by the end of 2022.”
The National Association of Realtors (NAR) has projected a “strong pipeline of newly built inventory” by later in 2022, Coldwell Banker’s report noted, which should certainly help luxury buyers with more move-in ready inventory to choose from. Residual buyer fatigue from 2021 could also help with the tight inventory situation, though it’s still to be determined how much that may impact the market in 2022.
Rising price thresholds
“Luxury home prices rose faster in 2021 than in any one-year period in documented history,” Coldwell Banker’s report stated.
Median luxury sold prices shot up 20.3 percent on single-family homes between January 2020 and December 2021, while those median prices rose 16.6 percent on attached properties in the top 10 percent of 120 markets reviewed by the Institute for Luxury Home Marketing. That yielded a median sales price for luxury single-family homes of $1.55 million in 2021, up from $1.28 million in 2020, and $982,000 for attached homes, up from $853,500 in 2020.
Depending on how a few market variables play out into 2022 — like domestic buyer demand, homebuilding rates, interest rates, and international investor demand — those higher prices could become the new luxury market normal, agents say.
“Buyers understand that property prices have dramatically increased,” Carrie Wells of Coldwell Banker Mason Morse in Aspen said. “With the lack of inventory, they are paying up to purchase what they want.”
“Even though the interest rates have risen, it has not affected the real estate boom in the first two months of 2022,” Mills added. “The frenzy continues. We are seeing multiple offers on properties that we feel are priced right. This is our new [reality].”
A reshuffling and new luxury markets
As luxury buyers explored new markets in 2021 during the ‘great reshuffling’ to prioritize their wellness, family and community, they opened up the opportunity for secondary luxury markets to experience a boom. Sun Belt states (i.e. Arizona, Florida, Texas, Nevada, etc.) thrived during this period as luxury buyers had the flexibility to work remotely and sought to take advantage of locations with appealing climates and tax benefits.
Likewise, cities that were often alternatives to pricier nearby metros (Denver, Boise, Sacramento, Raleigh-Durham, Salt Lake City) saw a boom with inventory of luxury single-family homes in these markets declining between 19 and 36 percent year over year.
Affluent suburbs also benefitted from work-from-home trends, and agents said they will probably continue to do so.
“I think the suburbs will continue to see a tremendous increase in demand this spring,” Frank Isoldi of Coldwell Banker Realty in Westfield, New Jersey, said. “With inventory already at an all-time low, prices will continue to rise and most likely stay there for the foreseeable future.”
Still, city living also made a comeback in 2021, with luxury prices in cities like New York, San Francisco, Washington, D.C., Philadelphia and Chicago increasing up to 10.3 percent from 2020.
In short, luxury buyers found appealing places to live everywhere — and Coldwell Banker’s report suggests that this widespread appeal will likely continue.
“There’s no reason to think the decentralization of luxury will stop in 2022,” the report states. “Luxury may be on the move for the foreseeable future.”
New luxury developments
Soaring demand for new luxury homes kept homebuilders busy in 2021, with new homes being snatched up nearly as quickly as they become available.
Southern states and select cities, like New York, are seeing huge demand from luxury buyers for new homes. During Q4 of 2021, U.S. housing starts in the South were at an annual pace of 933,000 homes, “accounting for more than half (56 percent) of all new home construction in the nation,” the report stated. Meanwhile, the number of closed new development condo and co-op sales in New York City nearly doubled over the course of 2021.
Coldwell Banker luxury agents said they believe the trend toward new luxury developments will keep going strong in 2022.
“Builders, investors and users and seeking prime locations to purchase older homes as sites for their building opportunities and new construction is the most sought out commodity, but there is extremely limited availability in this category, so selling prices will naturally increase,” Diane Polland of Coldwell Banker Realty in Great Neck, New York said.
Trends toward sustainability
As projections about the future of the climate continue to become more dire, buyers have already showed preferences towards environmentally friendly housing choices, and agents say this trend is expected to continue. In addition, individual homebuilding companies have pledged to become more green — 122 global construction and engineering firms have signed onto the Net Zero Carbon Building Council, which plans to reduce net carbon in new buildings 50 percent by 2030 and attain carbon neutrality by 2050.
More and more luxury buyers are wanting to implement the concept of ‘biophilia’ in their homes, or merging individual health with environmental health by way of home designs that merge with nature, Coldwell Banker’s report noted.
“Sustainability and environmental friendliness in the past may have been simply tangential features of luxury real estate, but as younger buyers become an increasingly dominant demographic, these considerations will assume far greater importance in the high-end residential market,” the report stated.
Renewed international buyer interest
Travel restrictions as a result of the COVID-19 pandemic put a significant dent in U.S. real estate transactions by international buyers over the last two years. But, in September 2021, the U.S. lessened restrictions, providing a greater opportunity for some international luxury buyers to invest stateside.
“Like their American counterparts, affluent investors overseas have also benefited from massive wealth creation during the pandemic with rising asset prices and stock markets,” the report states. “Wealthier than ever before, these international investors could be looking for greater returns where they can find them and may be eager to put their money in U.S. real estate, which has traditionally been regarded as a safe haven.”
International buyers from China, Canada and Mexico are expected to express an interest in U.S. real estate in 2022, according to Coldwell Banker. As more travel restrictions ease, wealthy Middle Eastern buyers would also likely make a U.S. comeback.
That said, Vladimir Putin’s invasion of Ukraine, which has rapidly erupted into warfare over the last few days, could shake these predictions quite a bit. European investors, in particular, are likely on edge now as the conflict continues and global markets are impacted as a result of tough sanctions against Russia. Therefore, the status of international investors returning to the U.S. is still a precarious one.
Coldwell Banker’s complete 2022 Global Luxury Report can be accessed here.