Luxury Markets Are Slightly Muted, But Still Strong

Our next chapter from the Sotheby’s Luxury Outlook focuses on how markets have changed since the pandemic. For some luxury markets, the pandemic only made them stronger. Read on to see the market perspectives from across our worldwide network…

Across the U.S., luxury markets that began to shoot up in value—and price—when the Covid-19 pandemic began in March 2020 seem to be holding their value.

The Santa Barbara County town of Montecito, California, is “still extraordinarily desirable, especially—from a buyer’s perspective—homes that are in the Montecito Union Free School District,” says Dusty Baker, senior global real estate advisor, Sotheby’s International Realty - Montecito Brokerage. “The entry level for homes in that school district is really above US$5 million. Anything under US$7 million is still getting multiple offers.”

In the flatter areas of Montecito near the Pacific Ocean coast, “anything under US$10 million is still going fast,” he says. Younger families “enjoy the community component here and the walkability” that you have in the flatter areas of town, which offer “proximity to the beach and shopping,” Baker says. Further, he hasn’t seen any of the predicted buyers’ remorse from the many pandemic home purchasers. “We had an onslaught of people from San Francisco, Los Angeles, Chicago, and New York, and people forecasted that they would say ‘Montecito is too boring, too slow and now it’s time to go back to a big city,’” he says. “In fact, we’re seeing the opposite,” he says. “Now we’re getting a second tier of buyers—the friends and family of buyers who came during the pandemic.”

Anything around US$2 million and above is now considered luxury in the Asheville, North Carolina, region, according to Marilyn Wright, global real estate advisor, Premier Sotheby’s International Realty. That threshold used to be US$1 million. The Asheville, North Carolina market has also remained strong after the initial jumps brought on by the pandemic. “This is one of the top places in the country for retirement,” says Marilyn Wright, global real estate advisor, Premier Sotheby’s International Realty. “We excel at all of the outdoor activities.” Since the Covid-19 pandemic, “we’ve seen a huge influx of buyers,” she says. Small towns within a 45-minute drive of Asheville, including Black Mountain, Waynesville, Brevard, and Weaverville, have been particularly attractive to luxury buyers.

In the summer of 2021, she sold an 11-bedroom home on 161 acres on the French Broad River in Brevard for US$9.3 million to a buyer from Austin, Texas. Another big recent sale was a six-bedroom home on 49 acres in the upscale town of Biltmore Forest that went to a Miami buyer for US$9.5 million. “They were looking for acreage and the best location in the region,” Wright says. Both buyers came looking for “proximity to Asheville and small-town Americana.” Before the pandemic, luxury was “US$1 million–plus,” Wright says. “Now anything around US$2 million and above is luxury [in our region].”

“If a home is priced right, it will sell,” she adds. “It’s just taking a little more time now, and inventory has gotten better. We’re seeing a more normalized market now, and I think that’s good.”

Inventory is also up in Jackson Hole, Wyoming. “We have 60 houses now above US$5 million, which amounts to 18 months of inventory,” says Brett McPeak, associate broker, Jackson Hole Sotheby’s International Realty. At this upper end of the market, Jackson Hole usually sees three or four luxury homes a month go into contract. “We’ve had a huge run-up in values in the last 24 months, up 50%, 75%, even 100% in some places,” he says. Wyoming has a “very favorable tax climate,” which has been a big draw for luxury buyers from high-tax states like California and New York. Specific local amenities, like views of the Teton Mountains, adjacency to national park or forest land, and direct access to the Snake River, are a big draw for luxury buyers, McPeak says. A house in the Solitude neighborhood that’s immediately adjacent to national-forest land “went under contract in less than a week north of US$13 million.”

In Moab, a city in eastern Utah that is home to the Arches and Canyonlands national parks, Becky Byrd-Wells, associate broker, Summit Sotheby’s International Realty, says that she is seeing a “lot of residents from the cities and suburbs who have either relocated or purchased second homes in Moab.”

“A lot of that we saw was in the form of investment properties like overnight accommodation property types,” Byrd-Wells says. “Some purchased higher-end homes in more exclusive subdivisions to enjoy privately with their families.” Buyers remorse seems non-existent. “People that relocated during the pandemic were primarily remote workers and they are so excited to get to live where they play and are loving it,” she says.

Last year, “I sold a US$1 million-plus property to a couple from the suburbs of Denver who both received the green light to work remotely,” she says. “They brought their Jeeps and mountain bikes over and feel as if they're living their dream, to work and play in one wonderful place.”

On the island of Maui in Hawaii, Ryan MacLaughlin, principal broker/partner, Island Sotheby's International Realty, says that the “new luxury buyer is definitely looking to get out of the congestion of the city. Our real estate lends itself to the sense of escape, privacy, and relaxation, whether they are looking at a home on the beach, acreage on the side of our mountain ranges, or perched on a golf course with amazing ocean views,” he says. “The clients seem to be not only wanting to get out of the cities, but even out of the suburbs, and are now interested in more unique properties with more space and privacy.”

There are a “wide range of properties that can be obtained, from the one-bedroom luxury condo to the eight-bedroom luxury oceanfront home,” he says. “It's much more of a lifestyle purchase, where families are bringing their kids to Hawaii more than just once a year,” he says. “In fact, they are even spending half the year here in their homes. They are appreciating the real estate that they purchased instead of looking at it like an asset that was an investment, and something they need to constantly look at making sense financially. It's really interesting to see.”

Second-Home Buyers Still Relish Pandemic-Era Buys, as New Buyers Hit the Market.

The luxury second-home market saw a boom during the pandemic years, and buyers seem to be staying put. Real estate sales in Turks and Caicos, for one, reached more than US$141 million in the first quarter of 2022, according to a report from Turks & Caicos Sotheby’s International Realty. The sales volume for existing condominiums, which saw the most action, increased by 61.53% year over year.

Pandemic-era buyers are holding onto luxury and superluxury properties, which are often their second, third, or fourth, says Joe Zahm, president and broker, Turks & Caicos Sotheby’s International Realty. They’ve scooped up both standalone homes or those part of managed communities because “it’s a safe-haven residence with ease of use and access, including no income, business, or property taxes (except for a one-time stamp duty upon purchase).”

In the traditional New York City second-home markets, there is still a great deal of interest. In Litchfield County, Connecticut, “interest has remained very active. We aren’t seeing the frenzy of last year, but there is still major interest,” says Kathryn Clair, real estate professional, William Pitt Sotheby’s International Realty. Further, Clair says that she isn’t seeing buyers’ remorse from people who bought second homes in Litchfield during the pandemic. They may be returning to jobs and apartments in New York, but they’re keeping their new Connecticut houses as weekend homes.

In New York’s Hudson Valley, luxury buyers are “still looking mostly in the countryside,” says Raj Kumar, associate broker, Four Seasons Sotheby’s International Realty. And like Clair, Kumar isn’t seeing resales from weekenders who bought during the pandemic. “That’s verified by the prices, which are holding,” he says. “I haven’t had any sales below the asking price.”

Discover more at Sotheby’s International Realty 2023 Luxury Outlook.

Photo Credit: Sotheby's International Realty Luxury Outlook