How millennials are changing the luxury housing market
Tech-savvy, highly-educated, and environmentally conscious, Millennials represent a drastic turn-of-face for the luxury home market
Tatiana and Shannon Harris started their blog — Power Couple Life — as a way to regale followers with glimpses of their lives as luxury travelers, gourmet foodies, and full-time adventurers.
After seven years, the couple decided to settle down and purchase a home in Austin, Texas — a city Zillow expect to be one of the hottest housing markets in 2021. When push came to shove, the couple said they focused their home search around three criteria: green, fresh, and beautiful.
“We started our blog and social media in 2013,” Tiana said in a statement. “Combining sustainability and luxury is our focus in everyday life, such as choosing our meals, the hotels we stay in, to the design of our home.”
The couple eventually purchased a home from Brohn Homes, a central-Texas homebuilder, and began outfitting the house with technology to keep them connected to their home, even when they are travelling. The couple added a Wi-Fi-enabled bed, touchscreen locks, and a smart alarm clock, among other amenities.
“As bloggers, we are always online in one way or another. Taking photos, shooting video, posting on social media, working on a blog post, and we are always on the go. We want to build a home that is as wired as we are. A home that we could control whether we were in Austin, or across the globe,” the couple wrote in a blog post.
While Tatiana and Shannon are not alone in their homebuying pursuit, their experience is reminiscent of how millennials — adults born between 1981 and 1996 — are disrupting the luxury homebuying market.
Settling for More
For starters, millennials are breaking the notion of a “starter home” because the Great Recession in 2007 set back their pursuit of home ownership, a survey by the National Association of Realtors from 2019 found.
According to the survey, millennials make up the largest share of home buyers in the US at 38%. Meanwhile, many deep-pocketed millennials are foregoing purchasing modest properties and instead are purchasing mansions both domestically and abroad.
Part of the reason for this is that older generations are retiring, downsizing their homes, and moving to more affordable cities, according to Sotheby’s 2021 Luxury Outlook report.
“The pandemic recalibrated interest in larger, greener properties, secondary cities, and geographies with favorable tax and emigration policies. These preferences are likely here to stay for the foreseeable future,” Bradley Nelson, chief marketing officer for Sotheby’s International Realty, said in a statement.
Another reason, according to the Brookings Institute, is that millennials are settling for more. They are the most educated generation, have higher earnings, and are set to inherit more from their parents.
For many, this equation translates to purchasing a home that previous first-time home buyers would work their way up to.
In the case of Tatiana and Shannon, the purchased a custom-built home from Brohn, whose average home price is north of $300,000 to build. These costs are outside the cost to acquire land.
New Trends
Outside of price, millennial home buyers are also reshaping the market through their tastes. Primarily, they include environmentally-conscious design, researching properties online, and choosing cities to live in rather than work.
In an article published by Bloomberg, author Jacqueline Davalos noted that “beginning almost immediately after the coronavirus hit, for instance, buyers began to flock to areas that offered walkability, nature, and a well-rounded quality of life. (Think food and an art scene.)” Cities who fit this bill include Aspen, Colorado, Austin, Texas, and Montecito, California, according to Davalos.
These trends are pushing sales volumes in the luxury housing market to the moon. According to Housing Wire, a real estate news source, luxury home sales spiked by 41.5% in Q3 2020.
“It’s the difference of choosing where you want to live vs. living where you work,” Nelson says. “Millennials are thinking about their overall lifestyle. It’s propelled these second-tier markets into the top of the interest list.”
Staying Power
While the diversity in millennial tastes reflects the generation writ large, homebuilders are integrating touchless, high-tech features into more homes to accommodate millennial buying trends.
Despite the pandemic, luxury buying trends remain strong in several Us cities. Las Vegas saw a 38% spike in sales for condos and houses valued at over $1 million, according to the Las Vegas Review Journal. Similarly, the Bay Area and Austin, Texas both saw pops in luxury homebuying.
Not all is rosy on the millennial front, however. Decreased tax revenues from the pandemic are forcing many cities to consider filling budgetary gaps with additional real estate taxes. This could push already high home prices through the roof.
For Nelson, coupling this phenomenon with the record-low supply would be a recipe for disaster in most cases. But, with millennials growing their wealth as the cost of capital remains low, Nelson says it as “a promising storm for the high-end housing market.”
