Your average buyer or seller in the high-end real estate market may not be what you’d imagine, according to Paul Boomsma. The Chicago-based president and founder of Luxury Portfolio International, the marketing program for luxury real estate companies within the Leading Real Estate Companies of the World group, presented research at the PowerHouse SMART 2018 Luxury Conference held in Chicago this week that aims to help real estate professionals better understand this growing segment of the market. His company’s report, called The Rise of the New Aristocracy, is based on 550 interviews conducted with U.S. residents age 25 and over with investable assets of more than a million dollars.
|Paul Boomsma addressing attendees at the PowerHouse SMART 2018 Luxury Conference in Chicago Wednesday.|
Boomsma told attendees that research on the luxury market is hard to find in the real estate sector, because much of what’s available examines past sales for insights. “What they buy and what they sell is great, but that’s kind of yesterday’s news,” he said at the conference. “We were really looking at, ‘What are they thinking?’”
The group is on the younger side. Crunching data from the National Association of REALTORS® and U.S. Census Bureau, the report notes that 77 percent of U.S. residents who purchased homes for $1 million or more in 2017 were under 50 years old. But Boomsma notes that these consumers are different from their parents and grandparents—more of them grew up wealthy and thus have higher expectations of luxury products than previous generations.
“There’s this enormous amount of wealth that is being transferred,” Boomsma said, noting that in the early 2000s, luxury market real estate pros were in a more educational mode, helping newly wealthy people manage their property investments. “For those people, their kids are now grown and they’re beginning to gift that [wealth].”
If agents now aren’t in an educational role, how can they best serve high-end clients? Boomsma said this group of younger wealthy people often sees agents as potential time- and stress-savers more than anything else. “Many of them like real estate people because they feel like their biggest challenge is time,” he said, adding that they may not necessarily appreciate the complexity of real estate, but that doesn’t really matter to the relationship. “They believe they could do it themselves… and I wouldn’t debate that with them.” Instead, Boomsma suggests agents highlight their value as someone who can free up clients’ schedules to concentrate on more important matters.
As for what luxury buyers are looking for in a home, the answer is more of everything. “They want larger homes, which surprised us… We always say that the younger people want to have smaller homes but that’s not necessarily so,” Boomsma said. He also noted that they’re seeing a lot of traditional amenities double in luxury settings: two master bathrooms, one kitchen island for prep and a second for socializing, or an additional in-home movie theater just for the kids. “Anything you can have, double it.”
Part of the ongoing trend eschewing conspicuous consumption means consumers are shifting away from luxury goods and toward experiences. “They’re saying, ‘We have luxury fatigue—we’re tired of all that stuff,’” Boomsma said. So how do you sell a home as an experience? Boomsma said it’s important that agents are able to articulate not just features, but what it’s like to live in a home and how the amenities offered can lower stress and increase enjoyment of life. He suggested agents ask themselves, “What’s the story, and what’s the innovation?”
One example of how this focus on experiences over products is changing residential preferences is obvious from the view of the dining room. “The dining room is not dead. We thought it was, but it’s not,” Boomsma said. He noted that consumers are seeing such spaces in a different light—as a place for important milestones, events, and holidays. “They’ve rebranded them as experience rooms.”
—Meg White, REALTOR® Magazine