The Hot Market of Luxury Homes
August 11, 2021
Arizona is one HOT place to be right now. And I’m not referring to the sky-high temperatures and blazing sun. The outside heat is nothing compared to the real estate market these days. From an all-around perspective, Arizona, and more specifically the city of Phoenix and Maricopa County, continue on an upward trajectory that seems to have no end in sight. After the market dipped in early 2020 due to COVID-19, real estate in Phoenix bounced back beautifully, and quite possibly none bounced higher than the luxury market.
How do we know this? Back in February, Coldwell Banker released a report of the top 10 power and emerging luxury markets in the United States where Phoenix was identified as a secondary market on the rise. I mentioned, this report was released in February 2021, and as the temperatures were on the rise over the summer, so did the market for luxury homes. Consider this: From April 2020 to April 2021, the number of homes sold that were valued at $3 million or more increased by 130%.
Overall, according to the Institute for Luxury Home Marketing, from April 2020 to April 2021, the total number of homes sold that were considered to be in the luxury category increased 274%. The total inventory dropped -53%, and, looking at these numbers, you might assume the selling prices have decreased due to the pandemic, but that is not the case. Sale price per square foot increased from $336 to $397. That’s an increase of 18% in just one year’s time.
While the real estate market started strong in 2020 pre-pandemic and has since more than recovered, I think we can safely say no one anticipated the luxury market would recover so quickly and so well. It’s not only surviving, it’s thriving. The luxury market in Arizona is quite literally one of the hottest luxury markets we have seen in the Grand Canyon state’s history.
The explanation of why the luxury market is so hot seems to be more of the same story as it is with other aspects of real estate success in Arizona. Lower tax rates, emerging technology companies, and great atmosphere for both big and small business. We’ve known for a long time that these are attractive benefits for those who had a specific reason to move, like a job or retirement. They’ve been driving the population growth increases for years and the real estate market as a result. One difference that may be influencing even more growth? Remember that remote work increased significantly during the pandemic and it’s likely that it’s here to stay. People have caught on to the fact that remote work means they can live anywhere with an internet connection.
With luxury buying on the rise, what are people looking for? Many of the latest trends are also due in large part to the pandemic and being on lockdown for over a year. For starters, it shouldn’t come as a shock that home office space is high on the list with the increase in remote work we’ve discussed. Additionally, it seems as if open floor plans rooms are on the decline and instead are being replaced with dedicated living spaces, dining rooms separated by doors, and multifunctional spaces that can be converted quickly depending on the need. Large kitchen spaces with oversized islands have increased in popularity as well – because they give everyone the space to do what they need like family gathering, meal prep or a homework and study counter.
As the luxury home market continues to boom with the rest of the real estate industry, make sure you’re keeping a pulse on these trends to support your clients. When it comes to knowing what your buyers are seeking, look for opportunities to suggest alterations to the home that would support their needs. Whether it’s keeping up with the latest trends or making changes to simply meet their desires, this will help them envision the home as their own and increase your chances of securing the sale.