Inconspicuous consumption dominated affluent consumers’ buying habits during the recent recession.
In this new era, McMansions, flashy cars and lavish vacation homes were out. Luxury buyers contented themselves with more modest purchases of high-end handbags, jewelry, watches, personal care services and subdued haute couture.
As the economic recovery has taken hold, however, wealthy consumers have expressed their confidence by returning to big-ticket spending. Sales of large and expensive homes have increased markedly throughout the country in recent months, driven by greater economic stability, attractive pricing and plentiful inventories.
While the average American homebuyer is looking for smaller, more affordable housing, highly affluent buyers once again are on the hunt for bigger, more luxurious homes. After declining between 2008 and 2010, the average home size has increased in the past two years, and 41 percent of new houses had four or more bedrooms, reports the National Association of Homebuilders.
Brad Hunter, chief economist and director of consulting at Metrostudy, recently commented to the New York Times, “those who have strong incomes, secure jobs, their stock portfolio is doing well — they are able to buy whatever they want. And what they are buying is larger houses.”
Sales of existing luxury homes are up, too. According to a recent article in the Washington Post, the national sales volume of homes sold for $1 million is almost 14 percent higher compared with a year ago. In the Northeast region, the sales volume of such properties is up 23 percent from a year ago.
The article cites brisk sales in the $1 million to $2.5 million-price range for existing homes in the Washington, D.C., metro area, while similar scenes are playing out across the country. In Silicon Valley, sales were up 23 percent last year for homes selling at $2 million and up. Even in relatively less affluent areas such as Des Moines, Iowa, the demand for high-end housing is up. And in Denver prices are up, but sales are slightly down because demand has shrunk available inventory.
Still, the move toward bigger and better is not all about the power of money. The renewed interest in luxury homes also reflects a desire for an improved quality of life.
Lawrence Yun, chief economist for the National Association of Realtors, observes “affluent buyers seem to be lured to established suburban communities that are near job centers and have good schools. They are showing less interest in the large homes — often dubbed ‘McMansions’ — in the exurbs that were popular during the housing boom years.”
For some affluent buyers, better means a somewhat smaller home but with higher-quality design and more amenities. In fact, some of these buyers are the ones jettisoning their current megamansions in favor of a more comfortable, homey lifestyle, reports the Wall Street Journal.
Small luxury homes are gaining in popularity, especially among well-to-do buyers looking to downsize but upgrade. Again, the selling point is improved quality of life. All of this activity bodes well for interior designers and builders, as the abundance of new high-end products featured at this year’s KBIS indicates. Clients are once again willing to spend to have the lifestyle they want.
But keep in mind that the new luxury is quality of life, whatever form that takes for that client.
Michael J. Berens is a freelance researcher and writer with more than 30 years of experience in association communication and management. He can be reached at firstname.lastname@example.org.