The luxury real estate market has seen healthy levels of buyer activity over the past few years in the Washington, D.C., region. In fact, this segment of the market never witnessed the same deep plummets that we saw with lower priced homes.
Sales of homes between $300,000 and $499,999 were hit hard during the recession years, but home sales over a million dollars were not nearly as impacted.
As the market has recovered, the increase in sales has had a steeper rise at the upper end of the market compared to the bottom. As managing partner for TTR Sotheby’s International Realty, I follow the buying patterns of these homes closely and have a few statistics and theories to explain this market trend.
Let’s start with the statistics. The Washington metropolitan area has the nation’s third highest concentration of individuals whose net worth is greater than $1 million. Around 8.81 percent of our local population meets this net worth.
Data from consulting group Phoenix Marketing International stated that 195,638 households in the Washington area met the criteria for having more than $1 million in investable assets.
Incidentally, in 2014, Maryland had the highest concentration of millionaires in the country for the fourth straight year. The short answer to why the luxury segment is growing is that buyers in the area have the money to make luxury purchases.
OlegAlbinsky / iStock.com
But, anecdotally, it feels like the growth of people inquiring and purchasing high-end homes has still outpaced the reaccumulation of wealth in the area. Pre-recession, when larger lines of credit were given more freely, many buyers wanted to buy luxury homes simply because they could.
Today, the clients with whom we work are focused more on investing in homes that represent good long-term investments. Location, quality and design are the benchmarks of the homes that clients in the luxury market are seeking.
This represents a shift in attitude among our luxury clients. Locations proximate to jobs and good transportation infrastructure are performing well. Also, buyers are moving away from features that give the illusion of grandeur but that lack quality.
The idea of “quality over quantity” is an important theme in the luxury market today. Finally, good design matters. Architecture and quality interior finishes are important to busy consumers who do not have time to renovate or update a property.
Across all markets, the Washington region continues to reflect a significant global appeal. In Fairfax County, the largest of the region’s jurisdictions, approximately 30 percent of the population is originally from outside the U.S.
Similarly, approximately 32 percent of Montgomery County is originally from outside the U.S. The median sales price of real estate is still far less than many other global capital including London, Hong-Kong and Moscow and make it an increasingly attractive location for global citizens to invest.
Looking ahead, strong job growth and interest rates at attractive levels will continue to fuel the Washington market heading into 2016. The luxury market will continue to strengthen as affluent buyers invest in real estate and as the global market continues to view the region as an attractive investment opportunity.
Mark Lowham is managing partner for TTR Sotheby’s International Realty. Follow him on Twitter or connect with him on LinkedIn.