How real estate’s new power players are redefining the luxury market

Today, nearly three times as many individuals with a net worth of $5 million+ own real estate in the $1-5 million range compared to the numbers in 2019 — an 180% increase of luxury property ownership in a mere three-year period.

This staggering growth led us to a question: Who are these new real estate power players and how are they driving the market in 2021?

Thanks to data compiled by WealthEngine, Wealth-X and The Institute for Luxury Home Marketing, our team at Coldwell Banker Global Luxury has just released “A Look at Wealth 2021: Real Estate’s New Power Players,” providing insight into luxury real estate’s unprecedented rise, fueled by the new movers and shakers who are reshaping the industry.

Wealth grows, the luxury market thrives

“A Look at Wealth” tells the story of the symbiotic relationship between wealth and real estate: the volume of wealth is growing and luxury real estate is booming.

U.S. individuals with a net worth over $5 million grew in population by roughly 17% and their dollar volume increased at a similar rate from 2019 to August 2021. The number of homes owned by these individuals is now 4,959,179, with those with a $5-10 million net worth representing the highest growth rate compared to any other wealth group.

While 2020 was a year of record for the luxury real estate market, 2021 is on course to surpass the numbers from last year. Volume of wealth spent on luxury real estate in 2020 compared to 2019 rose by over 21%, and escalated to a staggering 79% in 2021 from January to August 2021 compared to the same eight months in 2019. Stats at the end of August 2021 already show that real estate wealth in the luxury property market is greater than both the full years of 2019 and 2020, and we still have four months to go!

Additionally, the number of properties purchased between January-August 2021 in the $1-5 million range jumped an incredible 142% for luxury single-family homes and 129% for luxury attached properties compared to the full year of 2019. About 71% of luxury properties currently owned by those with a net worth over $5 million are now valued in the $1-5 million range.

How did we get here?

The cryptocurrency boom, surging stock markets, higher 401(k)s, and investments in private equity and hedge funds, paired with rising home prices and low-interest rates, allowed consumers to borrow and save more while re-investing their cash. A combination of all these factors has led to a house hunting and migration frenzy we may never see again in our lifetimes.

The new power players

Between the unprecedented growth of real estate wealth in the $1-5 million range and the rising number of people with a net worth $5-10 million, we identified the power players of the 2021 luxury real estate market.

These influential home buyers are responsible for the bulk of luxury real estate transactions in the United States, and their outsized influence over the past 18 months led to major shifts in the market. Below we highlight four main groups of buyers.

• Baby Boomers: Baby Boomers represent at least 51% of power players. You may have heard the media narrative that Baby Boomers are holding onto their properties and skipping downsizing. However, their home buying preferences indicate otherwise. The pandemic caused many to speed up their retirement plans and move into the property of their dreams. There are 2,020,854 Boomers who own more than three properties — the most out of any age group.
• Golden Millennials: Golden Millennials, those aged 35-40, own 60% of all millennial-owned properties today. For this older age group, shifting psychologies during the pandemic and an inability to travel intersected with lifestage catalysts like marriage or having children, which often drive homebuying decisions. Their influence will be important to watch as their wealth and real estate portfolios grow.
• Second Homeowners: The trend of rising second homeownership that began in 2020 during the pandemic has continued in 2021. Affluent consumers are looking for a second home as an investment or to align with their new remote-hybrid work situations and newfound FOMO-meets-YOLO mindsets. In fact, today nearly 70% of those with a net worth of $5 million+ own two or more properties.
• Urban Repatriates: Urban repatriates are an eclectic group, comprised of new and returning city dwellers, first-time buyers like younger millennials and older Gen-Zers as well as international buyers. Investors looking to capitalize on low interest rates and a more hospitable buying market in cities are also included in this group along with local residents who sold in 2020 and are now returning with a desire for more square footage and outdoor spaces. Today they own 1,647,110 properties in the downtown core of 158 U.S. cities, representing a significant jump in city-living demand.

The emergence of luxury real estate’s latest heavy hitters amid the immense growth in wealth makes now an exciting time to be a leader in the luxury real estate industry. The Coldwell Banker Global Luxury team is here to monitor the ongoing trends and be expert advisers to those looking to buy or sell their home in this red-hot market.

To read the full version of “A Look at Wealth: 2021,” please visit Coldwell Banker Global Luxury.