A new report revealed where wealthy Americans call home. As the rich have relocated this past year, more than one factor has influenced their moves and spending habits.
The real-estate brokerage Coldwell Banker issued a 132-page report breaking down where the wealthy have moved and why — as well as which locations have served as the most desirable relocation retreats. It includes six areas where the real-estate market is on the rise or exceeding expectations.
Taking the pulse of markets across the US, the brokerage identified hot spots the wealthy began to invest in during the pandemic by analyzing statistics that indicated demand, like local sales prices and total number of homes sold. It also asked local agents for insights, as they witnessed COVID-19-era buyers descend firsthand. With the housing market uprooted by the coronavirus pandemic, many Americans have left major cities like Los Angeles and New York over the past year for homes in the suburbs and vacation hot spots.
Using those metrics, Coldwell Banker singled out three areas it labeled "secondary markets on the rise" for buyers: spots in the Southwest and mountains where the wealthy moved in 2020 but where the demographic had previously not sought out property at such robust levels.
Three "markets exceeding expectations" were identified as well: cities where the wealthy weren't expected to invest in so heavily — but have. In each of these mountainous, coastal, and Midwestern locations, the number of homes sold each month had increased significantly relative to inventory since the start of the pandemic.
As for their common ground, each location's luxury market is more affordable than similar real estate in other major cities — and buyers can snag luxury properties at lower costs than they would in places like San Francisco or New York.
"Efforts to safeguard wealth led people to cast wider nets into real estate, stocks, art, technology, gaming, and other niches; many accelerated plans to move to tax-friendlier locales," the report said.
It added: "Ideas about wealth itself also shifted as the affluent set sights on 'intangible luxuries,' like family, health, safety, security, and space.
"The search for intangibles created new demographic groups, called 'affluent trailblazers' who relocated from cities to small-town hidden gems, suburbs and popular second home destinations in 2020."
Affluent trailblazers are broken down into three archetypes — explorers, new suburbanites, and resorters — based on factors like net worth, age, and desire. While explorers tend to be under 39, married with at least one child, and worth between $1 million and $5 million, new suburbanites are between 39 and 54, have a net worth between $5 million and $10 million, and tend to be married with two or more school-age children. Resorters are over 54, married with adult children, and tend to have the highest net worth of the three groups, $10 million or higher.
Explorers left high-cost cities in 2020 in search of "hidden gem" locations where they could get more space and a better quality of life, new suburbanites sought more square footage and home amenities amid the pandemic, and resorters fled cities for their favorite vacation destinations.
Tied together by their status as once secondary markets, the locations Coldwell Banker identified as cities on the rise are moving up in ranks to compete with the likes of New York and LA. Not far behind are the markets exceeding expectations, as well as booming secondary and even tertiary markets that reflect buyers' desire for more square footage and amenities without ditching the attractions of big-city life.
But while some major cities saw an exodus in residents and slump in residential demand, others ascended into a state of frenzy, with bidding wars and overasking offers on properties in once secondary cities.
Here's a deeper look inside the places wealthy homebuyers discovered in droves over the past year, and the three unexpected locations they're migrating toward next.
Secondary markets on the rise
1. Phoenix
"Phoenix is a big beneficiary of the California exodus, and over half of my luxury buyers are transplanted Californians," Debbie Frazelle, a realtor with Coldwell Banker in Phoenix, said. "Taxes are a big driver, but so are restrictive COVID-19 mandates."
The Phoenix area saw a significant uptick of buyers from the San Francisco Bay Area, Seattle, and Chicago in 2020, Frazelle said, adding that "early in the pandemic, anything under $600,000 blew off the market within 24 hours." Even local clients who had plans to downsize before the pandemic are now upsizing, Frazelle added.
"Days on market plummeted and so did inventory," she said.
Luxury sales in the $750,000 to $2.5 million range accelerated by the early summer, "doubling year-over-year during several months in the second half of the year," Frazelle said. Popular high-end neighborhoods fielding interest in the Phoenix metro include Arcadia and North Central, she added, "while East Valley is going like hot cakes for young families."
While North Central and East Valley are home to large numbers of Phoenix metro residents (over 1 million, combined), small enclaves like Arcadia — an area home to just over 40,000 residents — had a median list price of $1.3 million as of March, according to Realtor.com, which reported that the area's list price was trending up 10.1% year over year. Home to many young families, professionals, and retirees, the Phoenix metro as a whole is known largely for its local diversity and good schools.
2. Denver
"I've experienced ups and downs and crazy markets in my 35 years in Colorado real estate, but two very unusual things happened in 2020," Louie Lee, an agent with Coldwell Banker Realty in Colorado, said. "First, the pandemic sent everybody home, and we weren't sure what to expect, but then businesses gave people the freedom not to come into the office, and we got bombarded."
With Americans relocating in mass numbers, Lee said new residents flocked to Colorado from all over the country, leaving places like Texas, the East Coast, the Midwest, and California.
"The most feverish demand is in suburban communities like Castle Pines, where homes are typically 3,500 to 5,000 square feet on three-quarters of an acre and sell for between $1.2 million and $2 million," Lee said. "It feels like Vail, but it's only about 30 minutes south of downtown Denver."
Though it's comparable in atmosphere, Castle Pines is considerably more affordable than Vail, which has a median home listing price of $1.9 million, according to Realtor.com. The median list price on homes in Castle Pines is $697,500, and that figure is $495,000 in Denver.
And there's one more big seller that makes Denver attractive: Its luxury real estate is affordable compared with California, Lee said, not to mention the "perennial draw of the mountains, skiing, and an overall desirable outdoor lifestyle."
3. Dallas
"The Dallas market has enjoyed an extraordinary year of growth from a plethora of businesses moving here, the relocation of the affluent and influential, and an upsurge in luxury-home building," Lori Arnold, a broker with Coldwell Banker Apex in Dallas, said.
"Luxury prices have, on average, increased by 7%. And while properties have traditionally taken upwards of six months to sell, we are now seeing multiple offers and sales within weeks of coming on the market," she said. "Our sales in 2020 were up 62% compared to 2019."
The surge in Dallas buyers comes from all over the country, with new residents flocking to the city from feeder markets like Chicago, Southern California, and Washington, DC, where Arnold said average home prices were considerably higher than in Texas. In Dallas, the median home listing price is $390,000, according to Realtor.com, while the median list price in DC and Los Angeles stand at $599,000 and $950,000, respectively.
"Buyers are better positioned to afford our luxury properties," Arnold said.
"Even though we are a large metropolitan area, and our more established luxury markets saw significant growth in closed sales, our boundaries continue to grow, especially in the northern areas around Frisco, where sales jumped 35% in 2020," Arnold said.
Markets exceeding expectations
1. Salt Lake City
"In May, it was like a switch flipped, and 2020 was our best year by far, with most of the strength concentrated in the surrounding areas away from downtown," Molly Jones, an agent with Coldwell Banker Realty in Salt Lake City, said.
"California and New York are the two biggest sources of new arrivals," Jones said, adding that many new residents were moving in because big tech companies like Adobe, Facebook, and Microsoft have become a major presence just south of Salt Lake City.
And smaller tech firms from Silicon Valley are moving or establishing major outposts in Utah, as the rise of remote work has driven demand for remote, off-the-grid homes.
"It's easy to stay home when you have more space, but in the case of demographics influencing architecture, we went from really big houses to much nicer smaller homes," Jones added, adding that reflected on Utah's traditionally large families. The change is giving way to an influx of couples and young families just starting to have kids, he added.
2. Sacramento, California
Sacramento was a major recipient of flight from the Bay Area in 2020, according to Angela Heinzer, a Coldwell Banker agent in Sacramento.
Ninety minutes east of San Francisco, Heinzer said homebuyers flocked to the California city when companies told their employees remote work would continue for at least the remainder of 2020.
"Sales volume spiked, inventory levels fell, and prices rose," she said, adding that the downside to Sacramento's rise had been the softening of the San Francisco market, which has left her with some buyers who can't sell their homes in the Bay Area to purchase in Sacramento.
Many of these buyers are young families, she said, adding that Sacramento's luxury market was driven by public and private schools, location, and community.
As for where buyers are coming from, "it's not uncommon for people to move within the same community," she said, adding that many out-of-town buyers tended to gravitate to Placer and El Dorado counties, which border Sacramento County.
And despite Sacramento's surge, "I have had more sellers than ever before leaving California for states like Texas, Tennessee, and Florida," Heinzer said.
3. St. Louis
"We didn't have the rebound that several larger cities enjoyed after 2008, but over the past year, our luxury market really boomed," said John Ryan, a Coldwell Banker Gundaker agent serving St. Louis and its surrounding areas.
The luxury market in St. Louis runs along the Central Corridor from downtown at the Mississippi River due west to the Missouri River, according to Ryan.
"The Central West End features elegant homes from the early 20th century, Clayton has single-family homes and high-end condos, and Ladue is known for its country clubs with luxury homes on large parcels of land," he said.
The significant uptick in the local market's recent strength is largely because of the pandemic, Ryan said.
"After being cooped up in quarantine, people definitely had the urge to upgrade into living situations with more space and amenities," he added.
St. Louis' status as a jobs center, according to Ryan, makes it an even more attractive real-estate market.
"There's a lot of opportunity here for executives with companies like Edward Jones, Stifel, Emerson Electric, World Wide Technology, and Enterprise Rent-A-Car, along with rewarding careers in medicine at several hospitals, and in higher education at schools like Washington University," he said.
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