September 8, 2011
By Deirdre Woollard
There is no denying the effect that the economy has had on luxury markets in the last few years, but one aspect that has not been looked at as much is the U.S. perception of real estate value and how that has changed the way people shop.
The fact that millions of homeowners are underwater in their mortgages has a large effect on the overall economy, but also has resonance in the luxury world.
An increasing amount of luxury homes have entered the foreclosure and short sale market. The changing perceptions regarding real estate value are leading to a sea change in the way people choose to think about their homes.
Changed model
Until recently, there was a perception that any money spent beautifying or improving a home would have an equivalent payoff at the time of the home’s sale.
That belief has now been mostly destroyed and this has reverberations throughout the interior design and home decor market.
But it also impacts the larger luxury universe.
When people no longer think of their homes as sources of revenue or income, they change the way they spend.
And yet the current housing situation also offers opportunities for luxury brands.
Some of the wider trends afoot in the market: the small splurge, the well-researched purchase, the urge for sustainability and the trend toward urban living offer guidance on directions brands can go.
Much of the movement has been away from larger homes far from cities and into smaller homes, condos and townhomes in more walkable areas.
Consumers may not be outfitting as many rooms, but they are continuing to invest in key pieces that can travel with them from home to home.
Some consumers who might have planned to move to a larger home are instead choosing to stay where they are and remodel or redecorate as their needs change.
Home suite home
What we are seeing is not just a temporary response to market values, but a real transformation in the way that people think about their homes.
There may be fewer shelter magazines on the newsstands, but digital options such as Traditional Home and Matchbook have risen to the challenge.
Online shopping options for home decor such as Fab.com, 1st Dibs and V&M make shopping for distinctive goods easier than ever. They also make it easier for the artisan who makes a small, highly-priced line to reach more consumers.
Consumers are willing to pay more for energy-efficient appliances and for products that integrate the latest technology.
Smart homes are increasingly becoming the norm. Today’s buyer is also more likely to do research about the materials whether they be low VOC paint, eco-friendly countertops or water-saving faucets that still deliver spa-like experiences.
The rise of the staycation has also meant that people are doing more to beautify their yards, creating outdoor kitchens, fireplaces and living areas to maximize space and enjoyment.
Here too, they are thinking about sustainability whether it is embracing the urban farming trend with a modernist chicken coop or creating a drought-resistant backyard with xeriscaping.
YOUNGER BUYERS are looking for not just a home, but a lifestyle. They are drawn to communities with features such as dog parks, gyms, shared outdoor space and concierge services.
Walkability is highly desirable and there need to be quality shopping and dining experiences nearby.
Those at the other end of the age spectrum, the baby boomers who are retiring and downsizing, are in the market for similar features.
Condos with clean lines and designer-curated spaces are particularly appealing to both sets of buyers who are looking not so much to feather their nests as to move into ready-made palaces.
In every challenge there is opportunity. The housing market is facing a long recovery, but the desire to live in a beautiful space will never disappear.
Deidre Woollard is former editor of Luxist.com and is based in Los Angeles. Reach her at deidrewoollard@gmail.com.
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