Whether or not you are a real estate investor, homeowner, or just your average Joe, it was impossible not to notice the dramatic effect of the pandemic on the housing market. New stay-at-home orders and lockdowns sent real estate prices soaring, and it affected luxury properties just as it did mid-level family homes. Yet now, with unprecedented inflation, fears of an impending recession, and ever-rising interest rates, the sale of luxury estate properties and homes have fallen significantly.
In this article, we’ll uncover the reasons behind the drop in the luxury real estate market and explain what makes the new method of sales for luxury real estate, mansion auctions, so promising. Here, we will catalog which companies luxury estate owners are partnering with to enhance their chances of securing the right buyer for their estate, and ensure that they receive a fair market price.
How The Pandemic Created A White Hot Seller’s Market
During the coronavirus pandemic, luxury and residential real estate rose to new heights, which was most likely the result of many families who bought new properties to accommodate remote work. This new way of working, and of life, continues to go strong years later with seemingly no end in sight.
Luxury homes sold a similar (albeit slightly less dramatic) increase because many homeowners and families wanted to purchase a second estate so that they could split time. Additionally, we saw many of the US’s elite begin to purchase “primary” homes in states like Texas, where their income tax would be limited, and they can purchase more square footage for less.
For all levels of the housing and luxury real estate market, the pandemic coupled with low-interest rates created a seller’s market, unlike anything we’ve seen in recent years. And in 2020 to 2022, it became common for buyers to offer well over the asking price, often in all cash, and even wave home inspections. However, this boom could not last, and in recent months, things have begun to fall.
Reasons For The Shift In Luxury Property Sales
While both luxury and resistant real estate sales have dropped, luxury homes have seen the most severe decline. Redfin analyzed luxury real estate trends and found that they fell nearly 18% between 2021 and 2022.
While there could be many reasons for this, some experts say it’s due to the societal shifts of the pandemic. While remote work was the cause of the boost in larger estate sales, it’s also the source of the decline in estate sales in major cities. As remote work continues to go strong, luxury estate sales in highly populated cities suffer.
The job market was what used to make cities so attractive but now, it no longer holds the same power. Take, for example, the surge in luxury home purchases in the Bay Area, specifically in San Francisco and Oakland California. Previously, we saw people move to the state because of their careers in the tech industry, which required them to be close to Silicon Valley. Now, they can do their job virtually from anywhere in the world. The shift has led professionals and families to move to less populated parts of the country, to states where they could get more space and pay less income tax.
Therefore, it makes sense that the luxury housing markets in California saw the most dramatic decline in sales. Redfin, a real estate brokerage powered by technology, reported that home sales decreased by 55% in San Diego and almost 65% in Oakland, California. This is not to say that other luxury housing markets didn’t also suffer as Miami declined by 55% and New York fell by 11%.
What may be most troubling for luxury estate owners is that this decline is even more severe than when the pandemic began. Yet we still see luxury estates selling, and many of those sellers are getting a fair market value, and it’s all due to the surge of luxury real estate auctions.
How A New Way Of Selling | How Luxury Real Estate Auctions Ensure Fair Market Value
As the drop in luxury estate sales continues, property owners are looking for new methods of sales. Luxury estate owners work with auction firms who have dedicated their careers to amassing a collection of highly qualified buyers from around the globe. Using their expert marketing divisions, these firms connect those buyers with properties from penthouses to beachfront mansions to historical estates and hi-tech properties.
Luxury real estate auctions avoid the ‘standoff’ that has been happening in the luxury real estate market as there is a set date of sale. Additionally, it avoids the time wasted with verbal offers that never materialized. As mansion auctions are closed, the potential buyers who are invited have been thoroughly vetted and invited to do their due diligence beforehand so that their day runs smoothly and ends in a sale.
There are different forms of luxury real estate auctions, where sellers can either set their minimum bid or not, and either retain control of who they sell to or leave it up to chance and go with no other information than the highest bid. More than this, luxury real estate auctions take all the pressure off the seller as the auction firm handles the entire process end to end.
Luxury real estate auctions offer sellers the chance to keep their property off the market, which is important as the longer it remains unsold, the less chance the sellers have of getting their ideal selling price.
While the soaring real estate prices have affected luxury properties, these mansion auctions continue to provide incredible results. Platinum Luxury Auctions has the capabilities required to auction luxury homes for a variety of sellers and buyers. The team handles the process from start to finish from marketing, property showings, and negotiations to the auction itself and sales terms and closing.
While this unprecedented fall in luxury estate sales is making sellers’ lives more difficult it also poses a unique opportunity for buyers, as they can strike while the iron is hot in absolute auctions, where they can end up with a one-of-a-kind property at a great value. Auction firms connect these individuals with the estate owners and through a bidding process create the possibility for both parties to leave satisfied.