Marketing Luxury Real Estate for the Young & Affluents in a Digital World: Time, Telephones & Travel

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Paul Boomsa

 “The 1% own 4 homes on average.”

I love me some Paul Boomsma. The Chicagoan is the president of Luxury Portfolio of Leading Real Estate Companies of the World. He is NOT an real estate agent, but an expert in marketing luxury real estate and really, all things luxury. When it comes to knowing how to approach, talk to, and sell to the affluent real estate consumer, Paul Boomsma knows the story. He has researched affluent buying habits with companies such as The Harrison Group, which tracks affluent buying patterns for American Express, among others. Paul makes it his business to know not only that luxury is alive, but know HOW it is faring and where. As in what are the words du jour that marketers are using to attract luxury consumers?

He presented a portion of a white paper to a massive group of Dave Perry-Miller luxury real estate agents last Thursday morning at the Dallas Country Club:

Expensive and exclusive are OUT, and rare is how you order your steak. The new buzz words for luxury are —

balance

youthful

savvy

global

speed

nutrition

mobile

educated

balance

Note we do not see liposuction in that list. It’s all about natural health and wellness now.

Luxury is back in a big way, says Paul. Need proof? Business is up 47% at Bottega Venetta. Louis Vuitton is selling so many expensive products (you know how much those bags cost!) they have hit a million dollars in profit per day, or 8 billion in profit on 38 billion in sales. And have you seen Mercedes latest commercial, “It’s a Boy”? Mercedes is marketing their expensive cars to Millennials, those thirty-somethings, as the best car to bring their babies home from the hospital in. Wow, whatever happened to Volvo?

Michael Kors is expanding like crazy, 100 stores now. It is known as the aspirational and affluent brand. If luxury was a bad name during the downturn, it is negative no longer. What does this mean for real estate? Lots of trade- up buyers, and global buyers, thanks to more jumbo mortgages with lower rates. Even luxury home builders are back: Tatum Brown Custom Homes is building a 10,000 plus square foot spec at 4218 Arcady in Highland Park, and I know of an 8,000 square foot spec going up down the street from me.

Arcady_Color_Rendering_01It’s that one percent. Gotta love them, they are so good for your bank account. The 1% own 4 homes on average. I was in a $16 million Highland Park home tonight where the owners own 6 homes. There were 92.2 billion home sales in 2014, but buyers are now buying worth over value.

What does that mean?

Worth means “I love it”. I don’t care what the price it, I’m WORTH it and I gotta have it. Value means, well, proud of getting a good deal. In 2008 we were concerned about value — affluent Americans thought they had lost 1/3rd of their net worth, and 1/2 thought they had lost their jobs or were about to. No wonder Costco blossomed during the recession! Now, vacation home sales are blossoming. And watch out, said Paul, because agents don’t want to lose their clients to vacation home agents, but they can. I am so glad he said that because what have I been doing for years now over on SecondShelters.com? Preaching the vacation home market. You need to be in the driver’s seat, whether it’s Texoma, Telluride or Tahoe.

Boomers began consuming real estate in the 1990’s. They are not like their parents’ generation. Today’s Boomers look better, are healthier, and seek value. (Hopefully we live longer, too.) Look at IRIS! Boomers more than any group must know the value of what they are buying. If they know that a certain street commands a higher price per square foot because it’s the best street for trick or treating come Halloween, they are satisfied. They just have to KNOW.

Which means top agents need to know the value of the homes. They need to know a Bulthnaup kitchen from a Boffi from a Poggenpohl. (Don’t worry, we will be covering this and spell it all out for you.)

“It’s not just comps,” said Paul. “It’s selling the value of time and family, or the floor height for the view – why is this property valueble at this point in their lives?”

You also won’t find a happier group of buyers than the Baby Boomers. And they still don’t want to downsize too much — many want those large yards for grand children, and a grand dining room for holiday meals.

Oh by the way — the dining room is no longer for dining. It has become “The Experience Room.” You’re not going to have your daughter’s gender-reveal party at the island in the kitchen.

But! Those milennials are driving the opinions of the Baby Boomers — yeas, the kids are actually telling the parents what to do and what to buy. Wonder where those milennials are getting the bucks to buy a Mercedes or BMW at age 28 for their baby’s first car? From mom and dad: in 1997 1.6 million dollars in wealth transferred from  one generation to the Boomers; in 2015 114 billion will be transferred. Milennials are set to inherit 4.6 million from their parents, 50% more than Gen X.

So which generation is buying the most real estate? The list looks like this —

Milennials

Gen X

Boomers

Milennials are stressed and pressed. Poor kids, I knew we over-programmed them. They are heavy into device ownership — phone, computers, ipads, and we all know they text and email rather than talk on the phone. Here’s a surprise: Millenials are much more responsible with their spending habits. I love how they all buy and sell second-hand designer clothes on Facebook. These are the kids who use Airb&b. They Uber and say it’s cheaper than owning a car. They are willing to trade down in square footage but they still want the higher end finishes and the name brand goods. They are ecologically minded and re-cycle. They value professionals more than parents. They also value someone’s history, name recognition and perceived quality — look at IRIS!  They are guarding of their time and see technology and devices as a way to save time. As for lifestyle, they want to know that the professionals they hire “get them” and know their place: you better know where they go to play and eat.

Here is what is important to millennials in a home:

Privacy – 60%

Kitchens – 54%

Master Suite – 54%

Outdoor entertainment areas – 53%

His and her walk-in closets – 52%

This generation also loves value in a competitive gamesmanship way: according to Jim Taylor at The Harrison Group, purchasing for them is a competitive sport. They see buying a house or houses as enhancing their lifestyle.

As for affluence, we all know its getting more global. The affluent are now uniting as a result of their lifestyle with other affluent s across the globe. They are bonding over common interests — themselves, children, business, art, lifestyle and fitness. The wealthy travel and buy at the same hotels and there is cross ownership in business, club memberships, even properties. The affluent are increasing their spending on real estate, travel, entertainment, fashion and fancy automobiles. Here are the passion points of the globally affluent:

1. They want to live a fabulous life, enjoying beautiful country clubs, spas, NOT just real estate. That’s why if they buy in Dallas, there must be compelling things here for them to do.

2. They love to learn and have become the arbiter of all things house, or perhaps I should say HOUZZ.

3. They are on the go, love to eat out at the latest, hottest restaurants.

4. They work hard and are passionate about work.

5. They love to entertain, preferably in their homes, usually eager to host events for charities.

6. After they eat, host, and work, the affluent love to play.

Couple other interesting take-aways from Paul’s presentation: the recession was hard on big box real estate companies: consumers want local Real Estate brands now more than ever over the big multi-nationals. Affluents want agents to respect their time and privacy, but also be well-connected with their community both civically and culturally. They expect their Realtor to equip them with knowledge and insight — like being able to explain the qualities of a custom made Italian kitchen.

Have no fear: your cheat sheet is coming!

 

 

 

 

 

Candy Evans, founder and publisher of CandysDirt.com, is one of the nation’s leading real estate reporters.

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