The Luxury Home Market Confronts Its New Reality: Not Enough Buyers and Sellers
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The Luxury Home Market Confronts Its New Reality: Not Enough Buyers and Sellers

Sales at the high end continue to decline, as homeowners pull back on listing properties and would-be buyers grapple with high interest rates and recession fears

By KATHERINE CLARKE and E.B. SOLOMONT
Thu, Jul 27, 2023 9:07amGrey Clock 8 min

When Joan Dangerfield, wife of the late comedian Rodney Dangerfield, first walked into her Los Angeles home in the early 2000s, she knew immediately that she would buy it. The Art Deco-style estate, perched in the coveted Bird Streets above L.A.’s Sunset Strip, had dramatic views spanning Downtown Los Angeles to the ocean and Catalina Island.

“I stepped 3 feet into the house and I knew it was the place for me,” said Dangerfield, who paid $6.25 million for the property. “It swept me away.”

Roughly two decades later, Dangerfield, 70, is trying to sell the home—and finding that would-be buyers aren’t as eager as she once was. The $17.8 million listing for her property has been active since February and while she has received several full-price offers, they have come with complicated contingencies, such as requiring her to provide seller financing, she said.

“I figured it would sell in a week, but didn’t quite work out that way,” she said of the house, which is comparably priced with other homes in the area. “It was a shock for me to just watch it sit there on the market.”

Joan Dangerfield PHOTO: OLIVIA ALONSO GOUGH FOR THE WALL STREET JOURNAL

Luxury sellers across the country are finding themselves in similar circumstances, as the high-end real-estate market faces a perfect storm of rising interest rates, recession fears and population shifts in the wake of the Covid-19 pandemic.

Sales of luxury homes nationwide, defined as the top 5% of homes based on estimated market value, declined by 24.13% in the three months ended June 30, compared with the same period last year, according to a new report by brokerage Redfin. Inventory of luxury homes was down 2.39% during that same period, while the median sales price for a luxury home was up by 4.55%. In many metros, homeowners appear to have pulled back on listing homes in light of the market shift. New luxury listings were down by 17.08% year-over-year in the three months ended June 30, Redfin’s data shows.

Sales of non luxury homes also fell during the same period, but that drop—19.42%—was smaller than the decline in the luxury market, according to Redfin.

“The luxury market is definitely hurting in terms of transactions,” said Daryl Fairweather, Redfin’s chief economist. “Even when you compare it to the rest of the market, it’s looking like luxury has really cooled off.”

The report marks the continuation of a market slide that began in earnest last spring, following an unprecedented deal-making frenzy during the pandemic. Redfin’s data shows that sales began to plummet significantly as early as June 2022, as buyers began to grapple with inflation and a volatile stock market. In the first quarter of 2023, luxury sales volume was down by 33.3% year-over-year.

Some of the biggest drops in sales volume over the three months ended June 30 were in markets that seemed unstoppable during the pandemic. The Miami metro area saw the largest drop in activity, for instance, with a 40.14% year-over-year reduction in luxury transaction volume for the three months ended June 30, according to Redfin.

Other metro areas with large drops included Nassau County on New York’s Long Island, where luxury sales volume dropped 39.34% year-over-year, followed by New York City, down 35.98%, Los Angeles, down 36.17%, and Chicago, which was down 34.13%.

Real-estate agents and industry experts said the luxury market’s performance has been uneven. That often comes down to pricing: In areas where sellers have capitulated to the declining market and dropped prices, transaction activity is holding relatively steady. But in markets where sellers are clinging to pandemic-era prices, activity has taken a nosedive.

In the San Francisco area, for instance, where median sales prices for luxury homes were down by 12.73%, there was only a 4.04% drop in transaction volume. “Because the prices have fallen, it’s opened up the opportunity for people who say, ‘I might finally be able to buy,’ ” Fairweather said.

In contrast, in markets like New York, Chicago and Los Angeles, prices have remained consistent or even risen slightly from last year, but transaction activity is way down. “There’s less demand, but it’s not enough of a pullback in demand to draw down prices,” Fairweather said.

In Miami, industry insiders say it is lack of supply, not lack of demand, that has caused the drop in activity. That’s thanks in large part to the mass migration to Miami and buying frenzy during Covid. “People who are going to sell have already sold,” Fairweather said, noting that new luxury listings in the Miami area were down by 33.1% year-over-year in the three months ended June 30. “There are definitely people who are moving to Miami who want to buy homes, but there are not necessarily homes for sale.”

Heigo Paartalu is among those buyers frustrated by a lack of inventory properties.

Paartalu, a Cigarette boat dealer and CEO of YachtWay, a digital boat show company, said he and his wife purchased a modern, five-bedroom house on Hibiscus Island, a gated island in Miami Beach, for $6 million in late 2021. The home value shot up 25% after about a year, so they cashed out and sold the house for $7.5 million in early 2023. Now, with a budget of around $10 million, they are looking for a waterfront property in the area without luck. “The inventory is very low and we’re not seeing the prices come down, which is what we were hoping for,” he said. The couple is currently renting in Miami’s Edgewater neighbourhood for $24,000 a month.

Jeff Miller of ONE Sotheby’s International Realty, Paartalu’s broker, said some homeowners aren’t selling because prices have gotten so high they won’t be able to buy something else in the area. Others don’t want to walk away from low mortgage rates. “It’s creating a huge shortage in our supply of available inventory and homes,” he said.

Even with a limited supply of inventory in Miami, Dina Goldentayer of Douglas Elliman said buyers have more leverage than they did last year for things like home inspections and closing credits. “I’m no longer taking the position of, ‘Take it or leave it,’ ” she said. “There are clear shifts that are making it seem like a normal market.”

In Los Angeles, the issues in the luxury market go far beyond an inventory crunch. Real-estate agent Juliette Hohnen of Douglas Elliman estimated that her business is down roughly 50% in that market from this time last year. At the height of the pandemic-fuelled market, she said, she had signed as many as 10 deals in a month. This July, she has only one so far. She chalked up the drop to rising interest rates, an outward migration from Los Angeles to lower-tax states, the introduction of a new mansion tax and more recently, the strike by both the actors’ and writers’ unions. She said she was slated to show an Oscar-winning writer around L.A. homes this month, but he called off his search in favour of renting amid the strikes.

The rising interest rates are keeping inventory low and stymying sales activity, Hohnen said. “Anyone who bought in the last few years has got these crazy low interest rates, usually between two and three percent,” she said. If those buyers sell now, they’ll be incurring rates that are almost double and potentially taking a loss on the sale.

Hohnen said she bought a $2.525 million home in 2021 in the Sag Harbor area of the Hamptons, securing an interest rate of just 1.875% for an adjustable-rate mortgage. Normally, she would buy, renovate and flip, but not this time, she said. “I’m never going to sell that house. I could never afford it if I was buying now. The monthly expenses on a new house would be too high.”

Dangerfield said she didn’t foresee how detrimental the mansion tax would be for her home’s prospects. The new measure, which was implemented April 1, requires sellers to pay 4% on sales of homes priced between $5 million and $10 million, and 5.5% on sales of properties at $10 million or above. “We were flooded with shoppers in March. Then, things just came to a screeching halt. It was such a change in the amount of people coming to view the home that it felt like it wasn’t even on the market,” she said.

One of Dangerfield’s agents, Marcy Roth of the Eklund Gomes team at Douglas Elliman, said the ULA tax “tainted buyer sentiment,” especially when combined with other issues like rising interest rates. “Everything is muddy and offers are complicated,” she said. “There aren’t a lot of quick, clean deals.”

In Chicago, real-estate agent Katherine Malkin of Compass said the city’s downtown area and so-called Gold Coast have been most affected by the slowdown. She said quality of life concerns like crime and an outward migration of some of the city’s businesses has put a damper on sales. Citadel, for instance, the hedge fund headed by billionaire Ken Griffin, recently left the city and moved to Miami. Other businesses that recently relocated their headquarters from Chicago include Boeing.

“You have businesses that are leaving because of the taxes,” Malkin said, noting that some prominent Chicago philanthropists and entrepreneurs have also left the city in the past few years. “They went to Florida, they went to Texas, they went to states that had a much lower tax circumstance. That’s been a difficult thing for people to grasp.”

Some sellers, Malkin said, have been reluctant to lower prices significantly—median luxury sales prices were actually up by more than 6.82% in Chicago in the three months ended June 30—which has been a further drag on sales. “No person of means wants to give their property away when they feel that they’ve invested in it,” she said.

When sellers have capitulated to the market, it has led to activity, Malkin said. She said one of her clients, who public records identify as private-equity executive John Weaver “Jay” Jordan II, recently lowered the price of a roughly 20,000-square-foot townhome in the Gold Coast neighbourhood to $15.75 million from the $18.75 million it listed for in 2020. While the home hasn’t yet sold, the price cut resulted in a new wave of interest, Malkin said. Jordan, who paid $1.8 million for the house in 1996 and remodelled it extensively, didn’t respond to a request for comment.

Although luxury median sale prices in the New York metro area are up by 7.69% for the three months ended June 30 compared with the year-earlier period, the slower pace of sales has allowed some opportunistic buyers to ink great deals. Vanessa Lucin of the Corcoran Group recently worked with buyers who paid $6 million for an Upper West Side apartment that was first listed for $7.495 million in June 2022. The roughly 3,383-square-foot apartment has two private balconies and is currently configured as a four bedroom, according to StreetEasy. Lucin said the couple is relocating to New York from California and began searching in January, when the market had slowed from its Covid peak. “There was another offer on the table but it wasn’t going anywhere,” she said.

Daniel Parker, co-head of Compass New Development Marketing Group, said some recent condo closings reflect deals struck during the more robust market in 2021 and 2022. In pockets of the city, such as Billionaires’ Row and Hudson Yards, developers have offered significant discounts. “They are embracing the market we have rather than the market they wish we had,” he said.

However, there are signs of life. Agents in New York reported a recent pickup in big-ticket deals this summer; in particular, large downtown condos have been the “golden sweet spot” of the market, said luxury real-estate agent Donna Olshan. A string of mega deals downtown over the past few weeks include the $52 million off-market sale of a penthouse at 150 Charles Street, the $50 million off-market sale of penthouse at 151 Wooster Street, and a signed contract for a penthouse asking $52 million at One High Line in Chelsea.

Sylvia Hughes, Lucin’s client, said she and her husband, John Hughes, saw several apartments before making an offer on their new four-bedroom on the Upper West Side. “I think the seller was motivated. This apartment had languished,” she said. By the time they saw it, the original $7.495 million asking price had been reduced to $6.195 million and their offer of $6 million was accepted. “I was beginning to wonder if we should have offered less.”



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Clocking out to Turn Back Time—Vacations That Will Help You Live Longer
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Booming demand for wellness tourism shows no slowing, with travel related to health and well-being projected to have reached $1 trillion last year and to hit $1.3 trillion by 2025, according to the Global Wellness Institute, a nonprofit based in Miami.

Curated wellness travel programs are especially sought-after, specifically holistic treatments focused on longevity. Affluent travellers not only are making time to hit the gym while gallivanting across the globe, they’re also seeking destinations that specifically cater to their wellness goals, including treatments aimed at living longer.

“I believe Covid did put a spotlight on self-care and well-being,” says Penny Kriel, corporate director of spa and wellness at Salamander Collection, a group of luxury properties in places like Washington, D.C., and Charleston, South Carolina. But Kriel says today’s spas are more holistic, encouraging folks to understand the wellness concept and incorporate it into their lifestyle more frequently.

“With the evolution of treatment products and technology, spas have been able to enhance their offerings and appeal to more travellers,” Kriel says.

While some growth is connected to the variety of treatments available, results and the digital world are also contributing to the wellness boom.

“The efficacy and benefits of these treatments continue to drive bookings and interest, especially with the support of social media, influencers, and celebrity endorsements,” Kriel says.

While genetics, environmental factors, and lifestyle choices such as regular exercise, a diet free of processed foods, sufficient sleep, and human connection play essential roles in living well and longer, experts believe in holistic therapies to help manage stress, boost immunity, and ultimately influence length and quality of life.

Anti Ageing and Beyond

“For years, people have been coming to spas, booking treatments, and gaining advice on how to turn the clock back with anti ageing and corrective skin treatments,” Kriel says. However, today’s treatments are far more innovative.

On Marinella Beach in Porto Rotondo, on the Italian island of Sardinia, guests at the five-star Abi d’Oru Hotel & Spa can experience the resort’s one-of-a-kind “longevity treatment,” a unique antiaging facial using one of the island’s native grapes: Cannonau. The world’s first declared “Blue Zone”—one of five designated areas where people live longer than average, some into their 100s—Sardinia produces this robust red wine varietal, the most widely planted on the island.

Known as Garnacha in Spain and Grenache in France, Cannonau supposedly contains two to three times more antioxidants than other red-wine grapes. By incorporating Cannonau, Abi Spa says its unique 50-minute longevity session increases collagen production for firmer, younger-looking skin.

Maintaining a youthful appearance is just one facet of longevity treatments, which range from stress-reduction sessions like massage to nutritional support and sleep programs, Kriel says. Some retreats also offer medical services such as IV infusions and joint injections.

Keeping with the trend, Kriel is expanding Salamander Collection’s existing spa services, such as detox wraps and lymphatic drainage, to include dedicated “Wellness Rooms,” new vegan and vegetarian menu items, and well-being workshops. “Sleep, nutrition, and mindfulness will be a big focus for integration in 2024,” she says.

Data-Driven Wellness

Skyler Stillings, an exercise physiologist at Sensei Lanai, a Four Seasons Resort—an adults-only wellness centre in Lanai, Hawaii—says guests were drawn to the social aspect when the spa opened in November 2021.

“We saw a huge need for human connection,” she recalls. But over the past few years, what’s paramount has shifted. “Longevity is trending much more right now.”

Human connection is a central draw for guests at Sensei Lanai, an adults-only and wellness-focused Four Seasons Resort in Hawaii.
Sensei Lanai, A Four Seasons Resort

Billionaire co-founder of tech company Oracle Larry Ellison and physician and scientist Dr. David Angus co-founded Sensei. After the death of a mutual close friend, the duo teamed up to create longevity-based wellness retreats to nurture preventative care and a healthy lifestyle. In addition to the Lanai location, the brand established Sensei Porcupine Creek in Greater Palm Springs, California, in November 2022.

Sensei has a data-driven approach. The team performs a series of assessments to obtain a clearer picture of a guest’s health, making wellness recommendations based on the findings. While Sensei analyses that data to curate a personalised plan, Stillings says it’s up to the guests which path they choose.

Sensei’s core three-day retreat is a “Guided Wellness Experience.” For spa treatments, each guest checks into their own “Spa Hale,” a private 1,000-square-foot bungalow furnished with an infrared sauna, a steam shower, a soaking tub, and plunge pools. The latest therapies include Sarga Bodywalking—a barefoot myofascial release massage, and “Four Hands in Harmony,” a massage with two therapists working in tandem. Sensei Guides provide take-home plans so guests can continue their wellness journeys after the spa.

Sensei Lanai, an adults-only and wellness-focused Four Seasons Resort in Hawaii.
Sensei Lanai, A Four Seasons Resort

Sanctuaries for Longevity

Headquartered in Switzerland with hotels and on-site spas across the globe, Aman Resorts features an integrative approach, combining traditional remedies with modern medicine’s advanced technologies. Tucked behind the doors of the storied Crown Building in Midtown Manhattan, Banya Spa House at Aman New York—the brand’s flagship spa in the Western Hemisphere—is a 25,000-square-foot, three-floor urban oasis.

Yuki Kiyono, global head of health and wellness development at Aman, says the centre provides access to holistic and cutting-edge treatments benefiting physical, mental, emotional, spiritual, and social well-being. Aman’s customisable “Immersion Programs” consist of a three- or five-day immersion. “The programs encompass treatments and experiences that touch every significant aspect to create a path for longevity, from meditation and mindfulness to nutrition and movement,” Kiyono explains.

Banya Spa House at Aman New York.
Robert Rieger

The spa’s “Tei-An Wellness Solution” features 90- to 150-minute sessions using massage, cryotherapy, and Vitamin IV infusions. Acupuncture is also on offer.

“With its rich history of Chinese Medicine, modern research, and the introduction of sophisticated electro-acupuncture medicine, acupuncture has been proven to assist with problems and increase performance,” Kiyono says.

Resetting the Mind and Body

Beyond longevity, “healthspan”—the number of years a person can live in good health free of chronic disease—is the cornerstone of Mountain Trek Health Reset Retreat’s program in British Columbia, Canada.

Kirk Shave, president and program director, and his team employ a holistic approach, using lifestyles in long-living Blue Zones as a point of reference.

“We improve our daily lifestyle habits, so we live vitally as long as we’re meant to live,” Shave says of the retreat. He built the program from an anthropological stance, referencing humans as farmers, hunters, and gatherers based on their eating and sleeping patterns. Food includes vegetable-centric meals sans alcohol, sugar, bread, or dairy.

Guests wake at dawn each day and have access to sunrise yoga, several hours of “flow” or slow hiking, spa treatments, forest bathing, calming crystal singing-bowl and sound therapy sessions, and classes on stress reduction—one of Mountain Trek’s primary goals. The program motivates people to spend much of their time in nature because it’s been proven to reduce cortisol, the stress hormone that can lead to inflammation and disease when elevated for extended periods.

While most guests aren’t aware of how immersive Mountain Trek’s program is when they arrive, they leave the resort revitalized after the structured, one-week program. Set in the Kootenays overlooking its eponymous river, the resort and adventure promise what Shave calls a “visceral experience of transformation.”

“They’re interested in coming to be in nature,” Shave says of the guests. “They hit a wall in their life and slipped backwards, so they know they need a reset.”

Banya Spa House at Aman New York provides access to holistic and cutting-edge treatments benefiting physical, mental, emotional, spiritual, and social well-being.
Robert Rieger

This article first appeared in the Winter 2024 issue of Mansion Global Experience Luxury.

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