Luxury Home Buyers Starts to Scale Down Their Purchases
As people continue to spend more on housing, they're finding fewer reasons to buy million-dollar homes. According to Zillow, for homes priced between $1 million and $2 million, luxury status has been replaced by "affordable." At that price point, buyers who buy now stand to save the most.
Shoppers aren't the only people who have to deal with shrinkflation; they're just the most obvious victims of it. New research from real estate website shows that homeowners may be feeling the pinch from shrinking homes and rising rents.
One of the ways that rising prices are affecting the housing market is through increasing mortgage rates.She noted that $1 million isn't necessarily the most expensive house in town; however, it's certainly among the most expensive.
“A million dollar salary isn't as lavish as it used to be,” Olsen said, adding that he has been able to live comfortably. It’s no longer just California where people think they need at least $1 million to be able to afford a house. More and more cities are experiencing the same sentiments.
Even though the average size of homes sold in the U.S. has increased by 1,823 square feet since last year, the median size of new homes remains below the previous peak set in 2019.
Post Covid-19 Customer Behaviour
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Why do rich people buy luxury houses?
Rich people spend more money on luxury items because they have enough funds to afford them. They want to show off how much money they have. Rich people also like to live in lavish houses. Luxury homes cost a lot of money. It takes a lot of effort to build such a house. However, most rich people cannot afford these expensive houses. So, why do they still buy them? The reason is that they think that owning a luxury home makes them look richer and better than others who own cheaper homes. This helps them feel good about themselves.
In addition, many rich people believe that having a big house shows that they are successful and powerful. They may even use their wealth to influence people around them. For example, some rich people pay for the education of children whose parents work hard but earn little money. Some rich people give gifts to charities or politicians who promise to make changes in society. Many rich people donate money to charity organizations. These donations usually come from taxes that they paid while working.
Some rich people spend money on luxury car brands and other luxury products. They often drive these cars very fast. They enjoy driving these cars at night when there is no traffic. They love to see how fast they can go.
Benefits of wealthy buyers buying less luxurious homes and spending less money
- The rich have more money to spend
- They don’t want to buy too much stuff
- They know they can afford what they want
- They save money because they don't have to pay for things they don't need
- They get more bang for their buck
- They appreciate quality over quantity
- They enjoy the experience of shopping
- They prefer experiences over material goods
- They like to share experiences with friends
Larger million dollar houses have more bathrooms than smaller ones.
According to Zillow’s latest Home Value Index, the typical home sold for around $1 million in 2019 was smaller than ever before. It had fewer bedrooms and baths and was typically built earlier.
At this level, the biggest drops in size occurred in Phoenix, Arizona, where they dropped by 1,116 square foot, and Nashville, Tennessee — where they lost 1,019 square foot.
Only two metro areas saw the price of their high-end homes rise by $1 million or more between 2011 and 2015.
For prospective homeowners who want to buy a house in the $1 million dollar price category, they might be able to save some money.
Regrets of Overspending
A new study shows that nearly three out of four buyers who recently purchased homes had some sort of regret about their purchase. One of the main reasons people were unhappy was because they spent too much money.
However, as the housing market continues to cool, there are signs that real estate values are declining, which could provide buyers with more opportunities to buy homes at lower costs. Luxury homes seller need to consider real estate market situation in order to sell quickly.