Luxury Real Estate Trends

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How Today’s Highly Affluent

U.S. Consumer Selects Luxury Real Estate

Associates and Brokerages

It’s just a matter of asking the right questions

of the right people. The true professionals then

deliver on those preferences.”

 e know consumers will tell us what they want.

– Paul Boomsma, President Luxury Portfolio International™

in cooperation with

A research study brought to you by

Luxury homes from

leading real estate companies of the world®

I N T E R N A T I O N A L

I N T E R N A T I O N A L

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Luxury Portfolio International™

How Today’s Highly Affluent U.S. Consumer Selects

Luxury Real Estate Associates and Brokerages

Authoritative Research

We are pleased to bring you this white paper as part of our continuing focus on

providing customers, agents and brokers with the most up-to-date and current thinking

on what it takes to create win-win scenarios in the luxury real estate market. Luxury

Portfolio International™ is an authority in tracking luxury trends through LuxeTrends,

Luxury Portfolio Magazine and the Luxury Portfolio Blog. We believe in examining every

aspect of the affluent consumer with a laser focus to ensure we are creating the very best

opportunities in the market. This focused study helps us understand today’s continually

evolving and dynamic consumer. So by pulling back the curtain to investigate the true

science in real estate and marketing, we ensure we have the metrics and can approach

every transaction from the most informed position possible.

In our latest endeavor, we have tapped Harrison Group Inc., experts in understanding

high net worth Americans, to produce this valuable document. Our research, fielded

among 1,060 members of the American Express Ambassadors Network™, focuses on an

upscale subgroup of U.S. buyers and sellers of high-end real estate valued at one million

dollars or more ($1MM+). Nearly one in three of these consumers have household

incomes of at least $300,000, nine in 10 have a college degree (with over 40% holding

an graduate/advanced degree), and 60% live on either west (30%) or northeast coasts

(30%). The research reveals the top elements that high net worth consumers deem

important in the selection of a luxury real estate agent and agency. Additionally, we

bring you select insights from the

produced annually by American Express Publishing and Harrison Group.

® theSurvey of Affluence and Wealth in America,1 which is

Today’s Luxury Real Estate Consumer

Finding Opportunity in a Changed Economy

It would be an understatement to say that times have changed. And with changing

times comes a need to check in with our customers and evaluate their temperaments,

mindsets and marketplace sensibilities. In late 2010, we did just that. Our research

reveals that high net worth customers currently in the real estate market are defined

by their resourcefulness, their commitment to finding real value in the marketplace

(across all categories in which they are connected), and their desire to engage with

a demonstrated authority on the luxury real estate market. Because high net worth

individuals are also savvy and sophisticated, by conducting their own research online

on domestic and international markets, real estate agents need to be able to serve as a

resource by having both a global perspective and an even greater store of research and

information at their fingertips to share with this already knowledgeable consumer group.

Resourcefulness and Self-Reliance Dominate the Customer Mindset

The Great Recession has brought changes for everyone, including the affluent and

wealthy. The most important, permanent adjustment has been their adoption of a new

sense of resourcefulness and self-reliance. According to the

Wealth in America

more resourceful, 83% say they are more fiscally responsible, and 68% believe they are

much smarter shoppers.

Survey of Affluence and, 75% of affluent consumers report that the recession has made them

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Survey interviews among households with discretionary income of $100,000+

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Today’s Customer is Committed to Quality and Value

While affluent and wealthy consumers are searching for value, they have not traded

down in their notions of, and demand for, quality – in both product and service. “Their

expectations about, and their desires for quality, craftsmanship, and service have not

diminished. Meanwhile, their expectations that purchases be thoughtful and meaningful

have risen.

as amenities and/or features that address the needs of the most important of their

relationships, their families – all at a price that is perceived as fair.

In fact, over the course of the past few years, the value equation has developed into

what Harrison Group coined ‘purchase profiteering’:

discounts available in the short-term that may not exist for the long-term, the purchase

becomes profitable now,

even as dollars are expended.

In other words, the affluent

and wealthy don’t just want

to feel that they are receiving

a discount on their real estate

purchases; they want to feel

like they have made an

immediate profit.

2” For luxury real estate, this means they are seeking superb quality, as well3 If consumers believe there are

Salesmanship and the Details of Distinction

Dependence on the Salesperson is Shrinking

As consumer savviness and self-sufficiency have risen, their reliance on and view of

salespeople have diminished. The growing access to internet research has empowered

consumers to quickly find information which previously resided only with industry

experts. This is simply the new reality for salespersons across nearly all industries.

According to the

that they believe in their own abilities to search for the facts; nearly nine-in-ten feel that

they can often get to the facts faster on their own, via the Internet, than if they turned

to company representatives. Further, the trend line shows fewer and fewer consumers

depending on salespeople:

Survey of Affluence and Wealthy in America, affluent consumers report

...Expectations about quality,

craftsmanship and service have not

diminished. Meanwhile, expectations

that purchases be thoughtful and

meaningful have risen

2

2

Prospects (New York: AMACOM, 2010), 3.

Jim Taylor, Stephen Kraus and Doug Harrison: Selling to the New Elite: Discover the Secret to Winning Over Your Wealthiest

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2011 Luxury Summit Executive Summary, published by American Express Publishing and Harrison Group

I depend on a salesperson

to know the specific

details of a product that

makes it worth more

Source: Survey of Affluence and Wealth in America. Produced by American Express Publishing and Harrison Group.

67%

Q1 2007 Q1 2011 Q1 2007 Q1 2011

53%

34%

26%

I have a close relationship

with a few salespeople

that I count on

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While these data may feel daunting, even in this context there is a huge opportunity for

real estate salespeople to win clients and bolster market share through superior service. In

fact, real estate agents must continue to strive to enhance their salesmanship to become

go-to, reliable resources to help their individual customers decide on what is

best product for them personally. More than ever, real estate agents need to be able to

address the savvy luxury consumer’s research capabilities by bringing more knowledge and

insight to the table than the consumer can find on his own via a quick Google search.

Furthermore, agents must be able to use this knowledge to speak to the details of

distinction that matter most to a particular customer. The best website in the world will not

be able to uncover a customer’s interest and passions and then demonstrate the way a

brand delivers on those passions.

fill this vital role.

genuinely the4 Only an exceptionally service-minded salesperson can

Leading Factors in Agent and Agency Selection

Proven Experience, Performance and Reputation Are Key

When selecting an agent to work with, three types of characteristics were revealed in this

research: personal and professional attributes including 1) reputation, 2) a demonstrated

track record of performance, including insights into the market and the ability to reach a

large network of either buyers or sellers, and 3) the ability to market high-end properties

in high-end ways. As shown in the following table, it is notable that “trust,” as an

extremely important factor, is valued by 56% - nearly 20 points less than “reputation for

performance” when selecting a real estate agent. This presents both a challenge and an

opportunity for agents: a challenge in so far as not being able to assume that clients will

stay with an agent even when “trust” has been established, and an opportunity in so far

as consumers being open to establishing new relationships based on an agent’s stellar,

performance-based reputation.

Not only can agents not be complacent in assuming their existing clients will stay with

them as a matter of course, but agents should rethink the notion of trust altogether. That

is building and creating trust should not be an end goal in and of itself. Trust must be

organically created through reliable and consistent performance across all metrics that

matter. Performance is the new trust.

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2011 Luxury Summit Executive Summary by American Express Publishing and Harrison Group, Inc.

$1MM+ Real Estate Market Participants

% Extremely

Important

% Extremely/Very

Important (NET)

How important is each of the following when selecting

an agent to work with?

Personal/Professional Attributes (NET) 86 97

Has a reputation of performance in the market 74 91

Is someone you know/trust 56 80

Has a strong track record in the high-end/luxury

real estate space 58 87

Demonstrated Ability (NET) 84 96

Has a thorough understanding of the

high-end/luxury real estate space 68 92

Has the ability to represent your listings in other places online 63 87

(outside of the agent’s website)

Is able to demonstrate that they can reach successful

consumers outside of your market 58 82

Attractive Marketing Communication (NET) 67 92

Can represent your property on an elegant/attractive website 59 83

Is able to represent properties with high-end elegant materials 49 80

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Specializing in High-End Real Estate is Key

About three-in-four consumers in the $1,000,000+ home market say that the number of

$1,000,000+ sales that an agent has secured is a characteristic that would distinguish

that agent as among the very best in the field. Further, six-out-of-ten consumers say

that an agent who specializes in luxury real estate is important to them. Luxury Portfolio

International’s website, LuxuryPortfolio.com, helps its agents meet this criterion as more

than 80% of its property listings are priced at $1MM or more.

Other, related characteristics that distinguish an agent as a “top agent” include

reputation in the community (86%), reputation with colleagues (77%), length of time past

sales have taken (72%) and number of homes currently being listed with an agent (59%).

With the exception of reputation, note that all of these characteristics are “hard” data –

readily proven through indisputable metrics. This too, is a reflection of the high degree

of resourcefulness buyers and sellers bring to today’s high-end real estate market.

$1MM+ Real Estate

Characteristics That Distinguish Top Real Estate Agents From Others Market Participants

Reputation in your community 86

Reputation with their colleagues/peers 77

Total number of homes sold 76

Total number of homes valued at $1,000,000 or higher sold 74

Amount of time past sales took 72

Number of years in the the real estate business 71

Total number of homes valued at $1,000,000 currently selling 65

Total number of homes currently selling 59

Industry awards or recognition 41

Luxury Portfolio International’s

Property Listings

Property

Listed at

Less than

$1MM

17%

Property

Listed at

$1MM

83%

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Reaching the Customer

Key Marketing and

Advertising Channels

Affluent consumers are certainly savvy

enough to know that when an agent is

affiliated with a strong organization

(with “strength” not being a proxy for

the size of the organization),

opportunities for greater reach are

increased – whether they are looking

to buy or sell. And in fact, when asked

about the qualities of an organization

that they would like their own agent to

be affiliated with, the most popular

response was “is part of a strong

network,” cited by 82% of high-end

market customers. They want to be

afforded the highest possible service

with the lowest amount of risk, which is

something that stronger organizations

can offer to high-end consumers.

As part of their resourcefulness, the Internet is their go-to source for research and market

knowledge, yet when it comes to advertising 68% of affluent and wealthy consumers pay

greater attention to print advertising than digital, and the same amount also find print

advertising to be more engaging than digital ads.

find print highly relevant, a balance of elegant execution of information delivered both in

print (newspapers and magazines) and in strategic digital placements is highly advised.

About one-quarter of affluent and

wealthy consumers say that it is

desirable for their agent’s company

to have their own dedicated real

estate magazine. In a nod to their

resourcefulness, consumers want

to see industry trend information,

along with tips from real-estate

insiders. Additionally, 53% want

relevant lifestyle content like

summaries of lifestyle and living

trends among people similar to

them, or tips and trends on home

and interior design. Luxury Portfolio

is positioned to deliver on these consumer

desires through the

Magazine

luxury real estate audience by representing

the “lifestyle” of luxury including trends

in living and design and features articles

on high-end properties.

5 Since the affluent and wealthy stillLuxury Portfolio. This publication caters to the

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Survey of Affluence and Wealth in America, Q1 2011 by American Express Publishing and Harrison Group

$1MM+ Real Estate

Market Participants

Desired Characteristics of the Company with which

Agent is Affiliated (% Extremely/Very Important)

Marketing Efforts (Net) 93

Is part of a strong network 82

Has a strong Internet presence 77

Is frequently in the top returns on search engines 76

Has a popular Internet site 70

Promotes your property on YouTube 18

Is affiliated with an auction house 11

Advertising Efforts (Net) 65

Advertises in newspapers 47

Advertises in magazines 41

Has it’s own dedicated magazine 24

Advertises on TV 21

Company Recognition (Net) 52

Is nationally known (operates throughout N. America) 46

Is internationally known 31

(operates throughout N. America, Europe and Asia)

$1MM+ Real Estate

Market Participants

Valuable Features in Dedicated

Real Estate Magazines

Summary of trends in high-end real estate 58

Trends in lifestyle and design 53

Summary of lifestyle and living trends 38

among people similar to you

Home and interior design tips and trends 37

Advice and/or tips from real estate agents 48

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Global Organization

While an agent’s affiliation with a nationally known/operated brand is seen as important,

one-third of the affluent and wealthy have a strong interest in having an agency represent

them that has global representation, and company recognition is important to more than

half of high-end real estate consumers. Also critical is an agency’s track record of selling

internationally to demonstrate their international abilities to prospective clients.

Our research found that one-third stated that their agents had successfully marketed

their properties internationally, and 36% are extremely or very interested in receiving

an introductory and personalized correspondence from a global source about their

property. In fact, eight-in-ten agree it would make them more likely to select an agent if

they received a personalized letter from such an international company. Luxury Portfolio

International’s Luxe Introductions’ letters provide just such a service, whereby agents can

have customized letters sent to their prospective or existing client on their behalf.

Empowering Sellers

Internet Presence, High Visibility Print and Reporting Tools are Key

Affluent and wealthy consumers are well versed in using the Internet, so it should

come as no surprise that 71% say that it is critical for their listings to appear in Google

search results. Forty-eight percent wish to see placements in

in the

In addition to appearing in these media outlets, consumers are interested in receiving

personalized reports showing where their property is being marketed. More than onethird

also want to see statistics that demonstrate the popularity of their agency’s website.

The right Internet tracking and reporting tools make a difference for sellers. Today’s

increasingly tech-savvy customers want proof points of progress displayed through

sophisticated metrics, such as what Luxury Portfolio International’s

program provides to agents. Specifically, in order of importance, luxury real estate sellers

want to know the number of:

- Inquiries made to the agent about the property

- People who have viewed the property on the agent’s website, and

- People who have viewed the property on other websites:

The bottom line? Good reporting on all

marketing channels is key. For example,

Luxury Portfolio International™ is the

only luxury real estate program that

gives agents the ability to report on

comprehensive listing metrics – from

inquiries and views down to which

city, state, country a visitor came from

and even what language or currency

they use. This level of reporting allows

for better insight into those who are

browsing their listings online.

Unique Homes and 47%Wall Street Journal, 38% say representation in the duPont Registry is important.TM “LuxeAnalytics”

Salient Reporting Metrics

% Extremely/Very Important

92%

79%

77%

The Number of Inquiries Made

to the Agent About the Property

The Number of People Who

Have Viewed the Property On

the Agent’s Website

The Number of People Who

Have Viewed the Property on

Other Websites

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Conclusions

First and foremost, the luxury real estate consumer demands that an agent be reputable

amongst his or her peers. Agents must be knowledgeable about their market, have a

track record of selling $1MM+ homes and be supported by an agency with global reach.

In addition, while the luxury consumer is seeking agency websites that are as elegant

as the properties they represent, they also want to see that such websites are popular,

have a strong presence of luxury market share, proven Internet presence and tracking

statistics. More than ever, too, savvy sellers are looking for excellent reporting on web

traffic and searches.

While the Internet is paramount, printed material is still vital for advertising purposes

and must be elegant. Advertising in local newspapers is imperative, but specific national

papers are highly regarded, too. Magazine advertising is still considered appropriate, as

well; as is a designated agency magazine where the affluent and wealthy expect to find

real estate tips and home design trends.

Of course, the affluent and wealthy still demand high quality and craftsmanship in the

homes that they buy. But due to the changed economic times, they view all marketplace

decisions through the lens of resourcefulness.

Overall, in an era where consumers increasingly rely on their own abilities and search

for information on the Internet, an agent representing high-end real estate must be a

docent – a true authority on the luxury real estate marketplace - in every respect - to sell

to this increasingly sophisticated, knowledgeable and selective consumer. By becoming

a true real estate expert and addressing property distinctions that speak to a customer’s

interests and passions, they will not only win business but market share, as well.

Luxury Portfolio - Who We Are

Luxury Portfolio International

the World,

by many of the world’s most powerful independent luxury brokerages. Launched in

2005, Luxury Portfolio International today markets over 25,000 luxury homes to over

1.2 million high-net-worth visitors annually. By presenting a gallery of the finest luxury

properties and brokerages worldwide, our brand is recognized throughout the world as

the luxury standard of excellence.

In addition, we are unmatched in the global arena, with properties in over 45 states

and 25 countries, website visitors from over 200 countries/territories every month, site

translation in nine languages, conversion to multiple currencies and a total inventory of

available properties totaling almost $36.5 billion. The 200 brokerages of Luxury Portfolio

International™ represent the luxury segment of Leading Real Estate Companies of the

World,

and 140,000 associates producing $225 billion in annual home sales. Based in the United

States with an office in London, Luxury Portfolio International™ is backed by the experience

of the most respected and recognized experts in luxury real estate in markets worldwide.

This group’s experience spans many decades in the highly affluent residential market.

TM is the luxury face of Leading Real Estate Companies of® the largest global network of premier locally branded companies dominated® the premier global real estate organization encompassing 550 firms, 4,600 offices

Contact Information:

Robert Goldstein

http://www.robertgoldstein.net/

robert@joshuaco.com