Why luxury car sales are up and luxury apartments are under siege
Luxury car sales have surged in the past year, and apartment construction has fallen.
Meanwhile, luxury apartment construction is down.
So what’s driving the spike?
It could be a shift to more affordable homes.
But that shift isn’t happening yet.
A new study published Thursday by the National Association of Realtors (NAR) suggests that more than a third of the recent rise in luxury apartment growth is being driven by older buyers who are leaving the housing market.
“The luxury apartment boom is not going to happen unless people who are retiring from the housing stock or who are getting out of the market don’t have access to that market anymore,” said Gary Johnson, president of the NAR, in an interview.
“That’s the most important thing.”
“The affordability issue is driving this market,” he added.
While most recent apartment building boom has been driven by millennials, the NAM’s study found that many older Americans are also taking advantage of the housing bubble to buy luxury homes.
About two-thirds of all luxury apartment building growth has been between the ages of 25 and 34, the study found.
But older residents are driving the trend even more than their younger counterparts.
The NAM study found about three-quarters of all new luxury apartment sales in 2016 were by renters aged 65 and older.
By comparison, more than half of new luxury condo construction is happening in the 25-34 age group.
“We’re not seeing younger people moving into the market,” Johnson said.
Johnson said that many young buyers are entering the market as part of the baby boomer generation.
“It’s really interesting that young buyers in this market have a much higher propensity to move into the luxury market than older buyers,” he said.
“They’re willing to pay more for a smaller amount of space.”
But the real-estate boom isn’t all about luxury.
In addition to rising apartment sales, Johnson said a big factor in the recent surge of luxury apartment development is the growth of new residential amenities.
He said luxury apartment owners are also seeing more luxury condo developments being built in areas that were once underdeveloped, such as the Southeast, the Northeast, and the South.
Many of those developments, such at the luxury apartment tower in downtown Phoenix, were initially built to serve the local Hispanic population.
But now that they are being marketed to more affluent residents, Johnson says they are more likely to attract buyers from the Northeast and the Southeast.
A couple of recent luxury apartment developments in Phoenix are among those that Johnson says are benefiting from a combination of new affordable housing and new luxury amenities.
But he says many of the luxury developments in the Northeast are also benefiting from the trend of gentrification.
“It’s the gentrification that’s driving that,” Johnson explained.
“We’re seeing an influx of new residents in neighborhoods where they might be the first ones to walk in, and that’s what’s making that area so appealing to developers.”
The trend has been particularly pronounced in downtown, Johnson noted.
“It seems like every week we’re seeing some new development that’s coming to that area,” he explained.
And, as in the condo boom, the influx of luxury units has made some residents wary of living there.
There’s also been a decline in the number of rental units in the Phoenix area, and Johnson said there has been a significant decline in rental units as well.
But Johnson doesn’t think there is any real need for any sort of rent controls, because, “it’s not really a high cost of living.”
It’s possible that the surge in luxury car purchases and apartments could be due to the fact that many buyers are buying luxury cars to go on vacation, Johnson explained, and they are willing to shell out a little extra for a car to go shopping.
“I think the luxury car industry has become a luxury product that they have to cater to,” he noted.
If you are interested in the NARS report, you can find it here: