Why the Main Line Luxury Market Hasn’t Rebounded

While real estate values on the Main Line have not gone back up to their peak (2005-2006), the luxury market has suffered most.  Homes in the $1.5 million and above range tend to sit on the market for a long time and often sell at a bigger loss than their less expensive neighbors. Why?  There are several factors driving this luxury market slump:

1. Many of these properties are gracious, older homes (not many McMansions in this area). So, while the appeal of the style of these stately houses remains, as this segment of housing inventory ages, the efforts and expense of updating them increases. Buyers are often presented with costs and time requirements (as well as inconvenience) that make these houses more of a project than they want to take on.
2. Since the recession, people are being more careful with all spending, but particularly on real estate because, as they’ve seen, it may NOT always appreciate in value, so buying an extravagant property may be less enticing to some.
3. A growing trend toward owning second homes may also bear some responsibility for a dwindling buyer pool. Some people would prefer to own a more modest house (especially one without the cost of grounds to maintain, which can be an enormous expense) and have the money to have another home elsewhere.
4. In considering the target market for these homes (and who is most likely to be able to afford them), it is important to recognize a recent surge in new communities serving the 55+ buyer with luxurious as well as practical features which are providing some of the competition with these estate properties.  First floor masters, fewer stairs, hallways and bathrooms designed to accommodate wheelchairs are some of the features they offer.
5. Finally, Philadelphia has been enjoying an urban Renaissance with both new luxury condos as well as some major refurbishing of elegant older buildings.  For certain buyers, the appeal of living in a beautifully appointed building with set condo fees and no maintenance while in walking distance to restaurants and music, theater and art venues cannot be overstated, so again, an already limited buyer pool may be further diluted by this competing kind of housing.

For a more through discussion, please click here.