Although baby boomers make up most of the population that owns luxury homes in the United States, it has become increasingly popular for younger generations to invest in luxury real estate as an alternative to investing in the stock market. This movement has been influenced by a combination of factors including low interest rates, lower real estate prices, tax write-offs, and the state of the stock market when the younger generation entered the workforce. Young people have begun to skip the purchase of a starter home entirely, instead opting to buy high-end real estate immediately and often in the most expensive neighborhoods available. Even while homeowner rates have decreased rapidly for the middle-aged in the past year, it has risen for the 25- to 34-year-old population.
Parents are purchasing homes for their children now more than ever because bonds and money-market accounts for retirement funds are yielding lower returns. For the first time since before the Depression era, the younger generation is inheriting a great deal of money from the older generation. By purchasing homes for their children, parents are giving the younger generation the opportunity to resell houses for profit later on, thereby giving them a strong start, a great place to live, and financial options. Parents will often do this to celebrate a child's college graduation or first career-related job. Because so many younger people are buying luxury homes, marketing strategies have shifted to social media options. Amenities such as gyms, pools and spas have served well in attracting the younger crowd as well.
In areas like Los Angeles, where sandy beaches, beautiful mountain ranges, and an upscale lifestyle attract many young buyers, luxury home prices have risen by 5% within the span of a year because of the increased demand. In turn, the high demand has encouraged investors to take risks in high-end real estate by purchasing, rehabilitating and reselling luxury homes for higher prices. In 2012, the average luxury home in Los Angeles was worth $1.96 million dollars. Because the challenges of flipping a high-end home can be steep and include factors like renovation costs and the time it takes to sell, many flippers have lost money in the process. Others, however, have seen jaw-dropping profits that encourage them to continue flipping homes for a living.
Luxury homes are enjoyed by homeowners of every age because they offer a wide range of architectural styles and beautiful communities in which to live. A large percent of luxury homeowners even own or have considered owning a second luxury home. While high-end real estate might in fact provide large profits and financial sense, it is plain to see that owning a luxury home has also become one of the hottest trends of our time.