As Americans reconsider their home-buying priorities amid the pressures of the pandemic and lockdowns, a sweet spot has emerged when it comes to square footage. At the highest end, midsize homes are selling faster than both larger and smaller ones, according to realtor.com.
Last year, homes in the top 1% by price nationwide that measured between 5,000 and 10,000 square feet were on the market for an average of 97 days before selling. Homes measuring between 2,000 and 5,000 square feet, by contrast, took 102 days to sell, and homes larger than 10,000 square feet took 126 days.
This trend has continued in early 2021: Luxury midsize homes take an average of 110 days to sell, while larger ones require 127 days, and smaller ones 113 days.
It seems that there is a sweet spot for selling a luxury property quickly, as buyers are taking a cue from Goldilocks and seeking homes that are not too big and not too small. The data also drive home a point for affluent buyers and developers that even in the luxury market, bigger is not always better when it comes to securing a quick sale.
“The data supports our experience,” said Brett Dickinson of Pacific Sotheby’s International Realty in the San Diego area. “In La Jolla right now, with our 5,000-square foot homes, we can sell one a week. They’re just flying off the market.”
One factor behind this trend is that many luxury buyers are relocating from major cities to suburbs. Having become accustomed to living in apartments, these buyers are seeking more space but can feel daunted by the idea of managing a large house with ample acreage.
“Our buyers are largely coming out of Manhattan, but also the West Coast and London, and they definitely want more elbow room,” said Robin Kencel, a broker at Compass in Connecticut. “But when they’re coming out of 3,000-square-foot apartments in the city, and they’re looking at 9,000-square-foot homes, they don’t know what to do with all that space and land.”
Price point is also a major part of buyers’ calculus as they decide what size home is the right fit for them. In South Florida, buyers are relocating from urban areas like Miami to suburban ones where they can have more space, but they don’t want to go too big.
“We’re seeing demand for midsize homes, at 5,000 to 10,000 square feet, which is also a more approachable price point,” said David Martin, CEO of the Miami-based development firm Terra, which is developing a community of luxury homes in Weston. “Most people don’t see a necessity for 10 bedroom homes right now.”
Sellers of midsize luxury homes—particularly ones that are turnkey—are well-positioned now, and buyers should anticipate competition and bidding wars. But even in this hot market, correct pricing is still critical.
“Whether your home is smaller or larger, it’s definitely an important time to have an experienced Realtor,” said Kim Bancroft of Daniel Gale Sotheby’s International Realty on Long Island. “Even though we have an exodus of buyers, being priced correctly is key, because buyers are price sensitive and very educated as to whether something is properly priced.”
The appeal of midsize homes
The Covid-19 pandemic has sparked a migration from cities to suburbs, with wealthy buyers purchasing primary or vacation properties that offer more space for working, learning and playing at home.
These buyers want more square footage than urban apartments provide, but it seems that for many, there is such a thing as too large.
“There is a sweet spot when it comes to square footage,” Ms. Bancroft said. “People are valuing experience over luxury goods, and putting their money toward homes with land and room for kids to play. But they want a manageable space that is not overwhelming.”
And demand for midsize homes has become so intense in some areas that new buyers are driving up average sales prices substantially.
“We have a lot of buyers [in San Diego] coming from Los Angeles and San Francisco, and they’ve pushed up prices because they get less house for more money where they’re coming from,” Mr. Dickinson said. “Here, we’re 25% cheaper and we have all this space, plus new homes with incredible views, so everyone’s flocking to San Diego.”
Ms. Kencel said she has also seen buyers from the city driving up prices on homes. In the Greenwich area, 70 midsize properties have sold so far this year for an average price of $2 million; during the same time frame last year, 57 midsize homes sold for an average of $1.8 million.
“The story to me is the average price going up, which is a big shift,” she said.
The relative affordability of larger homes is also driving buyers from the West Coast to Las Vegas, where inventory is now especially tight.
“You can sell a 2,000 square foot home in California and buy a 5,000 square foot home here,” said Scott Acton, CEO with Forte Specialty Contractors in Las Vegas. “A big driver of demand now is Baby Boomers retiring, and with their liquidity they can buy the home of their dreams.”
A lighter tax burden is another motivator for buyers moving from high-tax states like New York and California to lower-tax ones like Florida and Nevada.
Property taxes, too, are a significant factor behind the appeal of midsize properties in suburban areas like Connecticut and Long Island.
“Taxes affect buyers even at the luxury end,” Ms. Bancroft said. “On a huge, magnificent home, the taxes can be $90,000 a year, and buyers may be able to afford that but don’t want to pay so much. Midrange homes are more manageable not only from a property and acreage perspective but also from a tax perspective.”
Advice for buyers and sellers of midsize homes
The market is hot for midsize homes, particularly those in turnkey condition on sizable lots, and buyers should anticipate competition.
“All but one of my sales this year have gotten multiple bids, so buyers have to come into the market knowledgeable,” Ms. Kencel said. “Make sure you’ve seen enough with your agent so that you’re ready to bid when you see what you want. The cleaner your bid can be, the better, and if you don’t need financing, that’s great.”
Having a smaller property doesn’t necessarily mean the home will linger long on the market: 2,000 to 5,000 square foot homes are always appealing to entry-level buyers, agents say.
And for homes larger than 10,000 square feet, selling quickly depends on local inventory and pricing.
“In our area, there are not a ton of properties on the market over 10,000 square feet, so as long as the house is in great condition, the seller is still in a strong position,” Mr. Dickinson said. “It’s also very price-driven. If you’re selling a home of that size for $10 million, you’re fine.”
Sellers of homes in that midsize sweet spot can expect plenty of interest, but it’s still important to make sure the property looks pristine for showings, and above all, that it is priced correctly. Today’s luxury buyers are well-informed about the markets they’re purchasing in, and though they may be eager to make lifestyle changes, they are still price-sensitive.
“It’s a hot market, so if your house hasn’t sold, it’s probably not priced correctly,” Ms. Bancroft said. “If you take the advice of an experienced Realtor, do whatever you can visually to enhance the buyer’s experience, and price it correctly, that will translate to actual dollars in your pocket.”
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