Home buyers have been seeking more space since the pandemic, but in the luxury market, there still appears to be limits on how big buyers are willing to go.
Homes in the top 1% by price that are between 5,000 and 10,000 square feet were the fastest-selling in the luxury sector in 2020, averaging 97 days on the market, according to realtor.com® data. In contrast, homes between 2,000 and 5,000 square feet averaged 102 days to sell. Homes larger than 10,000 square feet averaged 126 days to sell. So far in 2021, midsized luxury homes—between 5,000 and 10,000 square feet—are continuing to sell the fastest, averaging 110 days on the market. Larger homes—more than 10,000 square feet—are taking 127 days to sell, while homes between 2,000 and 5,000 square feet are averaging 113 days. “Most people don’t see a necessity for 10-bedroom homes right now,” David Martin, CEO of Terra, a Miami-based development firm, told Mansion Global.
For some wealthy buyers who have moved from the city to the suburbs, greater space may have been their primary motivator. But they are finding there is such a thing as a home that’s too large. “There is a sweet spot when it comes to square footage,” Kim Bancroft of Daniel Gale Sotheby’s International Realty on Long Island, N.Y., told Mansion Global. “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.”
Property taxes can be another factor behind the appeal of midsized luxury properties in suburban areas. “Taxes affect buyers, even at the luxury end,” Bancroft notes. “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.”