Understanding what affluent buyers with and without families are looking for
By SIDNEY PELL
The luxury goods market saw an increase of six percent in 2018 to an impressive $1.3 trillion globally, and it is expected to increase by at least three percent per year through 2025. It may feel complicated staying on top of this market when it is being driven by multiple groups with influence. Of late, millennials receive the lion’s share of credit for changing the standards of personal luxury, and with good reason: their very nature seems to define the term ‘luxury’. Across the board, millennials are calling the shots by raising the standards for product innovation and satisfaction, and heavily influencing what other consumers expect to receive in their day-to-day experience. But millennials are not the only ones with the power to influence the world around them.
Another group, who we will call the affluent consumer, is quietly leading the charge in setting standards in the housing industry. These consumers have a significantly higher income and larger net assets and investments compared to the average U.S. household. They tend to invest significant portions of that income in their homes. Uncovering exactly where affluent consumers choose to spend their money on home improvement or remodeling projects illuminates hidden trends in the luxury market that will drive product innovation and design, showcase features and rooms most important to homeowners, and help marketing spend more effectively.
A closer examination of the affluent consumer reveals that family composition is a key driver in purchasing decisions. For example, affluent consumers with families are seven percent more likely than those without families to have a net equity of $25K in their primary residence. This potentially frees up the cash for the family buyer and increases the inclination to invest money back into their home. Looking closer at this affluent segment, we find family buyers are 116 percent more likely — you read that correctly! — than the average household to make major home improvements over the next 12 months.
Affluent Households With Families Are More Indulgent
Affluent buyers with families tend to spend more on big-ticket items like window replacement, roofing, and HVAC units – all to enhance the energy efficiency and personal comfort
of their homes. These buyers are significantly more likely to remodel their homes in the next 12 months, focusing on the attic, basement, and garage spaces. Whether it is due to the project scope, the cost, or even the convenience, when it comes to remodeling, affluent family buyers are 90 percent more likely than the average household to hire a professional to manage home improvement projects.
Affluent Households Without Kids Are More Hands-On
When it comes to smaller-scale projects, affluent non-family buyers are more likely to spend their money on aesthetic enhancements inside the home such as wood flooring, kitchen sinks and cabinets, and interior paint. Kitchens lead bathrooms by a small margin when it comes to planned remodels, for both family and non-family affluent shoppers. While both groups might spend the same amount on kitchen faucets and sinks, affluent family buy- ers are more likely than non-family buyers to spend at least $1,000 on kitchen countertops.
Labels Are Important
The distinction between affluent buyers with and without families is also clear when it comes to home technology. In general, both groups are drawn towards features that enhance energy efficiency, and both consider themselves to be early adopters of technology. However, their purchasing trends show distinctly different patterns.
Affluent family buyers indicate the presence of their children as a strong influence on their purchase behavior. They also tend to give in more to impulse purchases, likely feeling the pressure of the immediate needs and comfort of their family.
Comparatively, affluent non-family buyers are more influenced by brand names. These buyers would describe themselves as informed customers, indicating that they will do more research on a product before making a snap purchase decision.
Understanding these nuances between affluent buyers will help inform strategic messaging and feature listings that appeal to their propensity for energy efficiency, cutting edge technology, and other influences that will increase product consideration.
The luxury market is growing, and professionals from all corners of the housing industry will benefit from paying attention to affluent consumers. Paying attention to affluent buyers’ spending habits when it comes to home improvement and remodeling projects provides great insight for designing new features and products, for homebuilders and product manufacturers alike.
Sidney Pell is the Manager of Consumer and Product Insights at John Burns Real Estate Consulting. Sidney leads John Burns Real Estate Consulting’s Consumer & Product Insights efforts, helping clients understand consumer trends, preferences, and expectations in the marketplace. JBREC’s National survey provides access to over 23,000 new home shoppers.