Wealthy people who fled major cities like New York City, Los Angeles and Chicago last year moved to 'hidden gem' locations like San Antonio, Texas and Salt Lake City, Utah, according to a new report.
Real estate company Coldwell Banker has released a 132-page report detailing insights into the luxury market including where and why people moved in 2020 amid the coronavirus pandemic, like fleeing taxes and 'restrictive COVID-19 mandates.'
The report used market data to identify a number of distinct locations where wealthy bought homes where they had not been expected to if not for the pandemic redefining the priorities of the affluent.
'Efforts to safeguard wealth led people to cast wider nets into real estate, stocks, art, technology, gaming, and other niches; many accelerated plans to move to tax-friendlier locales,' the report reads.
'Ideas about wealth itself also shifted as the affluent set sights on 'intangible luxuries,' like family, health, safety, security, and space.'
The reported added: 'The search for intangibles created new demographic groups, called 'affluent trailblazers' who relocated from cities to small-town hidden gems, suburbs and popular second home destinations in 2020.'
A map shows 12 cities were luxury buyers are relocating amid the pandemic
The report was issued by Coldwell Banker which said the pandemic redefined the priorities of the affluent
Some of the categories that the cities were broken down into included 'secondary rising markets,' 'exceeding expectations,' new discoveries' and 'ready for discovery.'
Phoenix, as well as Denver and Dallas, were listed as 'secondary markets on the rise' or cities where luxury buyers had not previously bought as many homes.
'Phoenix is a big beneficiary of the California exodus, and over half of my luxury buyers are transplanted Californians. Taxes are a big driver, but so are restrictive COVID-19 mandates,' said Debbie Frazelle with Coldwell Banker Realty in Phoenix.
She said buyers primarily came from the San Francisco Bay Area, but also Seattle and Chicago.
'Early in the pandemic, anything under $600,000 blew off the market within 24 hours,' Frazelle said.
'Then luxury sales between $750,000 and $2.5million accelerated in early summer, doubling year-over-year during several months in the second half of the year.'
Data in the study shows inventory declining 423 homes for sale with just 106 sold in December 2019 to an inventory of 250 homes for sale in December 2020 with 209 homes sold.
Louie Lee, with Coldwell Banker in Colorado, said real estate agents in the state got 'bombarded' when companies gave employees the freedom not to come into the office.
'It was relocation on steroids with people coming from everywhere: Texas, the East Coast, Midwest, and California. Denver luxury is affordable compared to California, plus there is the perennial draw of the mountains, skiing, and an overall desirable outdoor lifestyle,' Lee said.
Lee said that the biggest draws were suburban communities like Castle Pines where homes are typically between 3,500 and 5,000 square feet on three-quarters of an acre and sell for $1.2million and $2million.
'It feels like Vail but its only about 30 minutes south of downtown Denver,' Lee said.
Luxury markets that exceeded real estate experts' expectations included Salt Lake City, Sacramento and St. Louis. Pictured: Salt Lake City
Three cities where experts now expect to see growth include San Antonio, Texas; Knoxville, Tennessee; and Hamilton County, Indiana - where new luxury developments are 'sprouting up.' Pictured: San Antonio
Cities labeled 'new discoveries,' like Burlington, had relatively small luxury markets before the pandemic but saw strides with jumps in sales
Phoenix, a 'big beneficiary of the California exodus,' is pictured
Lori Arnold, with Coldwell Banker in Dallas, said that the city had an 'extraordinary year of growth' as companies moved to the area - sending the luxury real estate prices up 7%.
'While properties have traditionally taken upwards of six months to sell, we are now seeing multiple offers and sales within weeks of coming on the market,' she said.
Arnold said that the company's sales were up 62% in 2020 compared to 2019 with a 'surge of buyers from out of state.'
People heading to Dallas came largely from Chicago, Southern California and Washington D.C. A number of Dallas suburbs like Frisco and McKinney have already previously made lists for the fastest growing cities in the United States.
'Even though we are a large metropolitan area, and our more established luxury markets saw significant growth in closed sales, our boundaries continue to grow, especially in the northern areas around Frisco, where sales jumped 35% in 2020,' Arnold said.
Luxury markets that exceeded real estate experts' expectations included Salt Lake City, Sacramento and St. Louis.
Molly Jones, with Coldwell Banker in Salt Lake City, said 'it was like a flip switched' in May as the Utah capitol saw its 'best year by far.'
A chart provided in the report shows top luxury market performers in 2020
'California and New York are the two biggest sources of new arrivals, and many are coming here because big tech companies like Adobe, Facebook, and Microsoft have a major presence just south of Salt Lake City,' Jones said.
Smaller tech firms from Silicon Valley have also been moving to the area. Many others don't have to go into an office for work.
'We had more demand than ever for remote, off-the-grid homes,' Jones said.
'It's easy to stay home when you have more space, but in the case of demographics influencing architecture, we went from really big houses to much nicer smaller homes reflecting Utah's traditionally large families giving way to the influx of couples and families just starting to have children.'
Meanwhile, in Sacramento, Coldwell Banker's Angela Heinzer said the city - just 90 minutes east of San Francisco - received its bulk of new residents from the Bay Area.
'Sales volume spiked, inventory levels fell, and prices rose,' she said,
Heinzer noted 'the downside' has San Francisco's market decline has left her with some hopeful buyers who can't sell their Bay Area homes to buy in Sacramento.
'This group is younger and tends to have young children. Our luxury market is driven by the public and private schools, location, and community,' Heinzer said.
She also noted that she has had some clients trying to leave Sacramento for states like Texas, Tennessee, and Florida.
St. Louis in Missouri also saw massive influx of residents, which John Ryan explained as a welcome rebound after the 2008 housing crisis.
'We didn't have the rebound that several larger cities enjoyed after 2008, but over the past year, our luxury market really boomed,' he said.
Ryan explained the city provides job opportunities for executives at companies like Edward Jones, Stifel, Emerson Electric, World Wide Technology, and Enterprise Rent-A-Car, 'along with rewarding careers in medicine at several hospitals.'
St. Louis' luxurious 'Central Corridor' runs from downtown at the Mississippi River and west to the Missouri River, with 'elegant homes from the early 20th century.'
'COVID-19 is definitely a big impetus for the recent strength. After being cooped up in quarantine, people definitely had the urge to upgrade into living situations with more space and amenities,' Ryan said.
Cities labeled 'new discoveries' had relatively small luxury markets before the pandemic but saw strides with jumps in sales - particularly in the second half of 2020.
The cities in this category included Burlington, Vermont; Reno, Nevada; and Coeur D'Alene, Idaho. They were described as appealing for their access to nature and rich histories.
Burlington, whose population was just 42,545 in 2019, is situated on the eastern shore of Lake Champlain with views of the Adirondack Mountains.
'Burlington may seem like a new discovery for luxury real estate in 2020, but it has a rich history as one of New England's most desirable places to live,' Coldwell Banker's Brian Boardman said.
Boardman said that Burlington is also an attractive market because it is home to the University of Vermont and a great school system - while boasting a low crime rate.
'It appeals to progressive, open-minded younger people,' Boardman said.
He said that Burlington's luxury market started exploding first with rental properties as people fled bigger cities like New York and Boston but did not want to commit to buying while waiting to 'see how the pandemic played out.'
'Starting in May, buyers began been purchasing homes in record numbers,' he said.
In Reno, Nevada - which has no income tax - the city has seen droves coming from California and the Northeast, trends that started even before the pandemic.
'In the last two decades, Californians have discovered they receive a lot more house for the money, both in the luxury and the senior markets,' Nancy Cane Engle said.
She said tech companies, like the Tesla Gigafactory, and a number of data centers have also 'attracted millennials wanting to partake in Reno's privileged living.'
'There are PGA golf course communities with city views, equestrian estates, downtown penthouses, and condos attracting all age groups,' Engle said, noting the city's proximity to Lake Tahoe.
Coeur D'Alene in Idaho has also seen a big burst of buying amid the pandemic.
'Besides the natural beauty and recreation opportunities offered by our lakes and mountains, the conservative nature of North Idaho appeals to buyers coming in from places like Seattle, Portland, California, and even Texas,' Kathleen Tillman said.
'The Golf Club at Black Rock and Gozzer Ranch Golf & Lake Club showed some of the most rapid growth in our luxury market. Black Rock's $1,725,000 median price was up 94% from 2019, with selling price at 97.6% of list price.'
She added: 'At Gozzer, a Discovery property, entertainment and sports stars were flying in all year, and the median price was up 52.3% to $2,680,000.'
'The lack of inventory and the perception that many luxury buyers had deep pockets led to multiple offers. Lakefront homes are also hot. My prediction is that the market will continue to be driven by the same buyers, inventory will continue to be an issue and desirable land will become scarce.'
Three cities where experts now expect to see growth include San Antonio, Texas; Knoxville, Tennessee; and Hamilton County, Indiana - where new luxury developments are 'sprouting up.'
The report also noted luxury buyers looking for second homes or 'escape houses' that could easily be accessed by car saw an uptick in demand with people from cities like Los Angeles seeking refuge in place like Palm Springs or Santa Barbara, while others looked for places with yards and greenery.
According to the report, experts also noted the 'resilience' of the real estate market throughout the pandemic, even as initial fears of market volatility brought back 'memories of 2088,' when the real estate market crashed.
Some locations like New Jersey even started bidding wars, according to the report.
'As the early panic subsided, it was clear that home-buying appetites had not been dulled but instead invigorated by the pandemic,' the report reads.