House prices are rising All over the country, but luxury home prices are skyrocketing. according to Data comes from RedfinIn the first quarter of 2024, luxury home prices rose twice as fast as non-luxury homes.
But even as prices rise, sales are still rising, even as non-luxury prices rise Number of houses falling. In the first quarter of 2024, the sales price of this mid-priced luxury home reached a record high of $1.225 million, an annual increase of 8.7%. Meanwhile, sales of luxury homes increased 2%, while sales of non-luxury homes fell 4%, with the median sales price also hitting a record $345,000.
Why are luxury home prices rising so rapidly?
The luxury real estate agents we interviewed all agreed on one thing: Price increased yes largely due to leading to insufficient supply. Shocking.
“There’s just not enough inventory for people to buy,” Jason Mudd, managing partner of Cindy Raney & Team, a real estate brokerage in Fairfield County, Connecticut, told BiggerPockets. “As long as you don’t have the ability to build enough houses, you will There is a supply and demand issue.
Although the total supply of luxury homes increased by 13% year-on-year, supply Still below pre-pandemic levels, Redfin sayswhich Homes estimated to be in the top 5% of their metro area based on market value were studied.
have a lot of cash in productionmany luxury real estate buyers are ready Pay with cash Or almost all cash. this Helps stimulate demand as luxury homeowners are not subject to mortgage rates, Mulder said.
The demand for luxury homes is partly due to changes in people’s lifestyles today,
“More and more people are dividing their time between more homes, which creates investment opportunities,” said Nicole Beauchamp, associate broker at Sotheby’s International Realty in New York.
Some of Beauchamp’s clients Buying their third, fourth or even The fifth attribute. Although some yes purchase As a long-term investment property, some buyers are looking resort Or properties in areas where their children might go to college.
Meanwhile, homebuyers from California and New York state Who is Move to other areas e.g. Miami Filippo Incorvaia, CEO of FI Real Estate, said they found their money could go further.
“California residents, New York residents, they’re used to much higher prices than South Florida… they come to New York after selling their California properties and have more capital to invest. Properties are much cheaper, “He said.
Some builders are taking note of Florida’s lack of supply and are building projects that can divided Inkwaya added that they will go into different families. This allows the buyer to use part of the property if desired and rent out the other half of the home as short term or long term rent.
Should investors be concerned about the luxury real estate market?
Prices are so high now, Investment still makes sense In a luxury space? Beauchamp said it depends on the attitude of investors Looking for and your location.
once you know what is your goalwhether for appreciate, cash flow, or a place to live, “and then you reverse engineer what the ideal is,” she said. For example, if you want to buy a luxury home as a short-term rental, it may not make the most sense to buy in an area that doesn’t allow short-term rentals, such as New York City.
Other real estate agents agree that the short-term rental market may over-saturated In popular areas such as downtown Miami.
“I would not advise any of my clients Buying [short-term rentals] For now, at least until things change a little bit, we’ll see how the uptake goes,” said Ivan Chorney of Ivan and Mike’s team at Compass in Florida.
While there’s no crystal ball to predict the future of real estate, Mulder believes investing in real estate still makes sense today. “Historically, real estate has proven to be a good investment and what we’ve seen in recent years is that in certain markets… we’ve seen incredible spikes in home prices,” he added.
final thoughts
In some popular destinations, there are certainly opportunities be ownedas prices will likely only rise in the next few years.
although Luxury homes less affected by mortgage ratesthere are still supply issues in the luxury and non-luxury markets. Most high net worth buyers are more concerned about what is happening in their stock portfolios than what is happening with interest ratessaid Johnny.
“I think the massive wealth migration that we’re seeing is just beginning; I actually think we may be entering a second inning,” he said.
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