For roughly the past four years, home price growth across the market has outpaced growth in the luxury sector every month. But since January 2024, this trend has reversed, Zillow reports.
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Zillow reported Wednesday that, bucking a trend over the past few years, national luxury home value growth has outpaced home value growth across the market for the fifth straight month.
Zillow notes that the typical luxury home in the United States (i.e., the top 5% of the market) is worth approximately $1.62 million. In the 50 largest metropolitan areas in the United States, luxury home values range from approximately $750,000 in Buffalo, New York, to $5.3 million in San Jose, California.
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Compared with the overall market price increase of 3.2% annually, the value of luxury residential properties increased by 3.9% annually. From January 2019 to January 2024, the growth of house prices in the entire market exceeded the growth rate of the luxury goods industry every month. But since January 2024, the trend has reversed, with luxury home values growing faster than the overall market.
Anushna Prakash LinkedIn
“Luxury home sales can be challenging because the pool of buyers is much smaller,” Zillow economic research scientist Anushna Prakash said in the company’s report.
“That’s one reason their prices typically grow slowly. This year we’re seeing a different trend. Luxury home buyers may be less affected by rising mortgage rates than average buyers, especially as home equity has increased in recent years. Soaring repeat business Many people will be able to pay with cash and skip mortgage payments altogether.
Luxury home prices continue to climb, in part because inventory is recovering more slowly than the overall market. Luxury goods inventories increased by 15.7% year-on-year, but were still 46.9% lower than pre-epidemic levels. At the same time, total inventory increased by 22.7% year-on-year, which was approximately 32.6% lower than the pre-epidemic level.
Zillow added that luxury homes receiving price reductions are also growing, but the trend is less than the price reductions seen in the general market. In June, about 21% of luxury housing listings saw price reductions, up from 19.4% in the same period last year. In the overall market, 24.5% of listings saw price cuts in June.
Richmond, Virginia, had the largest price increase last year, with home prices up 16.5% from the previous year. Hartford, Connecticut had the second-highest annual home price increase, with home prices rising 8.6%.
Only six major U.S. markets have fewer luxury properties for sale than last year, including Richmond, where inventory fell 13.2% year over year. Richmond also had the fastest luxury home sales of any U.S. market in June, with properties selling within six days.
Last year, luxury home values fell in just one major U.S. market: Austin, Texas. Despite this, the value of luxury goods on the market fell by only 1.5% compared to the same period last year. Home prices in the Texas capital have soared during the pandemic. A construction boom to meet demand has helped moderate price growth in the area.
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