You've probably seen articles, news features, and social media posts about our red-hot real estate market lately. But rarely do they talk about the luxury market specifically, leaving buyers and sellers of high-end, million dollar, and luxury homes in the dark. So we thought we'd present you the most complete, accurate, and up-to-date data on the luxury real estate market.
Sales of luxury homes have skyrocketed in 2017, with Q2 sales up 7.5 percent from just one year ago, with the average luxury home selling for $1.79 million across the U.S.
This also marks the first time since 2014 or before (that’s the year they started tracking this specific data) that luxury home sale appreciation has outperformed the appreciation for all home sales.
Basically, the top 5 percent of most expensive homes are selling more robustly than the bottom 95 percent!
According to industry data, which defines a luxury home as one in the top 5 percent of most expensive homes in each city, the luxury home market has experienced a transformative shift, from a lagging and stagnant sector of the housing market to the forefront of activity.
But it seems to be the low-end of the luxury market (so to speak) that’s thriving the most. Sales of homes with a price tag of $1 million or more are up 22.2 percent from last year, while sales of homes priced at or above $5 million are up 19.6 percent.
Despite these price increases, sales volume is down. In fact, the number of listings priced $1 million or higher have dropped 9.4 percent compared to one year ago, and those in the $5 million and up price range have fallen about the same percentage.
That indicates an inventory shortage in the luxury market (mirroring the overall real estate trend), reversing a glut of double-digit inventory growth for five consecutive quarters prior.
Experts point to several factors that have contributed to this state of luxury home sales.
For one, there is a historical precedent that when the stock market is booming, the luxury home market does exceedingly well. But the biggest reason for the luxury market’s renewed vigor may be a change in the mindset of sellers. Analysts point to the theory that owners of million dollar-and-up luxury homes were flat out setting listing prices that the market wouldn’t bear.
Looking to cash in on the greater market’s steady climb, luxury listings were priced higher than buyers were willing to spend. Collectively, that resulted in fewer luxury home sales, greater Days on Market, and general price depreciation. But almost en masse with the start of 2017, sellers have gotten more realistic, reducing prices to levels more attractive to luxury home buyers.
Once luxury listings began to close, that created a supply shortage that further invigorated the market.
The result? The floodgates are open on high-end, million dollar plus, and luxury listings like we haven’t seen since perhaps before the real estate crash and recession.
While luxury listings may be selling like hot cakes, it's still a market dictated by buyers – and what they're willing to pay. Consider that only 1 in 50 luxury homes sold above list price in the Q2 of 2017 (compared to at least 1 in 4 homes that sold for above asking price in the bottom 95 percent).
How about the luxury market in California?
During the January to March first quarter of 2017, 10,562 homes sold for $1 million or more in California. That represents an 11.7 percent year over year increase and also the highest number on record for a first quarter.
During that same time span, 2,523 homes sold for $2 million or more, which is an 11.8 percent increase from the same period last year and also a record.
Irvine, California led the entire nation for year-to-year price appreciation in the luxury real estate market, with an astounding 37.4 percent increase over this time last year, to an average sale price of $3.5 million.
Long Beach, California and nearby Reno, Nevada saw price increases of over 25 percent for luxury homes, too.
The five zip codes with the highest number of million dollar or greater home sales last quarter were 92620 (Irvine); 92130 (San Diego, including Carmel Valley); 95125 (San Jose); 92037 (La Jolla, San Diego); and 92651 (Laguna Beach).
About 78 percent of the $1 million and up home sales were existing (not new) homes; only about 11 percent were condominiums, and 31 percent of all $1 million and up sales were cash purchases.
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Do you have questions about buying or selling a luxury home or would like more information? Contact us any time.
