Luxury Home Values Are Rising Faster Than Typical Homes for the First Time in Years - Zillow Research
The article discusses the recent trend in the luxury home market, where luxury home values have been rising faster than those of typical homes for the first time in several years. According to Zillow, luxury homes are defined as those in the top 5% of value in a given region. Historically, luxury home values have grown more slowly due to a smaller pool of buyers. However, luxury home values across the U.S. have increased by 3.9% year-over-year, surpassing the 3.2% growth rate of typical homes. This marks a significant shift, as from January 2019 to January 2024, typical home values consistently outpaced luxury homes.
One reason for this change is that luxury home buyers are less impacted by higher mortgage rates, especially those who are repeat buyers with significant equity in their current homes. Many luxury buyers can afford to pay in cash, avoiding mortgage payments altogether. Additionally, luxury home inventory has been slower to recover compared to the overall market, contributing to rising prices. Luxury inventory is up 15.7% year-over-year but remains 46.9% below pre-pandemic levels, whereas total inventory is 22.7% higher than last year and 32.6% below pre-pandemic averages.
The article also notes that the share of luxury listings with price cuts is increasing but remains below the overall market. In June, 20.8% of luxury listings had a price cut, compared to 24.5% of all home listings. The typical luxury home nationwide is valued at approximately $1,620,000, with values ranging from under $750,000 in Buffalo to over $5.3 million in San Jose among the 50 largest U.S. metro areas.
Richmond is highlighted as a particularly hot luxury market, with luxury home values up 16.5% year-over-year, the highest growth among major markets. Inventory in Richmond is down 13.2% from the previous year, and luxury homes sold in June did so in just six days, the fastest in the country. Conversely, Austin is the only major market where luxury home values declined, down 1.5% over the past year. This decline is attributed to a building boom that has reduced competition and stabilized prices. Luxury homes in Austin took 68 days to go pending, second only to Miami, where it took 83 days.
