Luxury Home Prices Reach All-Time High

New reports from Redfin and Zillow highlight the growth in luxury home values and sale prices relative to non-luxury.

Redfin’s report focuses more on luxury home sale prices, which rose 8.8% year over year in the second quarter of 2024, compared to a 3.8% increase for non-luxury homes that sold in Q2. The typical luxury home sold for a record $1,180,000, while the sale price for the typical non-luxury home hit a record-high median of $342,500.

For its report, Redfin (like Zillow) defines “luxury homes” as those whose estimated market value puts them in the top 5% of home prices for their metro area. “Non-luxury homes” in Redfin’s analysis are in the 35th to 65th percentile for market value.

The luxury market has withstood the havoc wreaked by high mortgage rates this year, thanks to an abundance of all-cash buyers. Now that sales are stabilizing and more homes are being listed for sale, it’s unlikely that luxury prices will continue to grow at quite as high a rate. Sheharyar Bokhari - Redfin Senior Economist

Zillow’s report focuses on how luxury home value growth—historically lagging behind the market’s middle price tier—has now surged ahead in home price appreciation for five straight months.

Based on Zillow’s research, the typical luxury home nationwide is valued at about $1,620,000. Across the 50 largest metros, typical luxury home values range from just under $750,000 in Buffalo, NY, to over $5.3 million in San Jose, CA.

Compared to a year ago, luxury home values across the U.S. are 3.9% higher—faster than the typical home’s 3.2% growth. For every month starting January 2019 and running through January 2024, annual price growth for the typical home outpaced that of luxury homes.

But for every month since, luxury home values have grown at a faster pace.

Luxury homes can be challenging to sell because the pool of buyers is so much smaller. That’s one reason prices for them usually grow more slowly. We’re seeing a different trend play out this year. Anushna Prakash - Economic research scientist at Zillow

LUXURY MARKET ADVANTAGES

Luxury homebuyers are less likely to be impacted by high or volatile mortgage rates and the lock-in effect since many can pay in cash to avoid interest.

During the three months ending in May 2024, 43.7% of the luxury homes sold were purchased with all cash—up from 43.2% in the spring of 2023.

High-end buyers are also more likely to have a substantial amount of equity from a previous home and to have profited from a strong stock market.

LUXURY HOME SALES HOLD STEADY WHILE NON-LUXURY SALES DROP

According to Redfin’s report, the number of luxury homes sold in quarter two of 2024 was nearly identical to a year ago—higher by just 0.2%, marking the third straight quarter of sales growth.

Non-luxury home sales dropped 3.4% to the lowest Q2 number in a decade.

While the overall market has seen less activity compared to before the pandemic, largely due to an ongoing housing supply shortage, the luxury market has made significant progress in narrowing the gap.

Compared to quarter two of 2019, luxury sales in Q2 2024 were down 12.8%, compared to a 20.1% annual drop in sales for non-luxury homes.

GROWTH IN LUXURY HOME INVENTORY OUTPACES NON-LUXURY

Redfin’s report shows luxury inventory climbing 9.7% year over year in the second quarter, marking the fourth consecutive quarterly growth after a steep decline during and after the pandemic. Meanwhile, non-luxury inventory climbed 3.9% year over year.

In both categories, inventory numbers are still well below pre-pandemic levels.

Zillow’s report shows 15.7% annual growth in luxury home inventory for June 2024—46.9% below pre-pandemic norms—while total inventory rose 22.7% compared to June 2023 and is roughly 32.6% below pre-pandemic norms.

The slower inventory growth for luxury homes compared to total inventory likely contributes to the faster price growth for high-end housing supply.

Redfin’s report shows an 11% annual increase in new listings for luxury homes—significantly higher than the 2.6% increase in new listings for non-luxury homes.

With the increase in supply, luxury homes spent a median 40 days on market, two days longer than a year ago. Non-luxury homes also took a median 31 days, up from 28 in the second quarter of 2023.

Also, as supply grows, the share of luxury listings with a price cut is on the upswing, with 20.8% of luxury listings seeing a reduction in the price—up from 19.4% in June 2023.

Looking at all homes, though, 24.5% of the listings had a price cut in June.

RICHMOND VS AUSTIN

Zillow’s report shone a spotlight on two metros with dramatically different stats related to luxury housing: Richmond, VA, and Austin, TX.

Richmond: 

• Luxury home values are up 16.5% compared to a year ago, growing faster than in any other major U.S. market. The next fastest was Hartford, CT, with 8.6% annual growth.
• Luxury home inventory is down 13.2% from June 2023, making Richmond one of just six major markets with fewer luxury homes for sale compared to a year ago.
• Luxury homes that sold in June went under contract after just six days on the market—the shortest time of any market in the U.S.

Austin: 

• Austin is the only major U.S. market where luxury home values declined year over year—down 1.5% from June 2023.
• Luxury homes in Austin went pending after more than two months (68 days) on the market. The only market where luxury homes took longer to go under contract in June was Miami at 83 days.

REDFIN’S METRO-LEVEL HIGHLIGHTS

Metros where the median sale price of luxury homes increased the most year over year:

1. Providence, RI (16.5% increase to $1,395,000)
2. San Jose, CA (16.4% increase to $4,830,000)
3. Nassau County, NY (14.3% increase to $2,572,500)

Median luxury home sale prices declined year over year in only two metros:

1. New York, NY (-3.2% to $3,200,000)
2. Austin, TX (-1.5% to $1,650,000)

Metros where luxury home sales increased the most year over year:

1. Nashville, TN, (20.4%)
2. Tampa, FL (14.3%)
3. Seattle (13.9%)

Luxury home sales declined the most year over year in—

1. Newark, NJ (-20.1%)
2. Baltimore, MD (-15.5%)
3. Indianapolis, IN (-12.4%)

Top 10 Most Expensive U.S. Home Sales in Q2 2024

1. Glenwood Springs, CO (Aspen): $77M
2. Glenwood Springs, CO (Aspen): $66.5M
3. Los Angeles, CA: $62.8M
4. Miami, FL (Miami Beach): $62.5M
5. Glenwood Springs, CO (Aspen): $59M
6. West Palm Beach, FL (Palm Beach): $51.3M
7. West Palm Beach, FL (Highland Beach): $50M
8. West Palm Beach, FL (Palm Beach): $49.6M
9. Glenwood Springs, CO (Aspen): $48.8M
10. Glenwood Springs, CO (Woody Creek): $46M

Metros with the biggest annual increase in the total number of luxury homes for sale:

1. Tampa, FL (29.6%)
2. Jacksonville, FL (28.9%)
3. San Antonio, TX (26.6%)

Metros with the biggest annual declines in total luxury inventory:

1. Newark, NJ (-16%)
2. Chicago (-9.8%)
3. Atlanta (-6.2%)

Metros where new listings of luxury homes went up the most year over year:

1. Providence, RI (31.5%)
2. Miami (28.1%)
3. Tampa, FL (27.6%)

New listings of luxury homes declined year over year in 11 metros. Metros with the biggest drops:

1. Newark, NJ (-18.3%)
2. San Francisco (-15.4%)
3. Chicago (-8.9%)

Key Details: 

• A new report from Redfin shows the typical luxury home sale price rising 9% year over year to a record $1,180,000 in Q2 2024—up 8.8% from Q1 2023. That 9% jump represents the largest annual increase in more than two years. 
• Meanwhile, non-luxury home prices rose at less than half that pace, climbing 3.8% year over year to a record-high median of $342,500. 
• Zillow research, focusing on home value growth (rather than sale prices) for luxury homes, shows a 3.9% annual increase in luxury home values for June, compared to a 3.2% annual growth for the typical U.S. home.

Posted by Sarah Lentz | Aug 8, 2024 | Housing Market

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