Luxury home values are rising faster than typical homes for 1st time in years, study says
SEATTLE - A new study reveals that luxury home value growth, which has consistently lagged the market’s middle tier over the past several years, is now outpacing appreciation on typical homes for five consecutive months.
The analysis, conducted by Zillow, found that luxury home values are up 3.9% higher than a year ago. This is a faster appreciation than the 3.2% annual growth for a typical U.S. home.
The typical luxury home was defined for this analysis as the most valuable 5% of homes in a given region. Among the 50 largest U.S. metro areas, the typical luxury home ranges from a low of just under $750,000 in Buffalo to more than $5.3 million in San Jose.
Zillow said the reason behind the change stems from luxury homes currently seeing relatively more competition than homes in the market’s midrange.
FILE: A mansion style home in Atherton, California. (Credit: Justin Sullivan/Getty Images)
"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," said Anushna Prakash, an economic research scientist at Zillow. "We're seeing a different trend play out this year. Luxury home buyers are likely less affected by higher mortgage rates than a typical buyer, especially repeat buyers who saw their home equity soar over recent years. Many will be able to pay with cash and skip a mortgage payment altogether."
The data also found that luxury home inventory has been slower to recover than inventory overall, helping to keep prices climbing. Inventory in the luxury segment is up 15.7% year-over-year and is 46.9% below pre-pandemic norms.
Richmond is hottest luxury housing market, study finds
Zillow found that the luxury home market in Richmond, Virginia is red hot, with values at 16.5% higher than last year – far surpassing the growth seen in any other major market. Hartford, Connecticut luxury homes had the next strongest growth, up 8.6% over the same period.
Luxury home inventory in Richmond is down 13.2% year-over-year, making it one of only six major markets with fewer luxury homes for sale than last year. Luxury homes in Richmond that sold in June did so after just six days on the market, the fastest rate in the country.
RELATED: Home prices hit another record in June even as sales fall: What to know
In contrast, Austin, Texas is the only major market where luxury home values declined over the past year, down 1.5%. Home values in Austin, overall, saw a large rise during the COVID-19 pandemic, and a building boom in response to that demand has helped lessen competition for each home and bring price growth under control.
Home prices hit another record
The cost of buying a house hit another all-time high in June, according to a new report.
RELATED: A $1 million starter home? It’s becoming the norm in these cities
The median existing U.S. home sale price jumped to $426,900 in June – a 4.1% increase from the same time last year, according to data shared by the National Association of Realtors, the largest U.S. trade association for people involved in real estate.
The figure marks the highest level on record and is the second straight month that prices topped a new high, the NAR said. Similar findings were shared by real estate company Redfin earlier this month.
This story was reported from Los Angeles. Kelly Hayes contributed.