Luxury home value growth, which has consistently lagged the market’s middle tier over the past several years, has outpaced appreciation on typical homes for five consecutive months, a new Zillow analysis found.
The typical luxury home nationwide — defined in this analysis as the most valuable 5 percent of homes in a region — is worth about $1.62 million. Among the 50 largest metro areas, the typical luxury home ranges from a low of under $750,000 in Buffalo, N.Y., to more than $5.3 million in San Jose, Calif.
Luxury home values are 3.9 percent higher than a year ago, which is faster appreciation than the 3.2 percent annual growth for the typical home. From January 2019 — the earliest year-over-year change in Zillow’s records — through January 2024, typical home values were outpacing luxury homes on an annual basis. For every month since, luxury home values have been growing faster.
“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,” Anushna Prakash, economic research scientist at Zillow, said in a release. “We’re seeing a different trend play out this year. Luxury homebuyers 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.”
Luxury home inventory has been slower to recover from the pandemic than inventory overall, keeping prices climbing. Inventory in the luxury segment is up 15.7 percent year-over-year and is 46.9 percent below pre-pandemic norms. By comparison, total inventory is 22.7 percent higher than last year and about 32.6 percent below pre-pandemic averages, the Zillow analysis found.
The share of luxury listings with a price cut is climbing, but is still tracking below the market, the analysis found. In June, 20.8 percent of luxury listings experienced a price cut, up from 19.4 percent the previous June. Among all homes, 24.5 percent of listings had a price cut.
The luxury home market in Richmond, Va., is red hot, with values 16.5 percent higher than last year, surpassing the growth of any other major market. Luxury home inventory in Richmond is down 13.2 percent year-over-year, making it one of only six major markets with fewer luxury homes for sale than last year. Richmond luxury homes that sold in June did so after only six days on the market, the fastest rate in the country. Hartford, Conn., luxury homes had the next strongest growth, up 8.6 percent over the same period, the analysis found.
Austin, Texas, is the only major market where luxury home values declined over the past year, down 1.5 percent. Home values in Austin overall saw a rise during the pandemic, and a building boom in response to that demand has lessened competition for each home and is bringing price growth under control.