First time in years: Luxury property values are rising faster than average residences

Luxury home value increase, which has persistently lagged that of the market’s middle tier in recent years, has now outperformed gains on average homes for five straight months, according to a new Zillow analysis.

The average luxury home nationwide—defined for this analysis as the most valued 5% of residences in a given region—is worth around $1,620,000.

The average luxury property in the 50 largest US metropolitan areas ranges from little under $750,000 in Buffalo to more than $5.3 million in San Jose.

Luxury house prices in the United States are 3.9% higher than a year ago. That’s faster appreciation than the average US home’s 3.2% annual growth rate.

From January 2019 — the earliest year-over-year change in Zillow’s statistics — until January 2024, ordinary home values were surpassing luxury properties on an annualized basis. Luxury house values have increased every month since then.

“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, Zillow’s economic research scientist stated.

“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.”

Luxury housing inventory has recovered more slowly than total inventory, contributing to further price increases. Luxury inventory is up 15.7% year on year while remaining 46.9% below pre-pandemic levels. In comparison, total inventory is 22.7% more than previous year and 32.6% below pre-pandemic levels.

The percentage of luxury listings with price cuts is increasing, but it remains below the market average.

In June, 20.8% of luxury properties saw price reductions, up from 19.4% the previous month. 24.5% of all house listings had their prices reduced.

Richmond’s luxury property market is booming, with values 16.5% higher than last year, outpacing increases in any other major market. Hartford’s premium residences experienced the next greatest increase, rising 8.6% throughout the same time.

Richmond’s luxury house inventory has fallen 13.2% year on year, making it one of just six major markets with less luxury properties for sale than the previous year.

Luxury homes in Richmond sold in June after only six days on the market, the fastest pace in the nation.

Austin is the only major market where luxury property values have fallen 1.5% in the past year.

property values in Austin increased dramatically during the epidemic, and a building boom in response to that demand has helped to reduce competition for each property and keep price growth under check.