$1 Million Is The New Entry Point For American Luxury-Home Buyers

Want to buy your way into the most expensive 5% of the United States? $1 million is the new entry fee, according to the latest report from Realtor.com.

What’s more, over 18% of luxury markets analyzed saw home prices grow at 10% year-over-year, while average growth across 91 luxury markets jumped 4.6%. 

In the 91 luxury markets analyzed, the entry-level price for luxury (measured as the top five percent of all sales) increased 4.6 percent year-over-year on average. Some markets continue to grow at a breakneck pace; 17 of the 91 luxury markets are now seeing prices grow at 10 percent plus year-over-year, that’s five more markets seeing double-digit price gains compared to last December.

Additionally, 51 of the 91 luxury markets now have an entry point of at least $1 million, and a record 53 markets have the realtor.com Luxury Price Index surpass the 1.2 mark, suggesting prices of upscale homes in the majority of markets are now well above 2012 levels. –Realtor

“Continued growth in high-paying jobs and stock market inertia have reignited many luxury markets this year,” said Javier Vivas, director of economic research for Realtor.com. “We’ve seen a substantial increase in buyer demand for high-end homes, even with prices and costs of ownership swiftly on the rise. Today, $1 million won’t get you a luxury home in most major markets.”

Luxury homes are selling faster than last year as well – with an average median time sitting on the market of 105 days, down from 112 last year, a decrease of 7%. Two thirds of luxury markets are seeing inventory move much faster, with the number of transactions above $1 million across the 91 markets surveyed up 25% this year, “the biggest jump observed since January 2014,” while over 2.5x the pace observed in January. 

Regionally, the Realtor.com report reveals that Southwest Florida and Northern California continue to accelerate, while luxury prices in New York and New Jersey appear to be stalling: 

Southwest Florida continues to attract luxury buyers from the North

Luxury prices in a number of Florida markets continue to follow an upward trajectory. This month, Florida accounted for the top two fastest growing luxury counties, suggesting the inflow of demand for luxury properties remains strong. In particular, Sarasota and Collier counties have been accelerating rapidly, with entry level luxury prices now up 15-20 percent year-over-year. The median days on market of luxury properties in these two counties combined is now 143 days, down 22 percent year-over-year on average. In Sarasota, luxury prices have crossed the $1 million mark for the first time.

Luxury prices along the Northern California coast accelerate

The region now has 4 of the top 10 fastest growing luxury markets in the country, suggesting a strong tech sector and foreign interest are pushing demand for luxury properties to new heights. Santa Cruz, San Mateo, Santa Clara and Monterey have all been growing at an accelerating pace, with entry level luxury prices now up 12-14% year-over-year. The median days on market of luxury properties in these four counties combined is 96 days, one day faster than a year ago, and the fastest pace of luxury sales since June 2015.

Jersey City and Queens luxury markets buck the trend in the Northeast

In the northeast, most markets in New York and New Jersey continue to see luxury home prices stall or remain stationary. The Hudson NJ (Jersey City) and Queens NY markets remain the exception, and both continue to see well above average, double-digit price growth. These two markets offer a lower luxury entry point compared with Manhattan and Brooklyn, where growth remains stagnant, and demand appears to shift outward. The median days on market of luxury properties in Hudson and Queens combined is 66 days, down 29 percent year-over-year. 

Demand for luxury homes in Denver extends farther out

Boulder, Douglas and Denver counties are all seeing double-digit price growth this month. The median days on market of luxury properties in these three counties combined is now 89 days, down 15 percent year-over-year on average, suggesting demand for million dollar homes is extending well beyond Denver proper.

Luxury suburbs north of Seattle grow rapidly

In the northwest, the Seattle metropolitan area continues to see pent-up demand for luxury properties. The entry-level luxury price in Snohomish county is now growing at the same pace as King county, up 13 percent year-over-year, as demand continues to spill-over farther north from the Seattle center. The median days on market of luxury properties in these two counties combined is now 48 days, down 3 percent year-over-year on average. Snohomish has the fastest moving luxury market in the country.

Nashville metro continues to attract luxury buyers

Demand for luxury homes in the Nashville metropolitan area continues an upward trajectory, with Williamson and Davidson counties seeing double-digit growth. The median days on market of luxury properties in these two counties combined is now 71 days, down 12 percent year-over-year on average. –Realtor

Meanwhile, focusing on what until recently was the epicenter of the new ultraluxury housing bubble – Manhattan – does indeed reveal some cracks, especially in the context of sharply rising prices across the rest of the MSA. According to a recent Goldman report, New York metro area house prices growing everywhere but Manhattan Across the entire New York Metropolitan Statistical Area (MSA), home prices are up around 6% year over year, close to the national average. However, this 6% overall figure masks significant variation across counties, as shown the chart below.

Home prices in Hudson County, NJ, which is part of the New York MSA and which includes such cities as Jersey City, Hoboken, and Harrison, NJ, appreciated by 20.3% over the past year, while in New York County, NY (which corresponds to the island of Manhattan), prices fell by 0.5%.

The strong price growth in Jersey City in recent years has been from a high but not astronomical base; the median price there was $300k in 2016. By comparison, the median price in Manhattan (including condo, coop and single-family) has been flat for the past two years at around $1.3m.

Jersey City is not the only area within the New York MSA experiencing strong house price growth: prices in Staten Island,
the Bronx, Brooklyn, and Queens are up 12.2%, 11.5%, 9.5%, and 9.0%, respectively. Inventory of homes available for sale in many of these areas are tight, consistent with the national trend, while the inventory of units for sale in Manhattan is climbin.

Furthermore, the share of listings in Manhattan for which prices have been reduced is increasing, another sign of softness in the market there.

The data at hand suggest prices in the New York MSA are generally trending up, with the significant exception of Manhattan – perhaps as a result of ongoing Emerging Market weakness and a sudden scarcity of Chinese robber barons and offshore oligarchs seeking to park their ill-gotten wealth within the new anonymous “Swiss bank account” that used to be New York City, until a recent Treasury Department crackdown on the unnamed LLCs that make up the bulk of Manhattan real estate buyers, making parking wealth in New York increasingly more difficult.

 

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Author: Tyler Durden

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