According to Realtor.com, U.S. luxury housing lagged behind the mainstream real estate market in 2017 and is likely to continue to slow in 2018. Of course, that does not mean that the sector is not still growing. In fact, analysts reported that average sales price in the luxury market, defined as the top five percent of sales nationwide, rose 5.14 percent between January 2017 and December 2017. However, the remaining 95 percent of the market boasted average price increases of 6.9 percent.
To put those numbers in perspective, luxury homes rose in average value to about $804,000 across the country. On the other hand, the remaining real estate rose to an average price of $234,851. The result: “We’re seeing the luxury market slow down compared to the overall market,” said Realtor.com’s director of economic research, Javier Vivas.
A Housing Inventory Issue
Vivas said that the main reason the luxury market is “slowing” at a faster pace than the rest of the housing market is supply. While the majority of housing markets in the United States are currently facing inventory shortages, there is plenty of high-end construction going on in the most active luxury markets, like New York City and Miami, Florida. “There is even oversupply at the very top of the market,” he said.
As a result, more and more luxury-home owners listed their properties last year in order to take advantage of rising demand for high-end properties. In fact, homes worth $1 million or more accounted for more than seven percent of all homes listed in 2017, up 3.9 percent from 2016. Median list price was just over $1.3 million, and median sale price was well under that at just over $800,000.
Hurry Up and Wait, With Some Exceptions
If you are hoping to list your luxury mansion and sell before the market softens further, be prepared to wait longer to sell than your friends with smaller, more affordable housing. According to the same Realtor.com study, luxury homes spent an average of 116 days on market, compared to 71 days on market for the “general market.”
Of course, these numbers are all national, which makes them interesting to study but not necessarily particularly useful for active real estate investors, who must focus on their specific markets in order to strategize effectively. For example, if you are investing in the luxury market in Hawaii, then you have three of the top five fastest-growing luxury markets in the country to work in: Maui (1), Kauai (4), and Hawaii, Hawaii (5). All three of these cities’ high-end luxury markets rose in value over the past 12 months by at least 24 percent.