LUXURY HOME PRICES OUTPACE THE REST OF THE MARKET

LUXURY HOME PRICES OUTPACE THE REST OF THE MARKET

High-end homes—the top 5% of the most expensive homes in each city—are increasing in value at a higher rate than the rest of the market. In the second quarter of 2017, they increased in price by 7.5% from the previous year, the first time they have outpaced the rest of the market since 2014.

The reason for the resurgence in prices may seem ironic: sellers have begun asking less for their high-end homes, and this has created more action in this market segment. Sellers are asking prices more closely aligned with actual market conditions, which tends to cause more competitive bidding on these properties. As the sales of these luxury properties increase more quickly than the rest of the market, the supply diminishes. This adds to the upward pressure on prices.

The National Association of Realtors has noted that the supply of luxury homes—those properties valued at $1 million or more—fell 9.4% compared to the same time last year. The inventory of homes some might call ultra-luxury properties— those priced at $5 million or more—have pulled back by about the same amount. The inventory for these pricey residences increased in each of the previous five quarters, according to the Association. This shortage of swanky homes is exacerbated by the pronounced uptick in sales; 19% more homes of $1 million or more sold in June of this year compared with last year’s statistics.

While not every home seller is likely to be overly concerned with the plight of the very wealthy, there is one lesson to take away from these statistics: sellers who ask realistic, market-based prices for their homes are more likely to get better prices than those who list their homes over the market, hoping to snag some unsophisticated buyer who might be willing to pay too high a price.

Source: CNBC.com