The recent expansion of the economy has left an encouraging wake that continues to bolster the entire country. The stock market, in particular, has become the beneficiary of the current rebound. However, with a healthy stock market, the housing sector has flourished. Subsequently, realtors believe that the current direction of the stock market is driving luxury home sales, but the pace in which these homes are selling may also be due to something far more fundamental: more high-end homes are available for sale. According to Zillow, Dallas, Atlanta, Phoenix and Nashville have at least two times more homes for sale in the top tier than the bottom tier. Perhaps even more surprisingly, they are selling at a rate we have not seen for some time.
“Depending on their finances, it’s likely that individual buyers in the same market might be having completely different home buying experiences,” said Stan Humphries, chief economist at Zillow. “Even as conditions improve for buyers overall, it remains a tough row to hoe for first-time buyers and lower-income buyers, especially compared to their more well-off contemporaries.”
According to the recent Zillow survey, which collected data from 350 metropolitan markets, the number of for-sale listings rose in 68 percent of the bottom price-tier of these markets over the course of a year. However, if that was not surprising enough: top tier listings rose in more than 82 percent of the metros. On a national level, inventory increased 16 percent in all tiers over the last year.
“This property was asking a little over five million,” said Nancy Taylor-Bubes, a real estate agent with Washington Fine Properties, as she showed a grand, historic five-bedroom, five bathroom, brick Colonial-style home in Washington D.C.’s upscale Kalorama neighborhood. “We put it on in the spring time, had a little activity, but we didn’t sell it. Here we are in late fall, and we had three offers on the property, and it sold very close to its asking price.”
Experts familiar with the market are attributing the increased sales to the season, as higher end buyers have traditionally shopped in the spring and purchased in the fall. However, this fall is stronger than usual. In fact, sales of homes priced over $1 million increased 16 percent. While impressive in its own right, sales of existing homes were trumped. In the year preceding October, existing home sales only increased 2.5 percent. Sales of homes in the $5 million-plus range were up 18 percent in the third quarter, according to a report by Redfin, a real estate brokerage.
In addition to the season, higher end home sales are likely increasing due to foreign investors. Accordingly, a lot of the sales in luxury homes are occurring in areas in which foreign investors already have a strong hold: Miami, Los Angeles, Riverside, California, and New York. There is a strong correlation between the city and where high end homes are being sold.
As a reference point, higher end homes only make up 2.2 percent of the entire housing market. Conversely, lower end homes make up the majority of the market. The average price a home sold for in the month of October was approximately $208,300. Only 9 percent of those sales were of a distressed nature (foreclosure and shortsale).
As the recovery trudges forward, we are witnessing more pockets of luxury homes emerge across the country. Houston, in particular, has seen an influx of luxury homes in otherwise affordable areas. Despite having a median home price below that of the national average, Houston is number six on Redfin’s list of markets with the most million-dollar sales. Perhaps even more impressively, Houston beat out traditional juggernauts like Boston, Washington, D.C., and Seattle.
