Luxury Real Estate Update: A Rising Market

Nationally, luxury real estate property values are now rising at an unprecedented rate (8.8% in the past 3 months), outpacing the growth of typical homes. This comes from an extensive update by Zillow, highlighting significant shifts in the high-end housing market.

 

The latest report from Zillow notes that listings for luxury homes are experiencing notably higher competition compared to midrange market homes. This surge in demand has driven luxury home values up by an impressive 3.9% year-over-year.

 

The national inventory of luxury homes remains critically low, standing 46.9% below prepandemic levels. This shortage is more severe than the overall housing market, further driving up prices.

 

Among the 50 largest U.S. metro areas, luxury home values (top 5% of home values) range from just under $750,000 in Buffalo to over $5.3 million in San Jose. Here the 3.9% annual growth in luxury home values surpasses the 3.2% increase seen in typical U.S. homes. 

 

The main reason is that the luxury market is less impacted by rising mortgage rates. Most luxury buyers, particularly repeat buyers with significant home equity, pay in cash, bypassing mortgage constraints. 

 

Despite a slower recovery in luxury home inventory compared to the overall market, with a 15.7% increase year-over-year, it remains significantly below pre-pandemic levels. Total inventory, by contrast, is up 22.7% from last year and 32.6% below prepandemic averages. While the share of luxury listings with price cuts has increased to 20.8% (up from 19.4% last year), it remains below the 24.5% seen across all homes. 

 

Here in Lake Tahoe, Nevada, we have seen a robust increase in lakefront home values, surpassing the national trend. There was a 15% increase in lakefront sale prices from 2022-2023 compared to no increase in the non-lakefront listings. As you can see from the chart below there has been a 185% increase in lakefront property values since 2015 compared to 114% in non-lakefronts. The current lakefront listings range from $7,995,000-$33,773,777 with the average at $17,461. The average year-over-year growth in lakefront homes has averaged 14.4%, since 2015.

 

Lake Tahoe's luxury home market is exceptionally dynamic, with inventory down 50% year-over-year, one of the few markets with fewer homes for sale than last year. This scarcity fuels substantial price growth. 

 

The scarcity of available lakefront properties along with the mass exodus of people fleeing high-tax states continues to drive this market and will continue into the foreseeable future.