New data from Zillow confirms a trend that has been building in the luxury housing market for a while now. The U.S. market is effectively splitting into two separate markets. Luxury homes, those in the top 5 percent of value for their region, are selling faster, with shrinking supply and more competition among buyers. Starter homes, meanwhile, are sitting longer and seeing more price cuts as everyday buyers stay on the sidelines.
The typical luxury home is now valued around $1.9 million, up over 3 percent from last year, while luxury home sales grew more than 6 percent year over year. Starter home sales, by comparison, actually declined. San Francisco shows the starkest version of this luxury market divide, with luxury sales surging over 21 percent year over year even as entry level sales slipped. The reasoning tracks with what I see firsthand with clients. Buyers at the top of the market are less exposed to the affordability pressure and rate sensitivity holding everyone else back, and that insulation is showing up clearly in the numbers.
- The typical U.S. luxury home is now valued around $1.9 million, up 3.1 percent year over year
- Luxury home sales grew 6.2 percent year over year, while starter home sales fell 5.4 percent
- San Francisco shows the widest gap, with luxury home sales up over 21 percent even as entry level sales declined
- Starter home sellers are cutting prices more than twice as often as luxury sellers to attract buyers
For buyers and sellers on the Main Line, in Philadelphia, and at the Jersey Shore, this luxury housing market divide is worth understanding before you make a move. If you are selling a well positioned luxury property right now, conditions are working in your favor. If you're shopping in that top tier, expect real competition.
