Luxury home value growth has outpaced appreciation on typical homes for the fifth consecutive month, according to a new data analysis from Zillow (NASDAQ:Z, ZG).
The typical luxury home – which Zillow defines as the most valuable 5% of homes in a specific market – is currently worth about $1.62 million. Zillow reported luxury home values are 3.9% higher than one year ago, compared to the 3.2% annual growth for the typical home.
However, luxury home inventory has been slower to recover than inventory overall, which is fueling the continued increase in prices. Inventory in the luxury segment is up 15.7% year-over-year and is 46.9% below pre-pandemic norms – in comparison, total inventory is 22.7% higher than last year and about 32.6% below pre-pandemic averages.
Among the major metro areas, Richmond recorded the greatest value acceleration at 16.5% year-over-year. Luxury homes in Richmond were sold in June after six days on the market, the fastest rate in the country. Austin was the only major market where luxury home values declined over the past year, down 1.5%.
“Luxury homes can be challenging to sell because the pool of buyers is so much smaller – that’s one reason prices for them usually grow more slowly,” said Anushna Prakash, economic research scientist at Zillow. “We’re seeing a different trend play out this year. Luxury home buyers are likely less affected by higher mortgage rates than a typical buyer, especially repeat buyers who saw their home equity soar over recent years. Many will be able to pay with cash and skip a mortgage payment altogether.”
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