Are Luxury Home Prices Increasing or Decreasing?

Some analysts are forecasting a decline in the luxury housing market, but not all experts agree with these predictions. To better gauge the outlook in the luxury housing sector, let’s explore the reasons for decreased optimism, along with some recent figures that suggest otherwise.

Why Are Some Predicting a Decline in Luxury Home Values

There are a number of high-profile events behind some of the bearish attitudes toward the luxury home market. These include:

• A decrease in foreign buyer activity. Foreign buyers have helped fuel the luxury home market to this point; however, many experts predict that international buyers will back off due to the uncertainty of a Trump presidency and the potential threat of new disclosure laws.
• Increased inventory. A surge in competitive supply has caused slower new luxury home sales in some markets. As sellers grapple with over-development in the highest tiers, many have been forced to make price concessions.
• Better entry-level sales. The market for lower-priced homes appears stronger, and entry-level sales are improving at a faster rate than higher-priced home sales.
• High-profile markets. High-priced properties have indeed slowed in two of the country’s most prominent luxury home markets, Palm Beach and Greenwich. While these cities may not represent conditions in other U.S. markets, they’ve certainly influenced opinions by gaining the most headlines.
• Fortune article paints foreboding picture. In a recent feature profiling sales slowdowns in key luxury markets, a Fortune analyst cited a number of events that could spell trouble for luxury home builders in many key markets.

Will These Predictions Pan Out?

While many prognosticators have pointed toward the above reasons as evidence or outright catalysts for declining luxury home prices, there’s reason to doubt their actual impact. While the market for lower-priced homes is stronger, this doesn’t necessarily mean luxury sales are struggling. Likewise, while cities such as Palm Beach and Greenwich have experience reductions in luxury property values, this doesn’t necessarily reflect on other markets which have their own sets of unique circumstances.

According to a recent study. by CoreLogic, sales of properties valued above $600,000 have actually risen in 37 of 43 key counties in 16 states (WA, VA, TN, PA, OR, NY, NV, NJ, NC, MN, IL, GA, FL, CO, CA and AZ). These sales also exceeded similar sales over the prior 12 months by 10 percent. Luxury home sales have also increased in every price increment, spanning from $600,000 to $1.5 million-plus.

What Can We Expect?

While some analysts expect the luxury housing market to weaken, others remain optimistic. According to experts at John Burns Real Estate Consulting, much of the negative market sentiment is owed to high-profile news focused on multi-million-dollar homes. This appears to be especially true in Forbes’ assessment of the luxury housing market, which was supported by the fact that prices have appreciated only slightly at the high end, compared to more appreciation at lower prices.

Ultimately, recent data suggest that – while the ultra-luxury market is seeing some decline – demand and median prices have stayed strong in the remainder of the luxury market.