Sale prices of luxury homes in the second quarter of the year surged 7.5 percent compared to a year ago. It’s the first time the luxury market’s gains outpaced the rest of the market since 2014, according to data by the real estate brokerage Redfin. Redfin defines the luxury markets as the top 5 percent of the priciest homes sold in each city.
But one of the main reasons behind the luxury market’s strong performance may be because sellers have gotten more realistic about their list prices, CNBC reports. Luxury sellers are asking a little less for their homes, which has spiked more interest among buyers, and in turn, is helping to boost prices once again too.
“There have been several years of a large disconnect between luxury sellers and market conditions, and what we’ve noted in all our research is that sellers are now much more willing to travel farther to meet the buyers,” Jonathan Miller, president and CEO of Miller Samuel, a real estate appraisal and consulting firm, told CNBC.
Miller cites a recent example: A home in Brooklyn, N.Y., recently sold for $15 million, which was a 40 percent discount of its original price.
Sales of homes priced above $1 million surged 19 percent in June compared to a year ago, according to the National Association of REALTORS®. That marks a bigger sales gain than the lower price points.
The spike in sales has caused a lower supply of luxury homes for sale. Listings at or above $1 million dropped 9.4 percent compared to a year ago, according to Redfin’s data.
“The housing shortage is now affecting the top of the housing market,” says Nela Richardson, Redfin’s chief economist. “Yet despite the strong uptick in prices, the luxury market is not nearly as competitive as the rest of the market. Only 1 in 50 luxury homes sold above list price in the second quarter, compared to more than 1 in 4 homes in the bottom 95 percent.”