Similar to the wider U.S. housing market, which is bouncing back from the early, dampening effects of the coronavirus pandemic, the luxury segment recorded a promising uptick in entry prices, demand and inventory, according to a report by listing website Realtor.com.
Defined as the top 5% of homes listed, the upscale housing sector saw the listing price entry point across the nation grow 6.1% year-over-year to $2.97 million. As more luxury residences hit the market in May compared to April, their higher prices led the overall housing market’s median price gain of 1.6% last month from a year ago, Realtor.com says in its luxury housing report released today.
“The Covid-19 pandemic has reinforced the resilience of the housing market and unlike prior downturns, the luxury market is leading the recovery,” Realtor.com’s Chief Economist Danielle Hale said in a press statement.
Nonetheless, only 25 of the 94 luxury markets Realtor.com tracks have posted increases in their asking prices since January, when the high-end segment finally gathered momentum after a rocky 2019, which was largely deemed as a year of correction in the amounts affluent sellers expected for their abodes.
Luxury home supply continues to lag, while demand spikes
In May, demand for multi-million residences outpaced its pre-pandemic trajectory, even if it experienced a considerable slump in April. Searches for upscale homes spiked 7.3% year-over-year last month, compared to a 9.5% drop in April and a 6.2% growth before the virus outbreak.
As is the overwhelming case in the larger housing industry, the stock of for-sale high-end abodes lagged behind demand. Yet, on a monthly basis, supply did improve considerably. New listings for homes priced above $1 million were down 15.1% year-over-year in May. This contrasts with the 57.8% annual decrease in April. The $1 million and up residences that were on the market took 89 days to find new owners in May or roughly two weeks longer than a year ago.
Luxury buyers flock to second-home markets
Much of the traction in the luxury housing sector unfolded in second-home markets near dense cities that have morphed into coronavirus hot spots, Realtor.com finds.
“Stay-at-home orders and social distancing have put a new value on the extra space,” Hale said. “We’re seeing this in the luxury market as well, which could mean there is renewed interest from high-end buyers to find a second home that is within driving distance from their primary residence.”
The Hamptons in New York, Palm Springs, California and Greenwich, Connecticut have attracted droves of affluent buyers over the last three months, many of whom initially rented spacious residences. In The Hamptons, luxury property views have ballooned 56% since January, accounting for an annual spike of 72% in May, Realtor.com reports. Since the start of 2020, Palm Springs and Greenwich have seen interest in their luxury inventory grow 28% and 24%, respectively.
Enclaves beyond the western bounds of New York City also lured wealthy home buyers escaping Manhattan as the state battled to contain the nation’s largest coronavirus outbreak. Year-over-year, views of upscale homes in New Jersey’s Union, Bergan and Somerset counties swelled by 40%, 30% and 28%, respectively. These figures far surpass the usual demand growth that hovered between 10% – 21% prior to the pandemic, according to Realtor.com.
Whether that positive dynamic is to remain on its course for the rest of the year, however, is still uncertain – and dependent on a slate of factors.
On the one hand, for instance, the fear of a second wave of infections, stoked by the current rise of cases in Texas, Florida and Arizona, might push even more well-off home shoppers to secondary and second-home markets.
On the other, fluctuations in the number of coronavirus patients rock the stock markets, the jitters of which often shake luxury home shoppers harder than they hit the average buyer. An unsteady stock market could dissuade some would-be purchasers of high-end residences, especially if they are eyeing homes not meant to serve as their primary abodes.