For the past year, there has been a slump in the luxury housing market, but that may now be over.
Interestingly enough, the reason behind this may be due to a quick dose of reality to home sellers.
Ever since 2014, the sale of luxury homes has been dwindling in the U.S. market. Real estate experts haven’t been able to determine why until now — they believe that the home sellers have finally created realistic expectations for the prices of their homes, which has led to a boom in the market.
Sale prices of luxury homes in the second quarter of this year were up a full 7.5% compared to last year, and this was the first time the luxury sector outpaced the rest of the real estate market in three years.
These findings come from a Redfin report, which monitored home sales in 1,000 cities across the country. According to their standards, luxury is defined as the top 5% of the most expensive homes sold in each city every quarter, and for perspective, the average price for non-luxury homes nationwide was $336,000.
While this thinking may just be speculation, market analytics show that sellers changing their minds about the list prices of their homes is actually positive. First, they were asking too much for their homes, then because they didn’t see any movement they started to ask for less. Decreasing the prices actually worked in their favor by creating more action in the market and boosting final selling prices to a bit higher than expected. This movement is much like supply and demand — lower the prices to something people can bid on and then they will come up with a figure everyone can agree on.
According to CNBC, because of this change in thinking, luxury home sales have been rising steadily. Redfin’s chief economist, Nela Richardson, believes that this could be due to the fact that the average-price housing market is going through a housing shortage.
It could also be because homeowners are looking for a little bit more indulgence with the small things in their home such as eco-friendly appliances, high-quality cabinetry, and hardwoods with epoxy flooring, which can increase an area’s brightness by 200%. All these small touches are usually only found in luxury homes and give off the impression of a bit more opulence, which is something a lot of homeowners are in the market for nowadays.
These trends show that as of right now, the housing industry is a buyer’s market.