Whether you’re searching for the ideal luxury home for you and your loved ones, looking to list your luxury home with a reputable Realtor, or just scanning listings and dreaming of “someday…” it turns out some facts about luxury listings may come as a surprise. And it’s no wonder: when it comes to the luxury market, there are loads of differences from the rest of the world of real estate.
So what are some of the most striking differences? Hint: it’s not just the number of zeroes (though we’re going to start at $500,000 listings)! Let’s peek inside this very special market.
When you consider the luxury homes market, you’ll find that these properties for those with discerning tastes spend quite a bit longer on the market than do the median priced homes. In fact, while the median-priced home might stay on the market for just under a month, luxury homes stay on average six months or more.
Why such a difference? Again, it’s not just pricing. Sellers of homes in the luxury price range also have the luxury of time; they don’t feel like they need to sell their home fast. And as we all know, a motivated seller is often more flexible with pricing and other negotiated points.
There is a substantial difference between the list-price-to-sale-price ratio for all homes versus those in the luxury market. For all homes that ratio is 99%, while luxury homes come in at 97%. That may not seem like much, but it can total an average of a quarter of a million dollars in sale price if the price tops the million-dollar mark.
Why the spread? Owners of luxury properties are apt to list their homes over market value, and as we mentioned, they’re patient. Once that property stays on the market for a while, they may be interested in lowering the price.
Anyone who is shopping for a home over the past few years probably has stories about how the inventory shortage has affected their buying experience. But in the luxury market, it’s a non-issue.
Why? The widespread inventory shortage has been linked to lack of new construction, the millennial generation buying their first homes and affordable housing being converted into rentals. But most millennials are not moving into luxury homes as their first foray into home ownership. More, construction continues to be on pace for the more lucrative luxury homes. And as a result, about half of the luxury home markets are, in fact, buyer’s markets right now.