Exploding prices continue to define the luxury home market

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Published Date 5/20/2024

Value is — and always has been — in the eye of the beholder especially with the well-heeled homebuyer.

Realtor’s Evan Wyloge reports that while luxury homebuyers may have wanted to snap up an oceanfront property in West Palm Beach four years ago at price tags of around $1.7 million, the then-significant sum was not out of line for Florida’s alluring coastline.

Now? These same properties have swelled in value, reaching nearly $4.5 million. And West Palm Beach is not alone, according to Wyloge.

It’s almost mind boggling that for the high end buyer, multimillion-dollar price tags are entry level, challenging even the most well-heeled buyers to recalibrate their visions of luxury living. Some of it is due to how the entire housing market was driven by rock-bottom mortgage rates and shifts in working and commuting patterns, making the luxury real estate market literally go crazy during the COVID-19 pandemic. “Across the U.S., luxury markets skyrocketed as many people sought larger homes and more space, farther from urban centers due to remote work flexibility,” says Wyloge.

While some high end prices came back down or plateaued in some places, in others luxury price growth has continued unabated. Wyloge uses realtor.com data to identify the high-end markets that are still as hot as ever, tracking the most expensive 5% of all home listings, of any given city, then comparing their prices in April 2024 with April 2020, just as the pandemic pump began.

Even though the median U.S. home list price rose over the past four years, the most expensive slice of the housing market has seen greater appreciation, with prices rising from around $1.5 million to about $2.2 million, according to Wyloge.

“In cities such as West Palm Beach, FL, Lake Havasu City, AZ, and Reno, NV, luxury home prices have more than doubled. West Palm Beach leads this trend, with an astounding 171% increase, soaring from around $1.65 million to more than $4.48 million. Realtor’s senior economic analyst says these areas have a strong appeal for retirees, and the equity they've amassed is likely a major factor in home prices in these areas.

Realtor’s senior economic analyst Hannah Jones says, "West Palm Beach, Lake Havasu City, and Reno are all strong retiree destinations, or they're where buyers are looking for relatively more affordable, wide-open spaces," she says, adding that the draw of sunny, warm climates allow for more opulent lifestyles. "A lot of these places, it's probably the case that they saw a ton of popularity during the pandemic, and that price growth has been kind of sustained," Jones explains.

Wyloge points out one West Palm Beach home he found listed now for $2.9 million changed hands for only $525,000 three years ago. “The listing explains that the home has a long list of renovations, contributing to the quintupled price.

Savannah, GA has seen a 137% increase in luxury home prices, highlighting the growing demand for Southern luxury — combining historical allure with a lower cost of living. "Savannah has always had a Southern luxury vibe," Jones says, "with big, old trees and historic homes.”

Other southern cities followed suit: ”The Raleigh-Durham Research Triangle boom is similar to what happened in Austin and Denver," Jones says of the influx of tech workers moving from cities with much higher prices. And for those buyers selling modest homes in Boston or San Francisco Bay Area, the equity they reap can make a luxury home in Raleigh attainable. "You can afford more for less, and it's still in a great job market, a strong economy, a great overall area," says Jones.

Luxury vacation destinations like East Hampton, NY and Park City, UT shine a light on how what were formerly known only as luxury vacation (second home and luxury rental) markets are rising with the work-life balance tide, and people seem to be interested in actually owning in these areas, according to Jones.

These areas have seen prices nearly double, even in the highest echelons of the market, showing the continuing trend of affluent buyers investing in properties that combine luxury and leisure. Even Texas is not immune. Midland, TX, a city of just 135,000 that sits halfway between Dallas and El Paso, has seen luxury prices rise by 77% — likely due to oil mining operations that have ramped up there over the years. This has created a unique demographic, says Jones, who is a Texas resident herself.

"Midland being on this list is so interesting, because oil workers make a lot of money," Jones says of Midland. "And so those buyers can be earning the money to spend big on a home."

And with a pool of new buyers competing for higher-priced homes, the laws of supply and demand tell us those prices will rise.

Cities with the highest luxury price growth include West Palm Beach, FL, Savannah, GA, Lake Havasu City, AZ, Reno, NV, East Hampton, NY, Park City, UT, Raleigh, NC, Sevierville, TN, Midland, TX, and Toms River, NJ.

Realtor,TBWS

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