Luxury home sale prices have increased 5.5 percent year-over-year to a median price of $1.28 million, breaking a record for October, according to a recent report from housing data firm Redfin.
The boost in luxury home prices outpaced non-luxury homes, which saw a 1.8 percent increase.
Redfin Senior Economist Sheharyar Bokhari noted that several factors influence rising luxury home prices.
“Luxury buyers are still able to move forward in ways that many typical buyers can’t right now, whether that’s because they’re paying in cash, benefiting from stock-market gains, or taking out smaller loans,” Bokhari said, in a press release. “Those advantages make them less sensitive to high mortgage rates, which helps keep demand at the top of the market steadier.”
As luxury home prices rise to record levels, some potential homebuyers may be wondering if this trend will have an impact on the wider real estate market.
Are luxury home price increases pushing non-luxury housing price tags higher?
The answer to whether high-end homes are impacting the wider market isn’t clear-cut and, in some cases, can depend on which part of the country you’re in.
The answer is a definitive yes in New York, according to John Walkup, co-founder of real estate data analytics firm UrbanDigs.
“Especially in New York City, the luxury market often acts as a bellwether for the broader housing market,” Walkup told The Independent via email.
George Sarkis, founder of Boston-based real estate group The Sarkis Team, believes rising luxury home prices can influence the wider housing market beyond the Big Apple.
“Yes, luxury price trends often act as a leading indicator for the broader market,” Sarkis told The Independent in an email. “Rising luxury prices can reflect strong confidence among wealthy buyers, which can indirectly support home values in lower tiers as wealth trickles down and buyers move up the ladder.”
On the other hand, some real estate experts believe what happens in the luxury market has little impact on the wider housing landscape. One of those experts is Jules Garcia, an agent at New York-based Coldwell Banker Warburg.
“The luxe market can exist in its own silo because of the luxe real estate buyer having more choice and geographic mobility that isn't always correlated to the general economy or marketplace,” Garcia told The Independent in an email.
Scott Pfeiffer, CEO of luxury customer home builder Sonora West Development, had a similar viewpoint.
“The luxury market operates in its own world,” Pfeiffer told The Independent in an email. “There are so many variables at play that it’s tough to tie its movement directly to what’s happening in the wider market. The lower price points react differently, so the two don’t necessarily influence each other.”
Is price negotiation still possible as high-end home prices rise?
Even though Redfin’s October data indicates that sellers may hold the power in price negotiations since the high-end home market is doing well, experts agree that buyers still have bargaining power in many scenarios.
For example, Garcia pointed out that negotiation might be successful in areas where inventory is high, or there’s a property in need of repair.
“If the luxe buyer is reasonably flexible on the exact geographic area, they can leverage searching in areas where there is more of a luxe property inventory build-up, a slightly less updated property in need of [tender, loving care],” she said.
Pfeiffer noted that negotiation is still possible, but it depends on the situation.
“If you find a property where the seller is feeling the pressure, either because it’s been on the market longer than they expected or they’re ready to move on, that’s usually when buyers have room to negotiate,” he said. “You need to look for a seller who’s under some pressure to sell - and coming in with clean terms always helps your case as well. This is how to get the best value.”
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