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A historic decline in luxury listings is forcing luxury buyers to compete over a limited supply, as reported in the Wall Street Journal. This supply crunch is caused by long-term owners hanging onto properties and home builders failing to keep pace with population growth and demand. Here are some other notable trends in the luxury space:
- Construction costs are about 40% higher than before the pandemic.
- Active listings of luxe homes remain approximately 40% lower than pre-pandemic levels.
- Since 2000, while the US population has grown 20%, the average monthly number of active existing-home listings has dropped 45%.
- Of the top 50 metros in the country, St. Louis has the lowest inventory of luxury listings. Typically, a 5-month supply is considered healthy. St. Louis has a supply of 1.73 months.
- Here are the metros where luxury supply is the tightest: 1) St. Louis, 2) Newark, NJ, 3.) Atlanta, GA, 4) Oakland/San Jose, CA, 5) Las Vegas, NV
Our take
Luxe sellers are still waiting for rates to go down before they list. They think that buyer demand will continue to increase if they just wait. At the same time, many owners whose property values skyrocketed in recent years are opting to keep the property rather than pay capital-gains taxes. That said, the typical US luxury home sold for a record $1,180,000 in Q2, up 8.8% YOY, the biggest increase in nearly two years and double the growth rate of non-luxury homes. According to NAR, properties priced over $1 million were the only category to see a sales increase in June. By the end of Q1, 45% of high-end US homebuyers were paying all cash, the highest rate in at least a decade.