As the real estate market has continued to heal since the financial crisis in 2008, homes on average have begun to increase in sales price due to higher demand. One demographic in particular that has experienced a substantial rise in price and popularity are luxury homes.
According to dnainfo.com, one of the largest hubs of people in the world, New York City, has seen an increase in the cutoff of what is considered to be a luxury home. StreetEasy’s new luxury price tier metric from their third quarter report found that one in every five Manhattan and Brooklyn homes on the market is considered to be a luxury property.
The luxury tier cutoff price is derived from a 12-month average of the recorded sales price of the top 10% of properties in the area.
In Manhattan, the current price of luxury is considered to be $3.59 million, up from last year’s cutoff of $3.35 million. Brooklyn also saw an increase in the designated luxury price from $1.24 million last year, up to $1.39 million.
Over the past five years, the number of luxury tier homes in Manhattan averaged out to 17%. This increase in the average share of luxury homes indicates how the entire local market is increasing in price.
One of the suspected driving forces is the upward trajectory of rent in Manhattan. The median rent rose almost 10% over the past year to a record high $3,339 a month.
“Renting in Manhattan is more expensive than it’s ever been — a fact that weighs heavy on the city’s long-term housing affordability,” said StreetEasy data scientist Alan Lightfeldt.
While the tier of average prices of luxury homes are rising in Manhattan and Brooklyn in part out of necessity, a report by Pacific Business News described how luxury home sales in Oahu rose by 18%, even as the median sale price fell 4%.
Based on Multiple Listing Service data of all single-family homes and condominiums sold for more than $1 million in Oahu, luxury property sales increased 18% last month to 84, up from 71 during the same time last year.
Of the 84 sales closed in September, 66 luxury properties were sold in the $1 million to $2 million price range, 17 sold in the $2 million to $4 million range, and one home sold for at least $4 million. The homes in the $1 million to $2 million range were specifically in high demand, representing up to 80% of all luxury properties.
“Sales of single-family homes for $1 million or more have been consistently strong since April this year,” Coldwell Banker Pacific Properties Previews International Director Patti Nakagawa said in a prepared statement.
Following this trend, the price cut off for luxury homes will likely continue to increase, potentially raising the average price of home’s altogether, regardless of whether they were existing homes or newly-built properties from custom home designers.