Following a difficult Spring season, the housing market has finally bounced back, thanks to feverish activity throughout the Summer and the Fall seasons. Prices have not only held up, but have also continued to grow, with the median listing price in the US at $350,000, up 12.2% Y-o-Y in October, according to a report by Realtor.com.
The luxury real estate market has also had a good year, as wealthy consumers have been less affected by the pandemic. In fact, many wealthy buyers have fled to suburbia in efforts to escape strict urban lockdowns, which has resulted in many reports of bidding wars over suburban luxury property.
This suburban exodus has certainly left a few cities scrambling, with the nation’s top luxury markets – New York and San Francisco – experiencing a difficult year, made evident by sluggish sales and discounted prices on the high-end of the market.
But luxury markets, even in America’s most expensive cities, are not equal. There are stark differences that exist between San Francisco and New York alone, and those differences only continue to become even more pronounced when we compare them with other markets such as Houston or Memphis. What will buy you a luxury property in Memphis, TN, for instance, might not even be enough to buy you a proper one-bedroom in Manhattan.
So we turned to Redfin and Zillow to assess what truly makes a luxury property in some of the largest cities in the US.
We ranked all the cities based on the highest threshold necessary for a home to be labeled locally as luxury property
We analyzed the top 10% of the listings (each with a price of at least $500,000, which is a widely-accepted definition for luxury property). Then, we ranked all the cities based on the highest threshold necessary for a home to be labeled locally as luxury property.
Some of the markets we analyzed, like Detroit and Baltimore, fell short of the description, with the 10% of their respective listings dropping well below the $500,000 mark, and they were thus excluded from our ranking.
In Spite of a Difficult Year, Manhattan is Still the Undisputed Capital of Luxury Real Estate
Despite a very long, arduous and uncertain 2020, Manhattan still holds the undisputed crown of having the priciest luxury market in the entire US. As a matter of fact, the cheapest property you can find in the luxury segment, defined as the top 10% priciest listing, is listed at close to $6.5M.
But possibly the most staggering fact of all is the sheer size of the luxury market – there are over 1,000 properties priced above $6.5 million! By comparison: not even the priciest property in about half of the nation’s largest 50 cities comes even close to hitting $6.5 million – but Manhattan has over 1,000 properties that easily do.
Over 1,000 Properties are Priced Above $6.5M in Manhattan
It’s a buyer’s market right now. “Smart buyers are securing luxury penthouses, new developments and supersized space at large discounts,” says Mara Flash Blum of Sotheby’s International Realty. And discounted prices are also leading to multiple bidding wars for luxury property, according to the same Sotheby’s broker.
Michael Shapot of Compass agrees that the current market is favoring buyers. “Buyers in NYC today perceive that they are in the driver’s seat and are making lowball offers. Some sellers are willing to play ball,” Michael tells us. “But not every luxury property is in demand – Some unique properties are flying off the shelves, if they’re move-in ready and offer value. By contrast, properties that need work, and are even a tad overpriced, are likely to sit and have multiple price corrections.”
Los Angeles: Super-Hot Luxury Market
Coming in at second place on our list, L.A. is not only the nation’s second-most expensive luxury market, but also the second-largest, featuring hundreds of homes listed above $5M. And L.A. does surpass NYC in at least one category – it is home to two of the nation’s priciest listings.
Contrarily to NYC, the L.A. luxury market has had a banner year, with the median sale price in the luxury segment up 33% Y-o-Y in Q3 2020, according to a report by Douglas Elliman.
“The [L.A.] market has been moving at a record-setting pace during these past 6 months and looks to continue its strong activity well into 2021. The pandemic has made the modern-day buyer switch their perspective a bit and people are heavily investing in their personal space right now and huge importance is being placed on amenities such as home offices, home gyms, and a privatized outdoor space,” according to Mick Partridge of Partridge Estates.
San Diego: Lifestyle, Culture and Climate Makes for a Very Attractive Luxury Market
San Diego comes in a surprising third position, pulling in front of well-established markets such as San Francisco and Boston. San Diego was voted as one of the four most performant luxury markets in 2019 by Coldwell Banker, and has lured luxury buyers due to its close proximity to the beach, beautiful weather, and a fantastic culture. According to Jason Barry of Barry Estates, the pandemic has shifted the market by attracting more people from outside San Diego County.
San Francisco: Depressed Luxury Condo Sales, Townhouses Recover
San Francisco, the nation’s most expensive city, also boasts the fourth-priciest luxury market in the entire country. Real estate in the city is so expensive, in fact, that the average property listed in San Francisco is more expensive than the majority of luxury properties in the cities listed in the second half of our table.
On the other hand, though, the property market is much more homogenous from a pricing perspective – there is a distinct lack of affordable properties in the city, but there is also a lack of trophy properties – priced at $30M or above – that you could easily find in Manhattan or Los Angeles.
Similarly to the situation in NYC, properties in high-density areas of San Francisco (primarily condos) have taken a hit this year, according to Compass. Luxury single-family homes sales, however, have rebounded.
Boston: Glut of Unsold Luxury Condos in the Downtown Area
Boston rounds out in the top five, with luxury property priced at $2,795,000 and above. It should be noted that Boston luxury market has seen better days, though, as its Downtown area has suffered the same fate as Downtown San Francisco and Manhattan have. According to the Greater Boston Association of Realtors, there is currently a glut of unsold condos in the Downtown area, with inventory levels up 50% Y-o-Y. Might be a great time to snatch a luxury condo in Boston!
Honolulu: Hot Luxury Market
Honolulu’s real estate market – and Hawaii’s statewide market, for that matter – is as hot as ever. The number of luxury properties sold in 2020 in the state of Hawaii was able to keep pace with 2019’s sales. Moreover, Oahu, the home state capital of Honolulu, topped Maui for the most uber-luxury sales (priced at $10 million and above), according to local brokerage Hawaii Life. Two of those uber-luxury sales were luxury condos in Honolulu.
Brooklyn: High Inventory Levels and Lower Prices
Brooklyn’s luxury market has certainly seen better years. According to a Douglas Elliman report, there are more luxury homes on the market, and it’s taking more time to sell them, in spite of lower prices. But there is one segment of the market that is seeing a rebound – townhomes. October saw 3x more contracts being signed for townhomes, compared to the same month last year – suggesting that this just might be the right time to snatch up a beautiful brownstone!
San Jose: High Demand and Low Inventory Levels
San Jose is a strong seller’s market, and high demand coupled with low inventory levels is pushing prices higher and higher. San Jose was voted by Realtor.com to be the hottest housing market in the country for 2021, so don’t expect things to cool down any time soon.
Washington, D.C.: Booming Sales Market, Luxury Rentals Crashing
The luxury market is booming in D.C, with more and more people looking for space and recreation at home, according to Laurie Mensing, a realtor with Christie’s/Long & Foster Real Estate. But the luxury real estate market here has seen one casualty: luxury rentals, which have seen steep rates in vacancies and price drops.
Dallas & Charleston: Most Expensive Luxury Markets in the South
Dallas ties with Charleston not only for the 10th-most expensive luxury market in the U.S., but also for the most expensive markets in the South.
“The Dallas luxury market is super-hot, and this is due to the influx of people moving in from California, Chicago and New York,” according to Compass broker Christy Berry. But, as opposed to other places, not everyone wants a larger home. Some people are simply looking to downsize, as their current homes take too much work to maintain.
Similarly to San Diego, the city of Charleston is also attracting more and more people for its climate, culture and lifestyle. And many of these out-of-towners are snatching up luxury properties. The market is hot, and there is a lot of activity even in the uber-luxury segment, which is represented in Charleston by properties priced at $4M and above.
We analyzed the top 10% of the listings, priced at $500,000 and above, found on Zillow and Redfin (cross-checked between the two websites). The top 10% of the listings is a widely accepted definition for luxury real estate. The median list price was sourced from Redfin. The data for the most expensive listings was researched on December 15th.
Featured property photo by Evan Dvorkin.