Against the expectations of observers, the higher-end of the real estate market has reported continued gains as sales of luxury homes rise, even as housing starts have grown to accommodated entry-level buyers. The Wall Street Journal has cited a survey by John Burns Real Estate Consulting showing that homes sales above $600,000 have risen in 37 of 43 counties, across 16 states.
Of the markets that were surveyed, luxury home sales grew by 10% in the last 12 months. Third quarter home sales in that price range only grew 5% year over year, however, sales increases were distributed throughout every price category, from the $600,000 to $1.5 million-plus price segments. The $1.1 million to $1.2 million segment experienced a 10% spike in sales, whereas the $1 million to $1.1 million category saw 4% growth. Whereas the luxury home starts priced at $1 million-plus fell precipitously by 41.6% to 1,762 last year, according to the National Association of Home Builders, that number is recovering along with the rest of the real estate market.
Toll Brothers, a US luxury home builder reported revenue growth for the fifth quarter in a row, with orders surging by 20.3% to 1,728 homes in the fourth quarter.
“We are encouraged as we look to FY 2017,” Toll Brothers Chief Executive Douglas Yearley said in a statement. “We are seeing positive demand trends in many regions.”
Higher home prices have also been an encouraging sign for luxury home builders. Toll Brothers reported that average price of homes sold grew to $834,000 during the fourth quarter, up from $789,700 a year earlier. Toll Brothers sold a total of 2,224 homes during that quarter, up from 1,820 a year prior, driving revenue increases of 29.1% to $1.86 billion. The company has forecast that it will build between 1,000 and 1,250 homes at the $750,000 to $780,000 price range during this quarter.
On the other hand, the ultra-high end of the luxury market has grown sluggish, according to Forbes, with the market for $100 million-plus homes softening, marking a reversal of the prevailing trend in recent years. Ultra-luxury home construction in New York and Miami have dwindled This may precipitate a belated focus on affordable and starter home building, given that the high-end market was the first to rebound after the recession.