In many coastal metros, million-dollar neighborhoods are no longer the exception, but the rule — and this change has caused a shift in what constitutes luxury homes.
In the early aughts, a $1 million-dollar budget was enough to afford the lavish mansion of your dreams (or something close to it), but buyers today — in areas such as San Francisco, Los Angeles and New York City — can expect to get a regular single-family home with that budget.
This “new normal” was the focus of Trulia’s latest study on luxury real estate, which revealed that the new benchmark for luxury living is $5 million or more.
According to the study, the number of million-dollar listings has grown by 17.8 percentage points over the last year, thanks in part to historically low inventory levels that have driven median home values up. At the same time, the market share of $5 million+ listings has increased 19.8 percent year-over-year.
Trulia senior economist Cheryl Young says buyers have accepted that $1 million won’t get you the large backyard, indoor pool and mini private theater anymore — instead, they see it as the “the cost of doing business.”
What are buyers getting for the extra dough?
According to Trulia, buyers who shell out an extra $4 million or more can get two more bedrooms than the average American (who can get three), three times the number of bathrooms (six), 3,798 more square feet of space and nearly an acre (0.96) of land.
Furthermore, the average super luxury listing description has these components:
- Focus on location: Trulia discovered the keyword “views” was mentioned in 87.8 percent of super luxury listings — 6.6 times the rate in listings valued at under $5 million. Keywords such as “waterfront,” “beachfront,” and “oceanfront” were also used to describe super luxury listings, appearing at 60 times the rate of other listings.
- The bigger the better: Super luxury listings were often described as “estates” and “park-like” and often referred to the acreage of land around the home. The term “estate” appeared 15.9 more times among luxury listings than those worth less than $5 million.
- High-class amenities: Super luxury listings are more likely to have pools (64.5 percent) and buyers are more apt to require entertainment spaces such as screening rooms. In the entertainment capital of the world, Los Angeles, “entertainment” appeared in 24.5 percent of listing descriptions.
- One-of-a-kind design: Super luxury listings were three times more likely to feature custom design features, and listing descriptions of these homes were 44.7 times more likely to mention well-known architects and 14.1 times more likely to mention well-known interior designers.
About the study
To determine the share of home values crossing the $1 million and $5 million marks, we looked at the value of condominiums and single-family homes in the largest 100 metros whether or not they were currently listed on the market. Shares reflect snapshots of home values on October 1 of each year.
Listing descriptions analyzed in this report represent all text descriptions provided by listing agents for condominiums and single-family homes on the market from October 1, 2016 to October 1, 2017. Word frequency rates are determined by the number of times a term is mentioned divided by the total number of listings.