The luxury real estate market has been on a strong run, as stock market and home equity gains have allowed affluent homebuyers to bypass many of the headwinds that have plagued their middle- to lower-income counterparts. This has created what economists call a “K-shaped housing market,” where seven- and eight-figure properties are snapped up like hot cakes and lower-priced homes sit like stale bread.
The Agency explored the particular economics of the K-shaped market in its annual Red Paper, published on Tuesday, which examines the buyer, seller and market trends driving luxury sales. The firm found that artificial intelligence (AI) tech workers are driving much of the activity — leveraging remote contracts and money from IPOs and stock gains to build impressive property portfolios across major Sun Belt and Northeastern markets.
Jake Krimmel | Credit: Realtor.com
“The K-shaped housing market started as the stock market went up and housing affordability went in the other direction,” Realtor.com Senior Economist Jake Krimmel said in the report. “Mortgage rates shot up, but home-price appreciation didn’t slow down, which makes it more unaffordable for the middle- to lower-end income earners to buy a home. The upper classes have an enormous amount of financial power in stocks and their 401(k) plans, as well as in home equity. There’s also more luxury supply, especially from new homes.”
How tech workers are changing the Sun Belt
Sixty-four percent of The Agency agents said inventory in their market is slightly (45 percent) or significantly (19 percent) up this year, while the remaining share said listings are slightly down (26 percent), significantly down (6 percent) or flat (3 percent).
The Sun Belt and the Northeast are at the center of activity, with Nashville and Chattanooga, Tennessee, becoming Southern tech hubs, Boulder, Colorado, on the precipice of an entertainment boom and Naples, Florida, serving as a second-home buyer paradise. Meanwhile, New York City and Washington, D.C., have maintained their place in the Northeastern market, with both cities serving as a gateway to cultural, social and political power.
Tech workers are driving a sizeable portion of activity in Boulder, Colorado and Nashville and Chattanooga, Tennessee, with The Agency affiliates in each market reporting increased sales at the highest tier. In Boulder, $10 million sales are becoming more commonplace, as luxury homebuyers see the wealth-building potential once the Sundance Film Festival moves to the city in 2027.
In Nashville and Chattanooga, the influx of coastal tech workers has shifted the luxury entry point from $1 million to nearly $2 million.
However, the report said there are plenty of sales happening between $6 million and $8 million in both cities, with Nashville buyers favoring swanky downtown condos or sprawling family compounds on the city’s outskirts. Inventory is a little tighter in Chattanooga; however, homebuyers have no problem competing for well-priced homes in prime locations.
“We’ve had a big influx of people from other cities with higher real estate prices than ours, so our luxury real estate seems inexpensive to them,” The Agency Chattanooga Managing Partner Becky Cope English said in the report. “Our luxury market threshold was $1.2 million, but over the past few years, it’s risen to $1.6 million. Luxury prices have risen at a faster pace than median homes because demand is high and buyers are insulated from economic drops and interest rates.”
The Agency Founder and CEO Mauricio Umansky said he expects luxury prices in the Sun Belt to keep rising and drive competition. Coastal buyers have the upper hand with their higher incomes, he said.
“Buyers coming from places like California and New York often have more money to spend, which has pushed prices up in some Sun Belt markets,” he said in an emailed statement. “Local buyers are having to adjust, whether that means making more competitive offers, looking in different neighborhoods or considering homes at lower price points. A lot of it comes down to knowing the market and understanding where you can still find a good opportunity.”
He also expects homebuyers’ attention to spread to other Sun Belt markets throughout Arizona, Texas and Florida.
“Beyond Nashville and Chattanooga, I’m keeping a close eye on Austin, Dallas, Scottsdale and Tampa Bay,” he said. “Florida is another market I’m excited about, especially Miami and Palm Beach, which continue to attract luxury buyers. People are drawn to these places for the lifestyle, business opportunities and the ability to get more for their money. I expect we’ll continue to see buyers looking to these markets as they think about where they want to live and invest.”
What about taxes?
The report said taxes are another motivating factor for luxury homebuyers. Several of the markets highlighted in the report offer more favorable tax policies, including no state income or inheritance taxes — two things that make long-term wealth-building much easier.
“Some of these buyers have done well in the stock market and want to move some of that money to brick-and-mortar assets,” The Agency Washington D.C. Managing Partner Nurit Coombe said in the report. “Some of them are moving within the region to mitigate taxes, since property taxes tend to be lower in Northern Virginia than in Maryland and D.C.”
Umansky said affordability matters as much to affluent homebuyers as to other homebuyers, though they approach the question with a different set of numbers in mind.
“Even at the luxury level, buyers care about what they’re getting for their money,” he said. “They’re looking at the price, property taxes, insurance and what it will cost to maintain the home.”
“The difference is that wealthy buyers generally have more options. They can afford to wait for the right property or walk away if the numbers don’t make sense, while many everyday buyers are struggling just to get into the market,” he added. “There’s no magic number where a luxury buyer suddenly feels something is too expensive. It really depends on the person and the property.”
“I’ve worked with buyers at every price point, and one thing they all have in common is that nobody wants to feel like they’re overpaying.”
Umansky said the current political landscape could create more challenges for luxury homebuyers looking to shave down their tax bills. Several states and cities have passed or are considering millionaire taxes, including Massachusetts and Washington, which have already enacted them, and New York, New Jersey, Connecticut and Washington, D.C.
New York City has been at the center of the tax debate, with the real estate industry pushing back against the pied-à-terre tax on secondary properties. The Agency New York’s managing partner Marnie Eden said the pied-à-terre tax has had little impact on homebuyers, who see the tax as a small price to pay to have a second property in one of the most famous cities in the world.
“A lot of buyers in New York City own multiple properties in other locations,” Eden said. “News stories about the pied-à-terre tax haven’t slowed demand for second homes here. People who can afford multiple homes can afford to pay that tax.”
Umansky said taxes “are definitely on the minds of luxury buyers right now” as they consider how new tax policies might impact their resale values. “Taxes aren’t the only factor when someone decides where to buy, but they absolutely play a role, especially when buyers have the flexibility to live anywhere,” he said. “If some of these proposals pass, I wouldn’t be surprised to see more wealthy buyers looking at states with lower taxes, which could put even more distance between the high end of the market and everyone else.”
Could the luxury hot streak be nearing its end?
Tech workers have played a major role in the luxury market’s latest hot streak; however, increasing tech layoffs and continued talk of an AI tech bubble have stoked uncertainty, according to a new Realtor.com report released Monday. That report revealed a softening luxury market, as the national entry point declined 2.3 percent year over year to $1,197,014. Entry points fell at every luxury tier, the portal said, with the threshold for the top 5 percent of listings down 4.1 percent year over year and the top 1 percent down 6.2 percent.
Days on market for the typical luxury listing is holding steady at 63 days; however, Florida was an outlier — bucking national trends with price growth of at least 1 percent year over year.
Umansky recognized that tech layoffs may make homebuyers slower to act across different markets, but it’s unlikely they’ll bring home sales to a screeching halt.
“There’s a lot happening in tech right now. On one hand, layoffs and uncertainty in the market can make buyers hesitant to make big purchases,” he said. “On the other, we’re seeing significant wealth being created through AI, IPOs and stock gains, especially among founders and early investors.”
“Many buyers at the very high end have the cash to purchase without financing, so they’re less affected by interest rates,” he added. “But if tech stocks take a major hit, even wealthy buyers may decide to hold off. I still expect strong interest in great properties in desirable locations, but buyers are going to be selective, and sellers need to be realistic about pricing.”
What does today’s luxury buyer want, and how are top agents meeting the moment? Drawing on The Agency’s latest Red Paper report, this three-story series breaks down the trends reshaping the high-end market and the strategies agents can use to compete for it. Other articles cover the wave of post-IPO AI wealth and the trend of legacy property stewardship.
