Tough at the Top: How Luxury Lagged Late in 2015
- Home value growth in luxury ZIP codes nationwide slowed during the second half of 2015.
- In entry-level and mid-market ZIP codes, home values continued growing a steady pace.
After growing in line with more modest areas throughout much of the first half of 2015, home value appreciation in America’s toniest ZIP codes stalled over the past 6 months – even as growth in entry-level and mid-market communities continued.
Zillow ranked ZIP codes based on their median home value in January 2015, and grouped them into deciles for every metro area nationwide for which we have sufficient data (the average metro area in our database spans 23 ZIP codes). The top 10 percent of ZIP codes in each metro area is classified as the “luxury market,” and the bottom 10 percent of ZIP codes in each metro area is classified as the entry-level market. We grouped the middle two deciles – the 5th and 6th deciles – to capture home value trends in middle-market ZIP codes. We then compared how home values evolved over 2015 for each of these groups.
Of course, the value of an entry-level and/or luxury home in one market is not the same as in another. In Los Angeles, for example, entry-level ZIP codes have median home values ranging from $155,200 to $333,100, while luxury ZIP codes have median home values ranging from $1,055,900 to $4,224,600. In Orlando, on the other hand, entry-level ZIP codes have median home values ranging from $71,600 to $110,000, while luxury ZIPs have medina home values ranging from $277,200 to $388,000. So median home values in L.A.’s entry-level markets are similar to median home values in Orlando’s luxury markets. By classifying ZIP codes within each metro area, we are able to gauge how different market segments are doing compared to their own market, rather than compared to different parts of the country.
Slowing luxury markets are likely the result of several converging forces, including:
- More hesitant foreign buyers in the long-term in the face of strong U.S. dollar appreciation and financial turmoil overseas;
- A slowing and normalization in home value growth overall after the rapid pace observed in recent years;
- And continued upward pressure on entry-level home values because of strong demand and limited supply of homes for sale in these markets.
Trends will also vary from market-to-market depending on local economic conditions and a given community’s supply/demand situation. Use the interactive tool below (figure 2) to home value appreciation trends in dozens of large metro markets nationwide.
