A million bucks in the New York City metro area won’t get you much these days. In this, the largest luxury market in the country, the luxury entry point—the lowest price of the top 5% of transactions—is $ 1.45 million, and that’s just to get a one-bedroom in some neighborhoods. In Los Angeles, the entry point is $ 1.78 million (but look what you get for that). Yes, luxury is back, and with a fury.
So says our own chief economist, Jonathan Smoke, whose data team looked through records from 2006 to 2014 to track how luxury housing in those markets has changed, and to see how they compare to each other. Luxury sales in New York last year had a market value of $ 23 billion—30% of the whole market, and up from $ 21.1 billion in the fully inflated bubble of 2006, even though (or maybe because) inventory went down 24.6% since then.
The median price of luxury in the five boroughs of New York and its surrounding suburbs is $ 2.2 million, about $ 550 per square foot. But the cost of ultraluxury—the top 1% of luxury sales—starts at $ 3.7 million, just under $ 1,000 per square foot, and up 11% from 2007. In a select few Manhattan neighborhoods—Upper East Side, SoHo, and Hell’s Kitchen among them—you have to kick in $ 20 million to get an ultraluxury foothold; in some spots that entry point is $ 32 million.
In Los Angeles, some of the same plot lines are repeated, though there’s a little more equity in the market at large. Much to the chagrin of the L.A.-centric, the luxury in the L.A. metro area comes second to NYC. In 2014, the top 5% of transactions had a market value of $ 17.3 billion, 25% of the total L.A. market. The median price of entry-level luxury is $ 2.5 million, which might be a mere $ 10 more per square foot than in NYC. The ultraluxury entry point starts at $ 3.9 million, or $ 750 per square foot. But that’s overall. In the tony spots of Bel-Air, Westwood, Beverly Hills, and Malibu, like the priciest Manhattan neighborhoods, ultraluxury starts at $ 20-$ 34 million. The market’s up 19.4% from 2006, from $ 14.5 billion to $ 17.3 billion. Same story here: Transactions are down, 18.6% lower than in 2006.
The difference in the desires of New Yorkers and Los Angelenos isn’t surprising: New Yorkers want amenities, and Angelenos want privacy. New Yorkers want river and park views; Angelenos want to see the ocean and the hills (hard to see either of those from Manhattan). New Yorkers want wood-burning fireplaces; Los Angelenos want infinity pools. Well, yes. And it seems the ultraluxury entry points will get them those things.
It’s great news for those in the real estate biz, but it might be just a little daunting for those in the working, middle, and even upper-middle classes hoping for a home of their own. The New York City area’s luxury market accounts for almost a third of transactions, despite how hard New York’s mayor, Bill de Blasio, fights to create more housing for those folks. While L.A. and NYC’s markets are busting at the seams, the rest of the country isn’t quite as keen on luxury. The national average entry point for luxury is $ 745,000, and the market is still down 20% since 2006, from $ 94 billion to $ 76 billion.
While luxury markets are rising faster than others, the housing market at large is slowly inching up, too. Median sales rose 1% from a year ago. It may not sound like much, but last quarter sales prices doubled in 51 metro areas, making the climb to homeownership even steeper.