As Northwest Arkansas continues to attract high-net-worth residents, we have seen increased demand for Luxury Real Estate. At NWALook we defined Luxury Real Estate in Northwest Arkansas as $850,000+ between 0-5 acres. This subcategory in real estate often allows for higher margins for builders but more risk associated than in lower price points. Luxury Real Estate typically has higher days on the market with higher initial costs for builders holding the loan.
Here’s a snapshot of the data as the key indicators in Luxury Real Estate. Starting with January 2023, there were 277 closings. This indicates a 3% decline from the same time frame in 2022. To give you context, we compared the number of 2019 during the same period, revealing 66 closings; this indicates a 76% increase. The median sales price for 2023 has been $1,250,000 year-to-date.
To understand the luxury real estate market as defined above, let’s consider active inventory. Currently, we have 373 active listing, a jump of 15% compared to the same period in 2022. However, the luxury subcategory includes a greater number of existing properties due to the rise in home values in Northwest Arkansas over the past five years
Finally, when understanding the subcategory, one must consider the demand, which can be gauged by days on the market. From year to date, the average days on the market is 82 days, which indicates a significant increase of 28% compared to the same time period last year. See the graph below for a 5-year look back at the days on market trends.
Two indicators of the luxury market that go hand in hand are household incomes and median sales prices within the housing market. We have seen an increase in household incomes of 13.2% from 2016 to 2021. Although, household incomes are not keeping up with price appreciation in our area. This can create an imbalance in the residential real estate market affecting the luxury subcategory.
As job opportunities continue to draw residents with higher net worth and income to Northwest Arkansas, our area is experiencing an influx of such individuals. We expect the luxury real estate market to have a healthy demand. Although we expect to see less price appreciation over the next 18 months, compared to the past few years.