Feeling the Squeeze for 'AFFORDABLE' LUXURY
More buyers can spend $1M to $3M on their next home, but they’re stymied by a lack of inventory
Nationally, the threshold for luxury homes was $1.2 million in April 2026, according to Realtor.com, and thanks to an increase in demand and not quite enough supply on homes priced between $1 million and $3 million—and in some cases and locations all the way up to $5 million—homes across this so-called affordable luxury sector are being met with a flurry of interested buyers. So for those luxury homeowners who are looking to move up to the next tier (maybe $5 million to $10 million), there’s an opportunity to cash out on their current homes for a more expensive one.
⸺ At a glance
Price and velocity vary across U.S. markets within each tier
Realtor.com (March 2021-2026)
Median price per square foot and days on market highlight the distinct dynamics shaping each of the three luxury tiers. The ultra-luxury market is seeing record price per square foot, but a dramatic slowdown in sales velocity.
Across the U.S., generally, there’s an increase in demand for homes over $1 million and under $5 million. When compared with just five years ago, homes across the U.S. in the $1 million to $2 million range are selling for a median price per square foot of $479 (up from $455 in 2021). For the next echelon, $2 million to $5 million homes, the average price per square foot is $790, up from $730 five years ago, and they’re selling 12 days faster, too, according to Realtor.com.
Increased incomes across the U.S. mean that 31% of Americans are now considered upper middle class, according to a report from the American Enterprise Institute, compared with 10% in 1979. That, combined with rising levels of home equity—up 142% since 2020—and three years of stock market gains, has generated more demand for luxury housing.
U.S. market snapshots across Anchorage, Bend, Dallas, Marblehead, and Hilton Head reveal that luxury market conditions vary significantly nationwide, with different price tiers and regional dynamics moving at different paces and shaping distinct patterns of demand, supply, and liquidity.
~1 in 3 Americans are now considered to be upper middle class
American enterprise institute (2026)
Emerging affordable luxury markets outside the U.S.; Buyers who want a luxury lifestyle and high-end property sometimes need to search farther afield to find the options they prefer.
Canadian Abundance
Unlike the U.S., where many luxury homeowners are reluctant to give up their low mortgage rate, many Canadians are eager to move. “Inventory in Canada is the opposite of the U.S., with more luxury homes available now than in 2019,” says Steve Bailey, Managing Partner of The Agency Waterloo Region, Brantford, Oakville, Muskoka, Toronto West, York Region, Niagara, and Halifax. “In Canada, our mortgages have terms of five years, so even if you have a 25-year loan, you need to renew it every five years.”
Canada’s housing market boomed from late 2020 through early 2022, Bailey explains, which means many homeowners face a jump from a 1.9% rate to 4% or so this year and into early 2027. “That’s not necessarily crippling, but it’s significant enough that we’re seeing more people decide to sell and use their home equity on another property,” Bailey says. “We’re seeing a more balanced market now, with at least six months of inventory in the C$1 million to C$3 million price range (US$731,000 to US$2.2 million).”
However, Bailey points out that in most of his markets, which are about one hour from Toronto, C$1 million (US$731,000) doesn’t get true luxury. He says that the size and quality of properties changes drastically at C$1.7 million to C$3 million (US$1.2 million to US$2.2 million), but there are few homes available at that upper end. “Most of our sales volume is in the C$1 million to C$2 million (US$731,000 to US$1.5 million) range of ‘affordable luxury,’ but right now it’s taking 300 to 400 days to sell them because so many people want to get out and make money as their loans reset,” he says. “This is different from the U.S.—we’re seeing prices drop from C$1.9 million (US$1.4 million) in 2021 to C$1.4 million (US$1.02 million) now.”
While a restriction on foreign buyers in Canada ends Jan. 1, 2027, noncitizens can buy properties in some rural and vacation areas now. Most of Bailey’s buyers are first move-up buyers from Toronto looking for a new lifestyle and more space or downsizing baby boomers.
⸺ At a glance
Canada's market is being reshaped by supply; Madrid is being driven by demand
The Agency Managing Partners (2026)
Europe for Less
While luxury home prices have increased dramatically over the past five years in Madrid, the city remains a more affordable option than London and Paris, says Patricio Guzman, a manager with The Agency Madrid. He estimates prices in Madrid are 40% to 60% lower than comparable properties in those cities, although if the rapid pace of rising values continues, that gap could narrow, he says. “Our luxury threshold used to be €800,000 to €1 million (about US$935,000 to US$1.17 million), but now luxury costs €3 million (about US$3.5 million),” Guzman says. “We’ve seen a big influx of investors from Venezuela, Mexico, and Colombia in the past few years, which rapidly pushed up prices.”
For €3 million, buyers can expect to find a small, renovated four-bedroom apartment with about 200 to 250 square meters (about 2,100 to 2,600 square feet) and a balcony, Guzman says. “Our inventory is very tight, particularly in the €1 million to €2 million (US$1.17 million to US$2.3 million) range, because demand was so high during the pandemic and by investors,” he says. “You can find some smaller refurbished apartments in less desirable neighborhoods in the €1.5 million to €2 million (US$1.75 million to US$2.3 million) range. But if you want a luxury neighborhood, a 150-square-meter (1,600 square feet) apartment starts at €2 million (US$2.3 million), and a 250-square-meter (2,600 square feet) place starts at €3 million (US$3.5 million).”
⸺ At a glance
Madrid's luxury prices outpace London, Paris in five-year surge
The Agency Madrid, Mansion Global
Illustrative index: Base 100 = 2020 luxury entry price Based on reported market estimates
⸺ At a glance
Madrid's luxury prices outpace London, Paris in five-year surge
The Agency Madrid, Mansion Global
Illustrative index: Base 100 = 2020 luxury entry price Based on reported market estimates
More inventory is available in the €2 million to €6 million (US$2.3 million to US$7 million) range, Guzman says. “This year we’ve seen an increase in people from Spain buying homes in Madrid compared to the past,” Guzman says. “Until recently, we had a huge influx of people from Latin America buying second homes and primary residences here because of the climate, the language, and the excellent schools. But many of them keep their money in dollars. Now that the dollar is not as strong, it’s become more expensive to buy.” Besides Spanish people, many luxury buyers are from Northern European countries whose currency is euros, he says. “Our Golden Visa program ended last year, but demand is still high and prices still keep going up,” Guzman says. ●
⸺ Insider experts
Steve Bailey
The Agency Waterloo Region, Brantford, Oakville, Muskoka, Toronto West, York Region, Niagara, and Halifax
Patricio Guzman
The Agency Madrid