Luxury home sales continue to be one of the strongest sectors in the Texas housing market, with sales continuing to rise, according to the 2016 Texas Luxury Home Sales Report recently released by the Texas Association of Realtors.

Right now, a popular trend for homebuyers in this price class is to purchase homes on smaller lots but in more desirable locations and with higher-end amenities. Meanwhile, other homebuyers are choosing to purchase older homes in prime locations for less than $1 million to demolish and rebuild a new home in its place.

"Rising land and development costs are changing what today's luxury market looks like, and many developers are now entering the high-end custom homebuilding market due to more expensive lot costs.” said Jim Gaines, economist at the Real Estate Center at Texas A&M University.

“Rising home prices across the state are also pushing more higher-end homes into the luxury market. Many homes priced in the $800,000 – $900,000 range a few years ago will now sell for more than a million," added Gaines.

Looking at the top housing markets in the state, luxury home sales in the Houston market jumped to 1,284 from January to October 2015, up 4.5% from the same period in 2014. In Austin, sales of homes for more than $1 million increased 16.3% in sales volume year-over-year.

In the Dallas-Fort Worth area, luxury home sales grew 12.4%, rising to 1,088 home sales from January to October 2015. And in the San Antonio market, sales of luxury homes for more than $1 million noticed a 36.4% increase compared to the same period in 2014. Although luxury homes accounted for less than 1% of the city's housing market, active listings increased 33%, with their median price at $1,298,375, the lowest compared to Austin, Houston, and Dallas.