Real Estate

Inventory Shortage Hits the Luxury Market, Sending Prices Up 4.9 Percent in the Third Quarter

Luxury home prices rose 4.9 percent in the third quarter of 2017 compared to last year, to an average of $1.71 million. The analysis tracks home sales in more than 1,000 cities across the country and defines the luxury market as the top 5 percent most expensive homes sold in the city in each quarter. The average price for non-luxury homes was $336,000, up 5.3 percent compared to a year earlier.

A sharp decline in the number of luxury homes on the market likely contributed to the price increase. The number of homes for sale priced at or above $1 million fell 18.1 percent compared to the same period last year, marking two consecutive quarters of a decline in the number of high-end homes for sale.  

The number of homes priced at or above $5 million saw a similar decline at 19 percent. This marked the first quarter in which luxury inventory fell year over year since Redfin began reporting on the luxury market in 2014.

“There is still strong buyer demand for high-end homes,” said Redfin chief economist Nela Richardson. “Despite declining inventory, luxury sales soared in the third quarter. Sales of homes priced at or above $1 million were up 11 percent from a year ago, while sales of homes priced at or above $5 million were up almost as much at 10 percent.”

Luxury homes are also moving off the market faster, with the typical luxury home finding a buyer in 70 days, four days sooner than last year.

Q3 Market Summary Luxury Market (Top 5%) Rest of Market (Bottom 95%)
Average Sale Price $1.71 million $336,000
Average Sale Price YoY 4.9% 5.3%
Average Sale Price QoQ -4.2% 0%
Average Days on Market 70 53
Days on Market YoY 4 fewer days than last year 7 fewer days than last year
Percent of Homes that Sold Above List Price 1.5% 24.2%

Biggest Winners

Two cities in Colorado saw strong year-over-year price growth in the third quarter; luxury home prices were up 34.7 percent in Longmont and 15.1 percent in Littleton. In general, the Denver and Boulder metro areas have seen rapidly escalating prices across all price bands, due to rising homebuyer interest and low inventory.

The number of homes for sale in the Denver metro in September was down 11 percent year over year. This tight inventory is pushing up prices from starter homes through luxury homes across the region.

In addition to Colorado, a number of Florida beach communities also saw big luxury price gains. Luxury home prices in Fort Lauderdale, St. Petersburg, West Palm Beach, Pompano Beach and Sarasota were up over 15 percent from a year ago.

Biggest Winners Luxury Market (Top 5%) Rest of Market (Bottom 95%)
City Average Sale Price YoY Change Average Sale Price YoY Change
Longmont, CO $1,550,000 34.7% $410,000 8.8%
Fort Lauderdale, FL $2,962,000 28.7% $371,000 16.3%
St. Petersburg, FL $1,336,000 19.6% $228,000 16.3%
Reno, NV $1,238,000 18.9% $354,000 14.9%
West Palm Beach, FL $1,182,000 17.5% $220,000 13.4%
Pompano Beach, FL $1,108,000 16.9% $205,000 17.1%
Oakland, CA $2,272,000 15.6% $735,000 7.3%
Sarasota, FL $1,787,000 15.6% $293,000 6.5%
Littleton, CO $1,114,000 15.1% $417,000 6.9%
Austin, TX $1,669,000 14.4% $384,000 3.8%

Biggest Losers

On the other side of the spectrum, the average price for a luxury home fell furthest in Delray Beach, Florida, down 27 percent from a year ago to $2.18 million. This marks the third quarter in a row in which Delray Beach saw sharp price declines in the luxury segment.  Prices for homes in the bottom of the market also fell 4.4 percent year over year in Delray Beach to an average sale price of $241,000.

Aaron Drucker, Redfin market manager in South Florida, attributes the decline to the mix of homes listed for sale and sold, rather than a shift in demand for Delray Beach’s luxury properties. Several $10M+ home sales in 2016 inflated the average luxury home price last year, making this year’s prices look low by comparison.

“There were only five homes for sale in Delray Beach in the third quarter that were listed above $5 million, compared to 13 during the same period last year,” said Drucker. “Delray Beach continues to be a popular market for luxury homes in the $1.8 to $3.5 million range, but there are only so many ultra-luxury properties in the city and a limited number of people with the means to buy them.”

Interestingly, luxury home prices fell year over year in San Francisco, Boston, Portland, Ore., and Seattle, some of the most competitive housing markets in the country. While luxury prices fell in those cities, prices for homes in the rest of the market continued to climb in the third quarter.

Biggest Losers Luxury Market (Top 5%) Rest of Market (Bottom 95%)
City Average Sale Price YoY Change Average Sale Price YoY Change
Delray Beach, FL $2,179,000 -26.9% $241,000 -4.4%
San Francisco, CA $4,288,000 -14.7% $1,282,000 7.9%
Boca Raton, FL $2,163,000 -13.8% $348,000 4.2%
Oceanside, CA $1,052,000 -9.9% $486,000 6.1%
Boston, MA $3,846,000 -6.8% $684,000 2.2%
Scottsdale, AZ $1,936,000 -5.0% $462,000 10.0%
Portland, OR $1,199,000 -5.0% $435,000 4.6%
Seattle, WA $2,047,000 -3.5% $671,000 13.5%
Tampa, FL $1,125,000 -3.5% $239,000 6.7%
Sandy Springs, GA $1,646,000 -3.3% $387,000 -2.0%

Most Expensive Sales

Curious about the most expensive homes sold last quarter? Take a peek at the top-five most expensive sales and live vicariously through these new luxury owners:

  1. This 90210 home is located next to the Beverly Hills Hotel and sold for $25.5 million.
  2. This Napa ranch that sold for $25 million offers more than a stunning home and mountain views, the listing noted the property includes a caretaker’s residence, stone barn, party barn, pool and cabana.
  3. At $24.9 million this modern Beverly Hills home was the second most expensive home  to be sold in the 90210 zip code in the third quarter.  
  4. The behemoth California estate of real estate mogul Don Abbey sold for $24.4 million, an unfathomable sum for the average American, but a steal compared to the initial asking price of $78 million.
  5. On a clear day this stately $23.4 million home on the shoreline of Lake Washington offers views of Mount Rainier. The new owners are neighbors to Bill Gates and Jeff Bezos, who also own shorefront properties in the ritzy enclave of Medina.

Visit the Redfin Data Center to find more housing market data for metro areas around the country.

Methodology: Redfin tracks the most expensive 5 percent of homes sold in more than 1,000 U.S. cities and compares price changes to the bottom 95 percent of homes in those cities. Analysis is based on multiple-listing and county recorder sales data in markets served by Redfin. To determine luxury market winners and losers, we looked at cities with at least 40 luxury sales in the quarter and an average luxury sale price of $1 million or higher.

The post Inventory Shortage Hits the Luxury Market, Sending Prices Up 4.9 Percent in the Third Quarter appeared first on Redfin Real-Time.

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