Shrinking supply sends prices for luxury homes up nearly 8% in Q1 2018
Luxury home prices in the first quarter of 2018 rose 7.9% compared to last year, to an average of $1.8 million, according to the latest report from Redfin, the next-generation real estate brokerage. The analysis tracks home sales in more than 1,000 cities across the country and defines a home as luxury if it is among the top 5% most expensive homes sold in the city in each quarter. The average price for the bottom 95% of homes was $330,000, up 7.5% compared to a year earlier.
The strong growth of prices for luxury homes is due to decline in supply that has persisted since the second quarter of 2017. The number of homes for sale priced at or above $1 million fell 20.4% in the first quarter compared to a year earlier, while the number of homes priced at or above $5 million dropped 19.2%.
The inventory shortage in the luxury market is newer and somewhat less severe than the inventory shortage for more affordable homes. The number of homes for sale priced below $1 million has been in decline since the third quarter of 2015 and fell 22.8% in the first quarter compared to last year.
Competition for luxury homes is also escalating. The average luxury home that sold last quarter went under contract after 82 days on the market, nine days faster than the same period last year. While only 1.5% of luxury homes were bid up over the asking price, that’s up from 1.3% in the first quarter of 2017.
“For the first time since changes to the tax code went into effect, luxury buyers could no longer deduct more than $10,000 in state and local property taxes or interest for mortgages over $750,000. In a world of balanced supply and demand these changes would have dampened price growth. Instead, this quarter saw the strongest luxury price appreciation in four years, demonstrating that the current inventory crunch is extremely broad-based and affects buyers at every price range,” said Redfin chief economist Nela Richardson.
Several cities in Florida and Nevada saw strong luxury price growth in the first quarter. In Vero Beach, Florida, the average sale price for a luxury home soared 68% over last year to $2.65 million. The early January sale of a $17.5 million property likely played a role in driving up the average sale price in Vero Beach.
Luxury home prices were up 51.3% in Reno, 26% in Las Vegas and 22.4% in Henderson, a Las Vegas suburb.
Jaime Moore, a Redfin agent in Reno, said, “We’re seeing an influx of buyers from high-cost areas such as Seattle, San Francisco and Southern California. Some come for retirement and the low taxes, others for tech jobs at companies like Tesla, Amazon and Switch. More companies are relocating here as the cost of living for the average employee has gotten too high in other cities. This is all leading many buyers to our area with larger pocketbooks than we have seen in the past and bidding wars and prices are reflecting that demand.”
Some cities saw luxury home prices decline in the first quarter. The average price for a luxury home fell furthest in Long Beach, California, down 26.1% year over year last quarter. Prices for high-end properties also fell in Washington, D.C. (-9.6%), Fort Lauderdale (-7.3%) and Clearwater (-4.5%).
To read the full report, complete with city-specific data and charts, as well as a list of the 10 highest-priced home sales in Redfin markets in the first quarter, visit: www.redfin.com/blog/2018/05/shrinking-supply-sends-prices-for-luxury-homes-up-nearly-8-percent-in-first-quarter.html