2Q Luxury Home-Price Growth Slows to 5 Percent, But Sell at Record Pace
MBA NewsLink Staff
Luxury home price growth slowed to 5.2 percent year over year to an average of $1.9 million in the second quarter, said Redfin, Seattle. This compared to 7.3 percent in the first quarter and 5.4 percent from a year ago.
The report said luxury homes went under contract after an average of 65 days on market, six fewer days from a year ago, representing the fastest pace on record since Redfin began tracking this metric in 2009. The market sped up even more for non-luxury homes, which spent an average of 51 days on market, 10 fewer days than last year.
Redfin 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 percent most expensive homes sold in the city in each quarter.
"Demand for luxury homes in the U.S. has strengthened this year because stock-market gains and tax reform put more money in the pockets of the wealthy," said Sheharyar Bokhari, senior economist at Redfin. "Yet the inventory shortage is ongoing--even among multi-million-dollar homes. As a result, we are seeing luxury homes sell in record time. The good news is that inventory declined at a slower rate last quarter, which has alleviated some of the upward pressure on prices, resulting in slightly lower price growth in the luxury market last quarter."
The report said luxury homes sold fastest in Oakland, Calif., where they found buyers in an average of 17 days, followed by San Jose (19); San Francisco (29); Seattle (43); and Washington, D.C. (44).
Refdin said cities across Florida and the western U.S. saw the largest increases in luxury home prices in the second quarter. In West Palm Beach, Fla., the average sale price for a luxury home soared 85 percent over last year to $2.24 million. Luxury home prices were up 59.1 percent in Boynton Beach, Fla., 27.7 percent in Henderson, Nev. and 27.5 percent in Seattle.
Bokhari said some portion of the gains in these cities can be attributed to the $10,000 cap on state income and property tax deductions established in the new tax code, enacted in December 2017. "More people are leaving high-tax states like New York and California for states with lower local income and property taxes like Florida, Nevada and Washington," he said.
A Redfin-commissioned survey in May of more than 1,300 people who had bought a home in the past year showed 36 percent of recent homebuyers said tax reform affected their home purchase decision.
The report said the average price for a luxury home fell the most in Boston, down by 16.7 percent year over year in the second quarter. During the same period, prices for non-luxury homes in Boston grew by 9.7 percent. Prices for high-end properties also fell in Clearwater, Fla. (-15.6%); Sandy Springs, Ga. (-1.9%); and Alexandria, Va. (-1.6%).
Inventory and Sales of Higher-Priced Homes: $2 million and Above
Redfin also reported homes for sale priced at or above $2 million fell by 7.3 percent in the second quarter from a year earlier. The decline in inventory is less severe than the prior three quarters, which saw double-digit, year-over-year drops in the number of $2 million-plus homes for sale. Sales of homes priced at or above $2 million rose by 11.4 percent in the second quarter, the eighth consecutive quarter of sales growth.