The nation’s luxury market is seeing an inventory shortage and a quarterly price increase of 4.9 percent in as a consequence according to a new report from Redfin.
The analysis tracks the top 5 percent of the most expensive homes sold in more than 1,000 cities across the U.S. each quarter.
Q3 showed the average price increasing from last year not only in the luxury sector, but also non luxury-homes, which saw an average price of $336,000, an increase of 5.3 percent, by comparison.
Why the price increase?
It’s likely due to a sharp decline in the number of luxury homes on the market. The number of homes priced at or above $1 million fell 18.1 percent for the second consecutive quarter, and homes priced at or above $5 million saw a 19 percent decrease.
But Redfin’s chief economist Nela Richardson said there’s still a strong buyer demand for high-end homes.
“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,” she said.
Strong year-over-year price growth in the third quarter was evident in two cities in Colorado: Longmont (34.7 percent) and Littleton (15.1 percent).
Several Florida coastal communities also saw luxury price gains including Fort Lauderdale, St. Petersburg, West Palm Beach, Pompano Beach and Sarasota, up 15 percent from last year.
Delray Beach, Florida, saw the average price fall furthest for a luxury home, down 27 percent from a year ago to $2.18 million. For the third consecutive quarter Delray Beach saw sharp declines in the luxury sector, and home prices in the bottom of the market also fell.
Redfin’s market manager in South Florida, Aaron Drucker, points to the mix of homes listed and sold as well as the fact that several $10 million-plus home sales occurred in 2016, which made this year’s numbers look low in comparison, to explain the decline.
Luxury home prices also fell year-over-year in San Francisco, Boston, Portland and Seattle; however, home prices outside the luxury markets in those cities continued to rise.