Sale prices for the top 5% of homes in the market fell nationwide for the first time in nearly three years, while major Florida, South Carolina and Idaho markets strengthened
SEATTLE (May 1, 2019) — The average sale price for luxury homes nationwide fell 1.6 percent to $1.55 million in the first quarter of 2019, according to a new report from Redfin (www.redfin.com), the tech-powered real estate brokerage. This is the first annual decline in nearly three years.
Redfin tracked home sales in more than 1,000 cities across the U.S. (not including New York City) and defined a home as luxury if it was among the 5 percent most expensive homes sold in the quarter. In the other 95 percent of the market, home prices rose 2.7 percent year over year to an average of $300,000 in the first quarter, following six straight years of increases.
Sales of homes priced at or above $2 million fell 16 percent year over year last quarter, marking the second consecutive quarter of declining sales and the biggest luxury sales decline since 2010. The supply of homes priced at $2 million or above increased 14 percent annually in the first quarter, the fourth quarter in a row of increases.
The combination of rising inventory and declining prices and sales suggests that demand for luxury homes is down from last year. While the stock market’s shaky performance over the past six months could play a role in hindering demand for high-priced homes, tax reform measures that lowered the limits on deductions for mortgage interest and state and local taxes are largely to blame.
“Because homeowners can’t deduct as much mortgage interest as they used to be able to, the calculus has changed when it comes to buying a home, especially an expensive one,” said Redfin chief economist Daryl Fairweather. “Although the new mortgage rule applies to everyone in the country, high earners in states with high income taxes like California and Massachusetts saw their tax bills surge. Not only do the new rules make it less desirable to purchase a multi-million dollar home in high-tax states, it has also motivated some people—especially those with big incomes and big housing budgets—to consider moving to places like Florida, Washington or Nevada, which have no state income tax.”
Despite the overall decline, luxury home prices fell in just one-third of cities in this analysis. Below are the major cities in the metro areas where most of the luxury sales in our analysis take place:
Among those 10 luxury-market driving areas, the city of Boston recorded the biggest year-over-year price drop in the first quarter (-22.4%), the fourth consecutive quarter of luxury price declines. In Newport Beach (-21.8%), Miami (-19.3%), San Jose (-2.7%) and San Francisco (-0.3%), last quarter marked the second consecutive quarter of luxury price declines. In San Diego, where prices fell 1.4 percent, this was the first quarter of declining luxury home prices in two years.
Nine of the 10 markets listed above drove the national sales drop in the first quarter, with West Palm Beach posting a 23.1 percent decline in the number of $2 million-plus homes sold and Los Angeles posting a 17.9 percent decrease. In Seattle, sales of $2 million-plus homes were unchanged from last year.
Biggest price gains
Although luxury prices are down nationwide, some cities experienced significant increases. For the fourth quarter in a row, West Palm Beach saw the biggest increase in prices for homes in the top 5 percent of the market, up 89.6 percent year over year to more than $2.8 million last quarter. In St. Petersburg, Florida, prices were up 62.3 percent annually to nearly $2 million.
Some less popular luxury markets also experienced price increases. In Charleston, South Carolina, luxury prices were up 42.3 percent annually to $2.3 million. In Boise, Idaho, prices rose 17.2 percent annually to $1 million.
“Home prices in Boise are going up at all price points, especially in the luxury market,” said Paul Reid, the Redfin market manager in Boise. “We are helping a lot of homebuyers move here from Seattle, Southern California, Denver and the Bay Area. Many plan to work remotely, bringing their big-city salaries to Boise. These buyers can afford high-priced homes, and what they get for their money is substantially nicer than what they could buy for the same amount of money in the cities they’re coming from.”
To read the full luxury report, including the methodology and a list of the most expensive homes that sold in the first quarter of 2019, please visit: https://www.redfin.com/blog/luxury-home-prices-sales-decline.
Redfin also issued a blog post showcasing homes across the country currently listed near the average luxury home price of $1.55 million. A typical luxury buyer could purchase a six-bedroom mansion in Austin, a beachy townhome near San Diego, or a one-bedroom loft in Brooklyn. To see how much home the average luxury price buys in different parts of the country, visit: https://www.redfin.com/blog/luxury-homes-for-sale-price-reduction.
Redfin (www.redfin.com) is a technology-powered real estate brokerage, combining its own full-service agents with modern technology to redefine real estate in the consumer’s favor. Founded by software engineers, Redfin has the country’s #1 brokerage website and offers a host of online tools to consumers, including the Redfin Estimate, the automated home-value estimate with the industry’s lowest published error rate for listed homes. Homebuyers and sellers enjoy a full-service, technology-powered experience from Redfin real estate agents, while saving thousands in commissions. Redfin serves more than 85 major metro areas across the U.S. and Canada. The company has closed more than $85 billion in home sales.
For more information or to contact a local Redfin real estate agent, visit www.redfin.com. To learn about housing market trends and download data, visit the Redfin Data Center.