Luxury home prices rose 0.7 percent in the fourth quarter of 2016 compared to last year, to an average of $1.6 million. Redfin’s 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 percent most expensive homes sold in the city in each quarter.
The bottom 95 percent of the market performed far better than the luxury market in fourth quarter. This marks the eighth consecutive quarter where non-luxury properties outperformed their luxury counterparts in price growth. An average non-luxury home sold for $312,000, up 6.1 percent compared to a year earlier, the largest such gain since the first quarter of 2014.
The supply of homes for sale above $1 million ticked up 0.6 percent in the fourth quarter, compared to a year earlier, while the number of homes priced above $5 million jumped 15.1 percent.
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”The Trump rally in the stock market did little to move prices in luxury real estate,” said Redfin chief economist Nela Richardson. “Cities with booming luxury markets attracted traditional high-income buyers seeking a place to live, work and grow their families. Prices in cities with more transient luxury buyers, looking for investments or a place to park their wealth, had more tepid growth to close out 2016.”
After four straight quarters of a Florida city leading the pack, Santa Clarita, California, a suburb of Los Angeles, was the biggest winner in terms of luxury price gains among all cities surveyed, up 113.8 percent in the fourth quarter compared to a year earlier, to an average of $2.0 million. Los Angeles, in seventh place, saw luxury prices surge 15 percent, to $4.9 million. Of the 10 zip codes with the most $1 million-plus homes for sale, nine were in California, providing ample opportunity for the luxury buyer.
“Santa Clarita has seen a lot of new construction and master-planned community developments over the past few years, which are raising its profile and attracting new buyers as these homes are now appearing on the market,” said Redfin real estate agent John Underwood. “Most luxury homebuyers in Santa Clarita commute to Los Angeles, but they get far more bang for their buck living in this suburb, where price per square foot is very favorable. The public school system in Santa Clarita is highly rated, which is a draw as well.”
In Florida, which still had three top-10 luxury markets, sister cities Tampa (27.1 percent) and St. Petersburg (10.1 percent) each had significant luxury appreciation, with the average luxury price at $1.1 million for both locales.
“High-end builders are putting up luxury high rises overlooking the water in both downtown Tampa and St. Petersburg,” said Redfin real estate agent Wendy Peterson. “In the fourth quarter of last year, these developers were incentivizing purchases by paying for closing costs, buying down interest rates and offering complimentary upgrades. The downtowns are becoming more walkable, which only adds to the appeal of living nearby. For example, the Heights project in Tampa will be a 40-acre public market fashioned after historic Pike Place in Seattle.”
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The luxury market in Nevada saw home prices fall significantly last quarter, with prices down 32.2 percent (to an average of $1.0 million) in Reno and down 14.1 percent ($1.1 million) compared to last year in Paradise.
“There just weren’t very many homes available, even in the luxury market,” said Reno Redfin real estate agent Jaime Moore. “In summer, many of those who did list overpriced their homes. So come autumn we were left with a lot of stale listings and price drops, pushing those who may have listed then to wait until spring in the hope that the market would change. We anticipate more homes soon, but the choice just wasn’t there at the end of last year, lowering buyer interest and prices.”
The Washington, D.C., metro area luxury market also took a hit, with prices down 16.2 percent in the District itself to an average of $2.1 million, and down 1.0 percent in nearby Alexandria to $1.3 million.
“The D.C. metro area is very transient,” said Redfin real estate agent Dan Galloway, “We see people come here intending to stay only three to five years, and we had a major election last quarter, highlighting this effect and creating uncertainty. Dropping big money on a home if you will not live here long enough to recoup the investment often doesn’t make sense. Also, many luxury buyers here have wide-ranging assets that are based outside the U.S., and so the rising tensions with Russia and the Chinese economic slowdown are more impactful than they would be for the average U.S. buyer.”
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When looking at which cities had the largest gap between the price of a luxury home and the price of an average home, Florida came out on top, with seven of the top 10 most unequal cities. The most unequal city, Fort Lauderdale, had an average luxury home sell for 8.3 times that of a home in the bottom 95 percent of the market there.
Curious about the most expensive homes sold last quarter? Take a peek at the top-10 most expensive sales and live vicariously through these new luxury owners:
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.
