Luxury home prices rose 1.4 percent in the third 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.
For seven consecutive quarters, price growth in the high-end segment has lagged the bottom 95 percent of the market, which has seen steady year-over-year price growth of around 5 percent for the past two years.
Stock market volatility early in the year followed by global economic uncertainty related to the Chinese economy and Brexit may have dampened price growth, but it didn’t keep luxury clientele from buying. Sales of homes priced above $1 million increased 6.8 percent in the third quarter from a year prior. Sales of homes priced above $5 million were mostly flat, inching up a mere 0.4 percent.
The supply of homes for sale priced above $1 million fell 2.4 percent in the third quarter from a year prior, while those priced above $5 million increased 17.2 percent.
“The luxury market improved in the third quarter, but its recovery was incomplete at best. Price growth lags in the more affordable segment of the housing market and sales at the very high end were stuck in neutral,” said Redfin chief economist Nela Richardson. “The super high-end homes are particularly out of sync with the rest of the market and seem to be bending toward a price correction given the tepid sales growth and double-digit pop in inventory at price points over $5 million.”
Several cities in Florida’s Palm Beach County saw significant luxury price gains in the third quarter. In Delray Beach, the average luxury home sold for $2.98 million, a 70 percent increase over last year. Luxury prices surged 38 percent in Boca Raton and 21.8 percent in West Palm Beach.
Alex Garcia, a Redfin agent in Palm Beach County, said that the boom in luxury prices is due to new building in waterfront areas and reurbanization of downtown areas.
“We are seeing builders tearing down older homes on waterfront and water-accessible properties and rebuilding with all the bells and whistles of a modern property,” said Garcia. “Luxury buyers in Delray and Boca are drawn to single-family homes with water access, but also proximity to revitalized downtown areas with trendy restaurants and shopping. While vacation homes make up some of our luxury market, we also have a lot of affluent buyers who live here as a primary residence.”
While prices were hot in the Palm Beach area, Miami suffered in the third quarter under a glut of luxury condominiums. Prices for luxury homes in Miami fell nearly 10 percent from a year ago to $1.4 million. The overabundance of luxury condo inventory in Miami is not a new story, but Redfin agents predict that prices will continue to remain soft as long as buyers have lots of choices and negotiating power.
Luxury property prices in Georgia also sunk last quarter, falling roughly 12 percent in the suburban Atlanta cities of Sandy Springs and Alpharetta. In the city of Atlanta, luxury home prices dipped 1.2 percent.
Sascha Gummersbach, a Redfin agent in Atlanta, said that a property over $1 million in the area will come with upwards of 6,000 square feet on a large lot with a pool and other amenities. He says Alpharetta continues to be a popular area with buyers and the price decline may have had to do with buyers having more options to choose from.
Houston’s luxury properties have declined in price for four straight quarters. A drop in energy prices has likely contributed. High-end buyers with fortunes tied to the energy sector may be hesitant to overspend in the current economic environment.
It’s worth noting that in every city on our “biggest losers” list, only luxury home prices fell in the third quarter, while the bottom 95 percent of the market saw prices rise. It’s common for the luxury market to move independently of the broader real estate trends.
Most Expensive Homes
Curious about the most expensive homes sold last quarter? Take a peek at the mega-mansions and luxury condos that recently found new 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 at least $1 million.
