Luxury Housing Market Stabilized in the Third Quarter After a Weak First Half

 In Featured Post, Luxury Report, Real Estate News & Analysis

Sales of homes priced at or above $1.5 million increased 3.2% annually, a sign that the high-end market is moderating after recession fears marred the first two quarters. 

The average sale price for luxury homes nationwide rose 0.3 percent year over year to $1.6 million in the third quarter of 2019. Though that’s essentially flat, it marks the first time luxury prices did not drop after three straight quarters of declines.

luxury home prices

For this analysis, Redfin tracks home sales in more than 1,000 cities across the U.S. (not including New York City) and defines a home as luxury if it’s among the 5 percent most expensive homes sold in the quarter. In the other 95 percent of the market, home prices increased 3.6 percent annually to an average of $319,000 in the third quarter.

Sales of homes priced at or above $1.5 million rose 3.2 percent in the third quarter. The increase comes after three straight quarters of dipping sales in the luxury sector, including a 12 percent annual drop in the first quarter of 2019. Sales of homes priced below $1.5 million experienced a similar annual increase, with a 2.9 percent rise. 

luxury home sales

Supply of homes priced at or above $1.5 million rose 9.3 percent year over year in the third quarter, the sixth consecutive quarter of growth, albeit the smallest annual increase in a year. Supply of homes priced under $1.5 million dropped 6.9 percent year over year during the third quarter.

The big increase in luxury supply was largely driven by a boost in the number of high-priced homes hitting the market. New listings priced at or above $1.5 million rose 6 percent year over year in the third quarter, while new listings of homes priced below $1.5 million dropped 4 percent. 

luxury inventory

Although the luxury housing market is still relatively tepid, it’s stronger than it was during the first half of the year. 

“Because recession fears peaked over the summer, I expected luxury home prices and sales to dip. But it appears that nerves alone weren’t enough to scare off wealthy homebuyers,” said Redfin chief economist Daryl Fairweather. “The U.S. economy grew faster than expected in the third quarter, partly as a result of healthy consumer spending. Those results, along with flat luxury home prices and rising sales, go to show that Americans are basing their spending habits on their own personal financial situation rather than concerns about global economic tensions. For many, that means strong incomes and good employment prospects.”

Although Redfin doesn’t track New York City housing data, it appears that Manhattan was an exception to the stabilizing luxury market last quarter as sales plummeted due to an increase in the city’s mansion tax.

Luxury housing market summary 

Q3 2019 national housing market summary Luxury market (top 5%) Rest of market (bottom 95%)
Average sale price $1,595,000 $319,000
Average sale price YoY 0.3% 3.6%
Average days on market 53 37
Days on market YoY 12 2
Percent of homes that sold above list price 22% 24.6%
Percent of homes that sold above list price YoY (difference in percentage points) -5.5 pts.  -1.3 pts. 

Twenty-two percent of luxury homes sold above their list price in the third quarter, down from more than 27 percent a year ago. In the non-luxury market, 24.6 percent of homes sold above list price, a small decline from 25.9 percent the year before. 

The typical luxury home sold in the third quarter took 53 days to go under contract, 12 days slower than last year. Inventory growth peaked in the first quarter but sales only started to increase in the third quarter, which means some of the luxury homes listed in the beginning of the year were on the market for several months.

Biggest price gains 

Luxury prices increased in more than two-thirds of the markets tracked by Redfin. West Palm Beach tops the list, with a 128.3 percent year-over-year increase to an average price of more than $3.7 million. It’s followed by two other cities in Florida: Clearwater (up 49.3% to $1.6 million) and Delray Beach (up 47.3% to $2.6 million). 

West Palm Beach Redfin agent Elena Glatko said one driving force in the particularly large year-over-year price increase in West Palm Beach in the third quarter was dozens of sales in a new luxury condo building, with sale prices for individual units spanning from roughly $4 million to more than $12 million. Glatko also noted a few other factors that contribute to the area’s strong luxury market. 

“Homebuyers can get a lot more for their money in West Palm Beach than in more expensive places like Miami and Palm Beach Island,” Glatko said. “And I’ve noticed that both luxury buyers and sellers feel that real estate is one of the assets least susceptible to economic changes. They believe that over time, luxury real estate is a better investment than the stock market.”

Here’s a look at the top 10 cities where luxury home prices rose most in the third quarter of 2019:

Luxury market (top 5%) Rest of market (bottom 95%)
City Average sale price YoY change Average sale price YoY change
West Palm Beach, FL $3,761,000 128.3% $248,000 14.2%
Clearwater, FL $1,600,000 49.3% $228,000 8.7%
Delray Beach, FL $2,606,000 47.3% $266,000 -0.5%
Paradise, NV $1,032,000 19.8% $258,000 2.2%
Raleigh, NC $1,160,000 19.3% $310,000 5.8%
Sacramento, CA $1,021,000 18.5% $352,000 5.9%
Boca Raton, FL $2,961,000 17.9% $359,000 2.9%
Denver, CO $1,663,000 11.8% $457,000 2.6%
Charlotte, NC $1,168,000 11.1% $289,000 10.2%
Las Vegas, NV $1,093,000 10% $287,000 4.1%

Biggest price declines

Luxury home prices in Charleston, South Carolina declined 17.6 percent to an average of $1.6 million in the third quarter, a bigger drop than any other city. Next come Virginia Beach (down 7.6% to $1 million) and Reno (down 6.9% to about $1.5 million). 

Luxury prices also declined in San Diego (down 4% to about $2.6 million), Miami (down 3.8% to about $2 million), San Jose (down 3.2% to about $2.3 million) and Scottsdale (down 1.5% to about $2 million).

“There’s been less activity in the luxury market in Miami over the last few years, and now it’s definitely shifting toward buyer’s favor,” said local Redfin agent Jessica Johnson. “ Sellers in the area can’t get away with overpricing their home because buyers are less willing to overpay when they know luxury prices aren’t increasing in Miami—if they can’t get a good deal on one particular luxury home, they can probably go down the street or to another neighborhood and find a seller who is willing to negotiate with them.”

Here are the top 10 cities where luxury home prices declined most in the third quarter of 2019:

Luxury market (top 5%) Rest of market (bottom 95%)
City Average sale price YoY change Average sale price YoY change
Charleston, SC $1,583,000 -17.6% $352,000 -3.1%
Virginia Beach, VA $1,000,000 -7.6% $296,000 8.7%
Reno, NV $1,447,000 -6.9% $395,000 1.8%
New Orleans, LA $1,138,000 -5.1% $297,000 4.9%
San Diego, CA $2,621,000 -4% $664,000 0.8%
Miami, FL $1,965,000 -3.8% $337,000 5%
Chicago, IL $1,669,000 -3.7% $325,000 2.3%
San Jose, CA $2,282,000 -3.2% $1,003,000 -5.7%
Portland, OR $1,238,000 -1.9% $460,000 2.3%
Scottsdale, AZ $2,046,000 -1.5% $502,000 2.6%

Most expensive sales 

Not everyone can afford a brand-new Beverly Hills estate with eight bedrooms or a luxurious 2,000-acre ranch in Utah, but we can all look at pictures. Here are the 10 most expensive home sales of the third quarter:

  1. The trophy for most expensive sale of the third quarter goes to this 25,000-square-foot  Bel Air estate, which sold for a jaw-dropping $75 million in July. The 9-bedroom, 15-bathroom home comes with a pool, gym, game room and sweeping city and ocean views. 
  2. For the second most expensive sale of the quarter, we move across the country to Palm Beach, Florida, where this 8-bedroom, 19-bathroom home sold for $43 million. The property sits on more than two acres, with nearly 300 feet of waterfront on the Atlantic Ocean and Lake Worth. 
  3. It’s back to the West Coast, where this 8-bedroom, 11-bathroom estate in Beverly Hills sold for $42.8 million. The brand-new home features a grand entry with 30-foot ceilings, pool, sweeping views, guest house, bocce court and rich landscaping. 
  4. This palatial oceanfront home in Palm Beach, with seven bedrooms and 16 bathrooms, sold for more than $40 million. The property comes with 35,000 square feet of indoor and outdoor living space, complete with a home theater, wine room, fitness center and barber shop. 
  5. Situated between the beach and the bay across three lots, this 5-bedroom, 8-bathroom home in Newport Beach sold for $35 million. In addition to the pool and outdoor living space, the property comes with a brand-new dock that can accommodate up to four boats. 
  6. This French-style home in Westlake Village, California, sold for $35 million. The 33-acre compound comes with its own lake and mill house, formal gardens, stone bridges and cascading pools, and the main residence spans more than 32,000 square feet. 
  7. Riverbend Ranch is an 8-bedroom, 8.5-bathroom estate located in Oakley, Utah that sold for $32.5 million. The 1,918-acre property sits on the Weber River, and comes with a heli-pad, tennis court, barn and large stone patio with a firepit. 
  8. Back in Beverly Hills, this vacant lot located high in the hills sold for $30 million. The lot has unobstructed views stretching from downtown Los Angeles to the Pacific Ocean and comes with architectural plans for a 7-bedroom, 14-bathroom residence that comes with a bowling alley, nightclub, bar, theater, salon and gym. 
  9. This 5-bedroom, 6-bathroom oceanfront home is newly renovated, with a chef’s kitchen, glass wine closet, home theater and deck with a firepit. The Malibu home, which comes with an expansive deck and stunning views, sold for $29.1 million. 
  10. In Naples, Florida, this 13,000-square-foot waterfront home sold for $28 million. The residence comes with five bedrooms, 10 bathrooms, expansive views and its very own putting green. 

Methodology 

Redfin tracks the most expensive five percent of homes sold in more than 1,000 U.S. cities (not including New York City) 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 cities with the biggest year-over-year price increases and decreases, we looked at cities with at least 45 luxury sales in the quarter and an average luxury sale price of $1 million or higher. For the national average home price, we included the top 5 percent of home sales by price nationwide, and for city-level average sale prices, we included the top 5 percent of sales by price for each individual market.  For inventory and sales, Redfin looked at homes priced at or above $1.5 million that were sold in the third quarter of 2019.

The post Luxury Housing Market Stabilized in the Third Quarter After a Weak First Half appeared first on Redfin Blog.

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