1Q Luxury Home Sales Down 16%
Sale prices for the top 5% of homes in the market fell nationwide for the first time in nearly three years, said Redfin, Seattle.
The report said the average sale price for luxury homes nationwide fell 1.6 percent to $1.55 million in the first r. 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. Meanwhile, 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.
Redfin Chief Economist Daryl Fairweather said 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,” Fairweather said. “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.”
Redfin said despite the overall decline, luxury home prices fell in just one-third of cities in this analysis. 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.
Some cities experienced significant increases. Redfin said 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.
