Redfin: Housing Shortage Now Affecting Top of the Housing Market

Luxury home prices rose 7.5 percent in the second quarter compared to last year to an average $1.79 million, reported Redfin, Seattle. 

“The housing shortage is now affecting the top of the housing market,” said Redfin Chief Economist Nela Richardson. She noted that after five consecutive quarters of double-digit inventory growth, the number of million dollar-plus homes for sale dropped by nearly 10 percent.

“Yet despite the strong uptick in prices, the luxury market is not nearly as competitive as the rest of the market,” Richardson said. “Only one in 50 luxury homes sold above list price in the second quarter, compared to more than one in four homes in the bottom 95 percent.”

Redfin tracked home sales in more than 1,000 cities across the country; it defines the luxury market as the top 5 percent most expensive homes sold in the city in each quarter.

This represents the first time since fourth-quarter 2014 that luxury homes displayed stronger price growth than homes in the bottom 95 percent of the market, Richardson said.

The average price for non-luxury homes equaled $336,000 in the quarter, up 7 percent compared to a year earlier.

Richardson said the luxury price increase may have been driven by a drop in the number of luxury homes on the market. The number of homes for sale at or above $1 million fell 9.4 percent compared to the same period last year. The number of homes priced at or above $5 million saw a similar decline at 9.5 percent.

Irvine, Calif., led the nation with the strongest year-over-year price growth in the luxury segment, Redfin reported. The average price of an Irvine luxury property increased 37.4 percent in the second quarter compared to last year to $3.5 million. Reno, Nev., Long Beach, Calif., and Clearwater, Fla., also saw average luxury home price gains exceeding 25 percent.

Richardson noted the inventory of high-end homes did not decline in every city. In Miami, Fla., for example, the number of homes for sale priced at or above $5 million increased 166 percent compared to last year. “A saturation of luxury properties sent the average price for a luxury home down 23 percent from a year ago, the steepest decline in the luxury cities we cover,” the report said. Luxury home prices also fell steeply in Delray Beach, Fla., down -17.3 percent and Alpharetta, Ga., down 10.5 percent.