Inventory Shortage Hits the Luxury Market, Sending Prices Up

Luxury home prices rose 4.9 percent in the third quarter from last year, to an average of $1.71 million, according to the latest luxury market report from Redfin, Seattle.

A sharp decline in the number of luxury homes on the market likely contributed to the price increase, said Redfin Chief Economist Nela Richarson. The number of homes for sale priced at or above $1 million fell 18.1 percent compared to the same period last year, marking two consecutive quarters of a decline in the number of high-end homes for sale. The number of homes priced at or above $5 million saw a similar decline at 19 percent. This marked the first quarter in which luxury inventory fell year over year since Redfin began reporting on the luxury market in 2014.

“There is still strong buyer demand for high-end homes,” Richardson said. “Despite declining inventory, luxury sales soared in the third quarter. Sales of homes priced at or above $1 million were up 11 percent from a year ago, while sales of homes priced at or above $5 million were up almost as much at 10 percent.”

The analysis tracks home sales in more than 1,000 cities across the country and defines the luxury market as the top 5 percent most expensive homes sold in the city in each quarter. The average price for non-luxury homes was $336,000 in the third quarter, up 5.3 percent compared to a year earlier.

The report also noted luxury homes are moving off the market faster, with the typical luxury home finding a buyer in 70 days, four days sooner than last year.

Longmont, Colo., led the nation with the strongest year-over-year price growth in the luxury segment in the third quarter. The average price of a luxury property increased 34.7 percent compared to last year to $1.55 million. Strong luxury home price gains were seen in Fort Lauderdale, Fla., (+28.7%) and St. Petersburg, Fla., (+19.6%).

Redfin reported the average price for a luxury home fell furthest in the third quarter in Delray Beach, Fla., San Francisco and Boca Raton, Fla., where prices fell 26.9 percent, 14.7 percent and 13.8 percent, respectively, compared to last year.

The report can be accessed at