Inventory Shortages Hitting Luxury Homes, Too
We’ve heard about housing inventory shortages for potential first-time home buyers, But according to Redfin, Seattle, the “haves” are facing shortages, too.
Redfin this week reported the number of luxury homes for sale fell by 20.4 percent in the first quarter from a year earlier, the fourth consecutive quarterly drop. In turn, this is driving the price of homes at or above $1 million up by nearly 8 percent from a year ago, to an average of $1.8 million.
Good news for sellers, who are seeing a better return on investment than envisioned; not so good for home buyers, who are having trouble finding homes; and when they do, paying more than they originally intended.
The Redfin 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. The average price for the bottom 95 percent of homes was $330,000, up 7.5 percent compared to a year earlier.
Redfin also noted the number of homes priced at or above $5 million dropped 19.2 percent from a year ago.
Redfin Chief Economist Nela Richardson said the inventory shortage in the luxury market is newer and somewhat less severe than the inventory shortage for more affordable homes. The number of homes for sale priced below $1 million has been in decline since the third quarter of 2015 and fell 22.8 percent in the first quarter compared to last year.
Richardson said competition for luxury homes is also escalating. The average luxury home that sold last quarter went under contract after 82 days on the market, nine days faster than the same period last year. While only 1.5 percent of luxury homes were bid up over the asking price, that’s up from 1.3 percent a year ago.
“For the first time since changes to the tax code went into effect, luxury buyers could no longer deduct more than $10,000 in state and local property taxes or interest for mortgages over $750,000,” Richardson said. “In a world of balanced supply and demand these changes would have dampened price growth. Instead, this quarter saw the strongest luxury price appreciation in four years, demonstrating that the current inventory crunch is extremely broad-based and affects buyers at every price range.”
The report said several cities in Florida and Nevada saw strong luxury price growth in the first quarter. In Vero Beach, Fla., the average sale price for a luxury home jumped 68 percent over last year to $2.65 million. The early January sale of a $17.5 million property likely played a role in driving up the average sale price in Vero Beach. Luxury home prices were up 51.3 percent in Reno, 26 percent in Las Vegas and 22.4 percent in Henderson, a Las Vegas suburb.
Some cities saw luxury home prices decline in the first quarter. The average price for a luxury home fell furthest in Long Beach, Calif., down 26.1 percent year over year last quarter. Prices for high-end properties also fell in Washington, D.C. (-9.6%), Fort Lauderdale (-7.3%) and Clearwater (-4.5%).
