Luxury Housing Market Stabilizes in 3Q After Weak First Half

Redfin, Seattle, said average sale prices for luxury homes nationwide rose by 0.3 percent year over year to $1.6 million in the third quarter, marking the first time luxury prices did not drop after three straight quarters of declines.

The report said sales of homes priced at or above $1.5 million rose by 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. Sales of homes priced below $1.5 million experienced a similar annual increase, with a 2.9 percent rise.

Redfin said supply of homes priced at or above $1.5 million rose by 9.3 percent year over year in the third quarter, the sixth consecutive quarter of growth, albeit the smallest annual increase in a year. 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.

“Because recession fears peaked over the summer, [we] 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.”

The analysis tracked 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.

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

At the other end, luxury home prices in Charleston, S.C., declined by 17.6 percent to an average of $1.6 million in the third quarter, followed by Virginia Beach, Va. (down 7.6% to $1 million) and Reno, Nev. (down 6.9% to $1.5 million). Luxury prices also declined in San Diego (down 4% to $2.6 million), Miami (down 3.8% to about $2 million), San Jose (down 3.2% to $2.3 million) and Scottsdale, Ariz. (down 1.5% to $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 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.”

The report can be accessed at