Homes Sold Above List Price Fall to 3-Year Low; Luxury Homes Pick Up
Zillow, Seattle, said the share of U.S. homes that sold for more than their list price in 2019 fell to 19.9%, the lowest annually since 2016.
In a separate report, though, Redfin, Seattle, said the average sale price for luxury homes nationwide climbed 1.6% year over year to $1.63 million in the fourth quarter, marking the largest gain in more than a year, albeit not nearly close to “outsized growth” of recent years.
Zillow said the dip in the share of homes selling for more than list price reflects in part to a slower market last spring. But Zillow economist Jeff Tucker suggest the current “historic” inventory shortage could put more money in sellers’ pockets leading into the 2020 home shopping season
Zillow characterized the 2019 housing market as having “returned to normal” after a frenzied couple of years marked by intense bidding wars in many markets. It said home value growth slowed throughout 2019 to a rate more in line with historic norms than the elevated levels of the past few years.
The report said nearly one-fifth (19.9%) of U.S. homes sold for more than their asking price in 2019, down from 21.5% the previous year. This drop breaks a streak of four consecutive years in which a greater share of homes sold above list price as the market picked up steam.
“The housing market took a breather in 2019, after years of red-hot sellers’ markets,” Tucker said. “Many sellers were caught off-guard by the changing conditions, and ended up accepting offers at or below list prices that were dreamed up during the height of the frenzy.”
Despite seeing recent year-over-year drops in home value, San Francisco (48.6% of homes sold above list) and San Jose (38.8%) top the list of metros with the greatest share of homes sold above list among the top 35, a continuing sign of just how competitive the Bay Area remains even after cooling significantly in 2019. Boston (34.7%), Minneapolis-St. Paul (34.3%) and Seattle (31.2%) have the next-highest shares.
The coolest top-35 markets were Miami (8.9% of homes sold above asking), Las Vegas (12.6%) and Tampa (13.3%). Las Vegas fell from 26.8% a year ago, which was the 12th-highest share in the country. Only San Jose’s share decreased by more, from 63.6% to 38.8%.
Zillow reported the median amount above asking that sellers realized fell to $5,100, down from $5,500 in 2018 and the lowest since at least 2011. San Jose ($41,000 above asking) and San Francisco ($37,500) lead the country in this measure as well, a product of both intense competition among buyers and the high prices of real estate there making these figures relatively in line. Still, these figures are much lower than a year ago when San Jose homes typically sold for $101,000 above asking and those in San Francisco sold for $50,000 above asking.
But Tucker noted the cloudy outlook for sellers began to clear late in the year after inventory buildups in several cities were whittled back down to record lows, suggesting a hot spring sellers’ market is around the corner. “Sellers hoping to cash in and upgrade should proceed with care, however, as the same tight conditions that may drive up their sale price will be facing them on the other side when they look to buy their next home,” he said.
Inventory is “incredibly tight” right now, Tucker said—last month, the National Association of Realtors said existing home inventories fell to a near record-low 3.0 months–and this scarcity is a main driver of bidding wars that drive up sale prices.
“We could be headed for a reversal in 2020,” Tucker said. “That’s good news for prospective sellers, but means buyers will need to be on the ball this shopping season. Monthly trends in 2019 show that the share of homes sold above list was greatest in the fall months–right as inventory was approaching its low point–which is typically a slower time of year for the housing market after home shopping season wraps up.
Meanwhile, Redfin reported the average sale price for luxury homes nationwide rose by 1.6% year over year to $1.63 million in the fourth quarter the largest gain since third quarter of 2018. Still, while this increase represents an improvement from the 4% drop in the first quarter of 2019, it hasn’t yet returned to the outsized growth of recent years.
Redfin 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% most expensive homes sold in the quarter. It found while luxury prices inched upward in the fourth quarter, homes in the other 95% of the market saw prices increase 5.2% annually to an average of $317,000, the third consecutive quarterly gain.
Sales of homes priced at or above $1.5 million rose 11.2% in the fourth quarter, marking the second-consecutive increase following three quarters of declines. Sales of homes priced below $1.5 million climbed 6% year over year.
“Demand for luxury is improving,” said Redfin chief economist Daryl Fairweather.. That’s showing up primarily in an increase in sales right now, but it’s also putting some slight upward pressure on prices. We’re ending the year in a much better position than we started, which is a good sign for 2020.”
The report said sSupply of active listings priced at or above $1.5 million grew 5.8% year over year in the fourth quarter, the smallest annual increase in nearly two years. Supply of active listings priced below $1.5 million dropped 5.1% year over year during the fourth quarter.
“Back in 2018, prices were growing just as fast in the top of the market as they were in the bottom of the market,” Fairweather said. “It’s unclear if that’s going to happen again, as prices are already so high, and a lot of the demand seems to be at the low end. But if wealth inequality continues to rise and the rich keep getting richer, it’s very possible that luxury could accelerate to that point again.”
The report said the typical luxury home sold in the fourth quarter took 60 days to go under contract, seven days longer than last year. In the non-luxury market, the typical home went under contract in 43 days, one day faster than a year earlier.
Luxury prices increased in two-thirds of the markets tracked by Redfin, with the top three gainers in the southeast. West Palm Beach, Fla., topped the list for the second straight quarter, with a 104.5% year-over-year increase to an average price of nearly $3 million. It was followed by Charlotte, N.C. (up 21.2% to $1.26 million) and Tampa, Fla. (up 20.6% to $1.30 million). The top 10 cities with the largest luxury price gains also showed impressive performance in the rest of the market, with all but one growing more than 5% year over year.
Luxury home prices in St. Petersburg, Fla. slid 13.3% to an average of $1.21 million in the fourth quarter, the largest drop of any city. Next came San Diego (down 13.1% to $2.46 million) and Mesa, Ariz. (down 8.7% to $698,000). Luxury prices also slipped in San Francisco and Chicago.
The report can be accessed at https://www.redfin.com/blog/q4-2019-luxury-housing-report.