High-end home prices rebounded in the second quarter, but the gain was modest.
The average sale price for luxury homes nationwide increased 1 percent year over year to $1.64 million in the second quarter of 2019. This marks a return, albeit a modest one, to the trend of rising luxury home prices, which was interrupted by a 1.7 percent decline in the first quarter of this year.
For this analysis, Redfin tracks 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 3.2 percent year over year to an average of $322,000 in the first quarter, a continuation of seven straight years of increases.
Sales of homes priced at or above $1.5 million declined 4.6 percent year over year last quarter. That’s the third consecutive quarter of dropping sales in the category, though the decline was much smaller than the 13.8 percent dip in the first quarter. Sales of homes priced under $1.5 million dropped 6.7 percent year over year.
Supply of homes priced at or above $1.5 million increased 18.7 percent in the second quarter, the fifth straight quarter of rising luxury inventory and the biggest increase in two years. Supply of homes priced under $1.5 million increased just 2.1 percent annually.
The minor gain in prices, along with dipping sales and a significant increase in supply, suggests that demand for luxury homes is tepid, especially compared to the past few years. But while the second quarter was relatively weak for the luxury market, it marked a small rebound from the first quarter, when prices declined for the first time in nearly three years, sales posted their biggest decline since 2010 and supply increased by double digits.
“Luxury home sales have been relatively soft since early 2018 when the tax code overhaul made it so that people with big mortgages and those living in high-tax states and counties couldn’t deduct as much from their annual tax bill,” said Redfin chief economist Daryl Fairweather. “But wealthy Americans who would otherwise be considering a multi-million dollar home purchase may now be a bit spooked that the economic expansion they’ve been enjoying for the past decade could soon be nearing its end.”
“Business owners and people with large investments are paying close attention to the escalating trade war and other uncertainties in global markets,” Fairweather explained. “Despite the fact that the economy at home is continuing to grow, these and other signs that a recession could be looming are likely causing well-heeled homebuyers to feel extra cautious about a big purchase or investment. The Fed’s rate cut is unlikely to have a big impact on the course of the economy and especially on the luxury housing market, where buyers are the least rate-sensitive. As a result, I expect to see continued caution in the high-end market as the future of the economy becomes more clear to those whose wealth is most closely tied to it.”
| Q2 2019 market summary | Luxury market (top 5%) | Rest of market (bottom 95%) |
| Average sale price | $1,642,000 | $322,000 |
| Average sale price YoY | 1% | 3.2% |
| Average days on market | 68 | 56 |
| Days on market YoY | -3 | -7 |
| Percent of homes that sold above list price | 1.3% | 23.4% |
| Percent of homes that sold above list price YoY (difference in percentage points) | -0.3 pts. | -2.7 pts. |
Luxury homes are selling slightly faster than they were last year. The typical luxury home that sold in the second quarter went under contract in 68 days, down slightly from 71 days a year before. That’s the fastest luxury homes have sold in at least a decade. The typical non-luxury home that sold during the same time period went under contract seven days faster than a year earlier, in 56 days.
Just 1.3 percent of homes priced in the top 5 percent sold above list price in the second quarter, down from 1.6 percent a year earlier. That’s a much smaller share of homes sold above list price than the other 95 percent of homes; among those, 23.4 percent sold above list price in the second quarter.
Biggest price gains
Two Las Vegas suburbs are among the cities with the biggest increases in luxury home prices in the second quarter. In Paradise, Nevada, where home prices in the top 5 percent of homes increased 46.8 percent year over year, more than any other city, the average luxury home sold for $1,079,000. In Henderson, Nevada, seventh on this quarter’s list, the average luxury home sold for $1,223,000, up 16.4 percent from the year before.
“From a tax perspective, Nevada is the best place to live in the contiguous United States if you are a high earner,” Fairweather said. “Nevada has long been a haven for California retirees looking to keep their tax bill low, but the reduced cap on SALT deductions has made Nevada an even more attractive migration destination for high-earners.”
Cities in Florida, including Fort Lauderdale, St. Petersburg and Tampa, also experienced some of the biggest increases in luxury home prices. Though it’s typical for Florida cities to be among the regions with the biggest increases in the category, this is the first time since the third quarter of 2017 a Florida city hasn’t topped the list.
Here’s a look at the top 10 cities where luxury home prices went up the most in the first quarter of 2019:
| Luxury market (top 5%) | Rest of market (bottom 95%) | |||
| City | Average sale price | YoY change | Average sale price | YoY change |
| Paradise, NV | $1,079,000 | 46.8% | $255,000 | 5.4% |
| Boston, MA | $4,709,000 | 37.7% | $803,000 | 6.1% |
| Fort Lauderdale, FL | $3,637,000 | 35.6% | $407,000 | -3.3% |
| St. Petersburg, FL | $1,608,000 | 28.5% | $267,000 | 8.1% |
| Philadelphia, PA | $1,154,000 | 20% | $240,000 | 5.3% |
| Overland Park, KS | $1,110,000 | 19.6% | $348,000 | 5.5% |
| Henderson, NV | $1,223,000 | 16.4% | $340,000 | 4% |
| Ann Arbor, MI | $1,139,000 | 15.3% | $386,000 | 4% |
| Tampa, FL | $1,340,000 | 14.1% | $268,000 | 2.7% |
| Denver, CO | $1,823,000 | 13.5% | $471,000 | 2.8% |
Biggest price declines
Seattle, Washington, D.C., Honolulu and San Jose—some of the most expensive real estate markets in the U.S.—are among the cities where luxury home prices have dropped the most. In Seattle, home prices for the top 5 percent of the market declined 14.4 percent to roughly $2.2 million in the second quarter, and in San Jose prices in the same category dipped 8.2 percent to $2.37 million.
“Part of the reason prices for luxury homes in Seattle are dropping this year is because it experienced a bigger market boom in all price ranges (especially the high-end market) in the last six years than most other cities, with Amazon and other tech firms bringing folks into the area quickly with high salaries. A bigger rise tends to lead to a bigger fall, and luxury is usually one of the first markets to feel the crunch,” said local Redfin agent Tamar Baber. “Now that the market has cooled down a bit, high-end buyers are scrutinizing their home purchases very carefully. Some of them feel the country could be headed toward a recession and aren’t willing to spend $2 million, $3 million or $4 million on a home right now unless it meets their exact specifications. Luxury sellers are slowly adjusting their pricing accordingly.”
Here’s the rest of the list of metros where luxury home prices have dropped most:
| Luxury market (top 5%) | Rest of market (bottom 95%) | |||
| City | Average sale price | YoY change | Average sale price | YoY change |
| Longmont, CO | $1,189,000 | -27.4% | $434,000 | -4% |
| Boynton Beach, FL | $1,113,000 | -20.6% | $259,000 | -1.9% |
| New Orleans, LA | $1,250,000 | -18% | $320,000 | -4.5% |
| Long Beach, CA | $1,565,000 | -15.3% | $575,000 | 3.6% |
| Seattle, WA | $2,193,000 | -14.4% | $727,000 | -3.8% |
| Washington, D.C. | $2,207,000 | -12.7% | $635,000 | -0.2% |
| Honolulu, HI | $2,914,000 | -12.6% | $630,000 | 1% |
| Charleston, SC | $1,662,000 | -12.5% | $364,000 | -0.3% |
| Delray Beach, FL | $2,348,000 | -10.3% | $291,000 | 9% |
| San Jose, CA | $2,370,000 | -8.2% | $1,047,000 | -7.8% |
Most expensive sales
From Beverly Hills to the shores of Lake Washington to Palm Beach, the quarter’s most expensive sales offer millions upon millions of dollars worth of luxury living. These are the 10 most expensive sales of the second quarter:
- Two homes sold for $45 million in the second quarter. The first is located in—where else?—Beverly Hills, California. The 5-bedroom, 12-bathroom estate comes complete with a swimming pool, tennis court, putting green and outdoor kitchen.
- Situated just down the road in Bel Air, California, this 7-bedroom, 10-bathroom, 20,000-square-foot home also sold for $45 million in the second quarter. The ultra-modern home has a 12-car garage, tennis court, infinity pool and sweeping views of Los Angeles.
- This 9,240-square-foot home is located on the shores of Lake Washington in Hunts Point, Washington. The home is situated on three-plus acres, with 300 feet of waterfront and views of the Seattle skyline and mountain ranges. It sold for $37.5 million.
- The fourth most expensive home sold in the second quarter is another Beverly Hills estate that sold for $34.7 million. The 7-bedroom, 11-bathroom house comes complete with a 3,200-square-foot master wing, movie theater, game room and saltwater pool.
- This 6-bedroom, 9-bathroom home sits on two acres in Brentwood, California, and it comes complete with a sauna, steam room, pool, security building and gym with racquetball court. It sold for $33.5 million.
- It’s back to Bel Air for the sixth most expensive property of the quarter, a 13,361-square-foot home that sold for $31 million. The former home of Elvis Presley, the property boasts a screening room, gym, spa, pool and tennis court.
- The seventh most expensive sale of the quarter is another Seattle-area lakefront property, a 5,350-square-foot home that sold for $30 million. The estate, located in Medina, Washington, sits on two acres and 280 feet of Lake Washington waterfront.
- This 12,100-square-foot Manhattan mansion was originally built as two four-story buildings, which have since been combined. The home, which was outfitted with brand-new plumbing, wiring, floors, walls, HCAV system, elevator and kitchen, was sold as a nearly complete renovation. It sold for $29.5 million.
- This waterfront property in Palm Beach features seven bedrooms, 10 bathrooms and more than 12,000 square feet of living space. The home, which was on the market for the first time in 50 years, sold for $28.7 million.
- Located next to the Presidio Open Space Preserve, this 6-bedroom, 8.5-bathroom San Francisco mansion features panoramic views of the Golden Gate Bridge and Alcatraz. The home, which had undergone a multi-year renovation, sold for $27 million.
METHODOLOGY
Redfin tracks the most expensive five percent of homes sold in more than 1,000 U.S. cities (not including New York City) and compares price changes to the bottom 95 percent of homes in those cities. Analysis is based on multiple-listing and county recorder sales data in markets served by Redfin. To determine cities with the biggest year-over-year price increases, we looked at cities with at least 45 luxury sales in the quarter and an average luxury sale price of $1 million or higher. For the national average home price, we included the top 5 percent of home sales by price nationwide, and for city-level average sale prices, we included the top 5 percent of sales by price for each individual market. For inventory and sales, Redfin looked at homes priced at or above $1.5 million that were sold in the second quarter of 2019.
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