Inventory Shortage Hits the Luxury Market, Sending Prices up 4.9 Percent in the Third Quarter

Redfin economist says there is still strong buyer demand for high-end homes

SEATTLE — Luxury home prices rose 4.9 percent in the third quarter of 2017 compared to last year, to an average of $1.71 million, according to the latest luxury market report from Redfin, the next-generation real estate brokerage. 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.

A sharp decline in the number of luxury homes on the market likely contributed to the price increase. 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," said Redfin chief economist Nela Richardson. "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 as 10 percent."

Luxury homes are also moving off the market faster, with the typical luxury home finding a buyer in 70 days, four days sooner than last year.
The city of 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%).

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

To read the full report, complete with city-specific data and charts, as well as a list of the five highest-priced home sales in Redfin markets in the third quarter, click here.

About Redfin

Redfin is the next-generation real estate brokerage, combining its own full-service agents with modern technology to redefine real estate in the consumer's favor. Founded by software engineers, Redfin has the country's #1 brokerage website and offers a host of online tools to consumers, including the Redfin Estimate, the automated home-value estimate with the industry's lowest published error rate for listed homes. Homebuyers and sellers enjoy a full-service, technology-powered experience from Redfin real estate agents, while saving thousands in commissions. Redfin serves more than 80 major metro areas across the U.S. The company has closed more than $50 billion in home sales.