Sales of homes priced at more than $2 million declined 16% year-over-year last quarter, marking the second-consecutive quarter of decline and the biggest drop in luxury sales since 2010, according to a Redfin report.
Redfin compiles the data by tracking home sales in more than 1,000 U.S. cities, excluding New York City, and defines a home as “luxury” if it’s among the top 5% most expensive homes sold in the quarter.
The price of homes in the remaining 95% of the market rose 2.7% year-over-year to an average of $300,000 in the first quarter, continuing six straight years of increases.
Declines in home sales, though, are not indicative of the available inventory. The report states that the amount of homes priced at more than $2 million increased for the fourth-consecutive quarter by 14%. The amount of luxury homes continues to rebound after supplies declined 10% in 2017.
“Because homeowners can’t deduct as much mortgage interest as they used to be able to, the calculus has changed when it comes to buying a home, especially an expensive one,” said Daryl Fairweather, Chief Economist at Redfin. “Although the new mortgage rule applies to everyone in the country, high earners in states with high income taxes like California and Massachusetts saw their tax bills surge. Not only do the new rules make it less desirable to purchase a multi-million dollar home in high-tax states, it has also motivated some people—especially those with big incomes and big housing budgets—to consider moving to places like Florida, Washington or Nevada, which have no state income tax.”
Homes priced at more than $2 million spent an average of 83 days on the market, compared to 69 days for homes priced under $2 million. The amount of homes sold above the listing price for luxury homes was just 1%, a steep drop from the 18% for non-luxury homes.
The news isn’t all bad for luxury homeowners, however, as prices for high-priced homes fell in just one-third of U.S. cities.
Boston reported a 22.4% decline in luxury home prices in the first quarter. Other markets that saw decreases were Newport Beach, California (-22.4%); Miami (-19.3%), San Jose, California (-2.7); and San Francisco (-0.3%).
Two Florida cities—West Palm Beach and St. Petersburg—recorded the nation’s biggest increases at 89.6% and 62.3%, respectively. Luxury home prices in West Palm Beach skyrocketed to more than $2.8 million.