The supply shortage of homes is not limited to the median home only. The first quarter of 2018 saw the luxury housing market also feeling the heat of inventory shortage as prices for high-end homes saw the strongest appreciation in four years, according to a report on the luxury housing market by Redfin.
This quarterly report tracks home sales in more than 1000 cities across the country and defines a home as a luxury property if it is among the top 5 percent most expensive homes sold in the city during the quarter.
Prices for luxury homes rose nearly 8 percent to an average of $1.8 million during the quarter, Redfin found. However, this did nothing for sales of these homes which fell 20 percent marking four consecutive quarters of declining sales in this segment of the housing market.
“For the first time since changes to the tax code went into effect, luxury buyers could no longer deduct more than $10,000 in state and local property taxes or interest for mortgages over $750,000,” said Nela Richardson, Chief Economist at Redfin. “In a world of balanced supply and demand, these changes would have dampened price growth. Instead, this quarter saw the strongest luxury price appreciation in four years, demonstrating that the current inventory crunch is extremely broad-based and affects buyers at every price range.”
The inventory shortage is also escalating competition for luxury homes. The report indicated the average luxury home that sold last quarter went under contract after 82 days on the market, nine days faster than the same period last year. While only 1.5 percent of luxury homes were bid up over the asking price, that's up from 1.3 percent in the first quarter of 2017.
In terms of regions, Florida and Nevada saw strong growth in prices of luxury homes with average sale prices in Vero Beach Florida increasing 68 percent to $2.65 million over last year while those in Reno going up 51.3 percent. On the other hand, some cities known for their luxury homes actually saw a decline in prices.
Homes in Long Beach, California led this group of cities with prices falling 26.1 percent year-over-year in the first quarter. Prices in Washington, D.C. also saw a decline of 9.6 percent as did Fort Lauderdale, which saw prices falling 7.3 percent.