For the first time since 2014, luxury home prices saw stronger price growth than homes in the bottom 95 percent of the market, according to the latest report from Redfin.
Luxury home prices rose 7.5 percent in the second quarter of 2017 compared to last year, which led to an average price increase of $1.79 million. The average price for non-luxury homes was up 7 percent compared to this time last year.
Redfin estimates that the price increase could be due to the drop in the number of luxury homes on the market. This is the first year that luxury inventory has fallen since 2014 when Redfin began reporting on the luxury market.
The number of homes priced for sale at or above $1 million fell 9.4 percent compared to the market levels last year while the number of homes priced at or above $5 million declined by 9.5 percent.
“After five consecutive quarters of double-digit inventory growth, the number of million dollar-plus homes for sale dropped by 9.4 percent,” said Redfin chief economist Nela Richardson. “Yet despite the strong uptick in prices, the luxury market is not nearly as competitive as the rest of the market. Only one in 50 luxury homes sold above list price in the second quarter, compared to more than one in four homes in the bottom 95 percent.”
Luxury homes priced at or above $1 million were up 22.2 percent from last year and homes priced at or above $5 million were up 19.6 percent. Redfin reports that this suggests that high-end buyers have confidence in the U.S. economy and see real estate as a smart place to invest their wealth.
Boston in particular fared extremely well in the luxury home market. The average sale price increased 21.4 percent to $4.35 million, while the average sale price of the rest of the market increased 6.6 percent.