Luxury home prices rise nearly 8 percent to average sales price of $1.8 million in the first quarter of 2018, according to a new report from Redfin.
An analysis of over 1,000 cities by Redfin indicates prices of the top five percent most expensive homes rose 7.9 percent following a decline in supply. In comparison, the average price for the bottom 95 percent of homes rose 7.5 percent to $330,000 since last year.
Since the second quarter of 2017, luxury home supply continues to decline, while competition for these homes is on the rise. Last quarter, the average luxury home sold nine days quicker than the same quarter last year, after 82 days on the market.
The shortage of luxury homes is more recent and less severe than the shortage of affordable homes. The number of homes priced below $1 million fell 22.8 percent in the first quarter compared to last year.
“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, Redfin chief economist. “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 strongest luxury price growth in the first quarter was seen in Vero Beach, Florida with a 68 percent price increase since the previous year. Miami luxury home prices increased 18.7 percent while Boston prices increased 18.5 percent.
However, some cities faced a decline in luxury home prices. In the first quarter, the average price for a luxury home fell furthest in Long Beach, California, down 26.1 percent in the past year. Luxury home prices in Houston fell 3.2 percent, with an average sale price of $1,315,000.