The average sale price for luxury homes in the U.S. climbed 1.6 percent year-over-year to $1.63 million in the fourth quarter of 2019, according to a recent Redfin report that tracked luxury home sales – defined as among the 5 percent most expensive homes sold in the quarter – in more than 1,000 cities across the country.
While the increase marked the largest gain the luxury market has seen since the third quarter of 2018, it still has a way to go to get back to previous highs.
“Back in 2018, prices were growing just as fast in the top of market as they were in the bottom of the market, and it’s unclear if that’s going to happen again, as prices are already so high and a lot of the demand seems to be at the low end,” said Redfin Chief Economist Daryl Fairweather. “But if wealth inequality continues to rise and the rich keep getting richer, it’s very possible that luxury could accelerate to that point again.”
Still, the 1.6 percent gain in luxury home prices was far less than the 5.2 percent year-over-year increase in home prices seen in the other 95 percent of the market, up to an average of $317,000.
Homes in the luxury sector took an average of 60 days to go under contract – seven days longer year-over-year – as compared to 43 days for the rest of the market, which was one day faster year-over-year.
Supply of active listings priced at or above $1.5 million grew 5.8 percent year over year in the fourth quarter, while supply of active listings priced below $1.5 million dropped 5.1 percent year-over-year during the fourth quarter.
“Demand for luxury is improving. That’s showing up primarily in an increase in sales right now, but it’s also putting some slight upward pressure on prices,” Fairweather continued. “We’re ending the year in a much better position than we started, which is a good sign for 2020. I expect price growth to return to at least 3 percent to 5 percent by spring.”
West Palm Beach topped the list where luxury home prices rose the most for the second-straight quarter, with a 104.5 percent year-over-year increase to an average price of nearly $3 million.
“The Palm Beach market was slow over the summer, with rumors of a potential crash, a possible rise in interest rates and jitters from Hurricane Dorian,” said Redfin Palm Beach Market Manager Delray Valle. “A lot of people were touring but not making offers. But then the market never crashed, the storm largely spared Florida, and Palm Beach blew up; people who weren’t closing deals in the summer closed in the winter. Plus, you had an influx of snowbirds and folks looking to take advantage of Florida’s tax benefits.”
Miami also made the top 10 list of cities where luxury home prices rose most in the fourth quarter of 2019 with an average sales price of $1.94 million, an increase of 18.3 percent year-over-year.
The most expensive home sold in the last quarter of 2019 was a $94 million 12-bedroom, 21-bath mansion in Los Angeles featuring three gourmet kitchens, five bars, a massage studio, infinity pool, bowling alley and a 40-seat movie theater.