Home sale for the upper crust continued to grow in the third quarter, rising 9% even as sales in all the rest of the housing market shrank 1.2%.
Nela Richardson, chief economist for Redfin, says that this comes as no surprise, given that the luxury housing market was the first to recover after the crisis and has been going strong ever since.
Luxury home buyers, after all, have the extra assets to invest in the stock market which has been booming. It’s also easier for the well-heeled to take advantage of record low interest rates and overseas investment opportunities.
But this trend may show signs of fraying at the edges.
“…That overseas investment is beginning to wane, and markets that are most dependent on international demand are seeing a steady and dramatic decline in sales of million-dollar-plus homes,” Richardson says. “Meanwhile sales of expensive homes continue to rise at a steady pace in cities where those sales rely less on investors, both foreign and domestic.”
According to Redfin, $1 million dollars will still buy what’s considered a luxury home in most parts of the country, but there are of course places where this price point will buy nothing more than the average home.
A number of pricey California cities were at the top of the list for million-dollar-home sales in the third quarter, such as San Francisco, Los Angeles, San Jose and San Diego.
But, Richardson notes, a few cities considered more affordable also made the list, such as Houston and Chicago, which scored higher than Seattle, Boston and Washington, DC, which have higher housing costs in general.
“Houston was a clear standout, with a 42 percent increase in sales of homes costing $1 million or more since last year; the average increase for the 385 cities that had million-dollar-home sales in the third quarter was 17 percent,” Richardson says. “The big surge in million dollar-plus homes in Houston was driven by a shift in homebuyer demand toward luxury properties.”
Redfin agent Tara Waggoner broke it down based on local Houston economic conditions.
“The luxury home market in Houston is thriving in large part because of the strong and diverse job market,” Tara Waggoner says. “Energy and technology companies like Exxon Mobil are hiring employees away from the coasts. Those people are shocked at how much home they can get for $1 million in Houston. The Heights area is popular for its 1920s to 1950s inspired bungalows and its protected historical district. In other popular neighborhoods, like The Woodlands, the job market is causing a bit of a cultural shift, too. People are starting to forgo the Houston nightlife and opt to stay home, simply because they now have the space to entertain. ”