Inventory shortages have long impacted home prices, as increased competition has pushed prices higher.
A new report from Redfin now shows this same problem has made its way into the luxury housing market.
However, the report noted that competition is not nearly as significant, with few houses selling above list price.
According to the latest luxury housing market report by Redfin, luxury home prices grew 7.5% in the second quarter of 2017 compared to last year, to an average of $1.79 million.
The report looks at home sales in more than 1,000 cities across the country and defines the luxury market as the top 5% most expensive homes sold in the city in each quarter
For comparison, the average price for non-luxury homes was $336,000, up 7% compared to a year earlier, meaning this is the first time since the fourth quarter of 2014 that luxury homes had stronger price growth than homes in the bottom 95% of the market.
“The housing shortage is now affecting the top of the housing market,” said Redfin chief economist Nela Richardson. “After five consecutive quarters of double-digit inventory growth, the number of million dollar-plus homes for sale dropped by 9.4%.”
“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%,” said Richardson.
Breaking up the luxury market, the number of homes for sale priced at or above $1 million fell 9.4% compared to the same period last year, while the number of homes priced at or above $5 million saw a similar decline at 9.5%.
The news follows a recent trend from homebuilders. Back in May, homebuilders reportedly started to finally switch gears from the luxury market, which they focused on the past several years, to starter homes.
Nearly all major builders are making this shift as Millennials, the newest generation of homebuyers who were born from the early 1980s to mid 1990s, increase their presence in the market, according to an article by Laura Kusisto and Chris Kirkham for The Wall Street Journal.