In the first quarter of 2019, luxury home prices decreased 1.6% year over year, marking the first annual decline in nearly three years, according to the latest data from Redfin.
Redfin classifies luxury homes as those that sold among the top 5% most expensive in the quarter. In the first quarter, luxury home prices across the country averaged $1.55 million.
However, in the other 95% of the market, Redfin discovered home prices rose 2.7% year over year, averaging $300,000 in the first quarter.
According to the company, sales of homes priced at or above $2 million decreased 16% in the first quarter. This is the second consecutive quarter of declines, and the biggest luxury sales drop within the last nine years.
That being said, the supply of homes for sale priced at or above $2 million grew 14% year over year, rising for the fourth quarter in a row, according to the company.
Redfin Chief Economist Daryl Fairweather said since homeowners can’t deduct as much mortgage interest as they used to be able to, the calculus has changed when it comes to buying a home, especially an expensive one.
“Although the new mortgage rule applies to everyone in the country, high earners in states with high income taxes like California and Massachusetts saw their tax bills surge,” Fairweather continued. “Not only do the new rules make it less desirable to purchase a multi-million dollar home in high-tax states, it has also motivated some people—especially those with big incomes and big housing budgets—to consider moving to places like Florida, Washington or Nevada, which have no state income tax.”
In fact, Redfin revealed that despite the overall decline, luxury home prices fell in just one-third of cities recorded in its study.
The report indicates that cities in Florida, South Carolina and Washington experienced the largest increases in luxury home prices in the first quarter.
Here are the top five areas that saw the largest increase in luxury home prices:
- West Palm Beach, Florida increased 89.6%
- St. Petersburg, Florida increased 62.3%
- Charleston, South Carolina increased 42.3%
- Tacoma, Washington increased 33.1%
- Fort Lauderdale, Florida increased 27.8%
“Luxury prices may be down nationwide, but they’re rising in some cities,” Redfin writes. “For the fourth quarter in a row, West Palm Beach saw the biggest increase in prices for homes in the top 5% of the market, up 89.6% year over year to more than $2.8 million last quarter.”
Additionally, Redfin’s analysis revealed that luxury homes are actually selling faster this year. According to the company’s data luxury homes went under contract after an average of 83 days on market, three fewer days than the first quarter of 2018.
Interestingly, the market for non-luxury homes also sped up this quarter, with homes spending an average of 69 days on market. This is ten fewer days than same time in 2018, according to Redfin.
NOTE: This report is based on multiple-listing and county recorder sales data in markets served by Redfin. For inventory and sales, Redfin analyzed homes priced at or above $2 million that were sold in the third quarter of 2018.