Luxury home prices rose 7.4 percent year over year to an average of $1.76 million in the fourth quarter of 2017, according to the latest luxury market report from Redfin, the next-generation real estate brokerage. The analysis tracks home sales in more than 1,000 cities across the country and defines the luxury market as the top 5 percent most expensive homes sold in the city in each quarter. The average price for non-luxury homes was $333,000, up 6 percent compared to a year earlier.
Persistent demand, fueled by stock market gains, along with shrinking supply contributed to the price increase. The number of homes for sale priced at or above $1 million fell 23.8 percent compared to the same period last year, marking three consecutive quarters of declines in luxury supply. The number of homes priced at or above $5 million followed the same trend, down 23.4 percent.
“The stock market hit all-time highs with gains in nearly every sector last quarter, instilling confidence among the wealthiest homebuyers,” said Redfin chief economist Nela Richardson. “As a result, we saw double-digit growth in luxury home sales in the last months of the year.”
Sales of homes priced at or above $1 million were up 15.2 percent from a year ago, and sales of homes priced at or above $5 million were up 13.7 percent.
Luxury homes moved off the market quickly, typically finding a buyer in an average of 75 days, eight fewer days than in the fourth quarter of 2016.
Seven Florida beachfront communities saw the average sale price of luxury homes increase by more than 25 percent year over year. In Sarasota and Delray Beach, luxury prices shot up 45.6 percent and 41.3 percent respectively, the highest fourth-quarter luxury price gains of all cities Redfin analyzed.
San Francisco posted the largest year-over-year decline in luxury home prices, down 12 percent to an average $5.03 million.
While the strong stock market boosted confidence in other housing markets, some would-be luxury buyers in San Francisco held back.
“The luxury market in San Francisco slowed through 2017,” said Miriam Westberg, a Redfin agent from San Francisco. “An unusually low number of initial public offerings among local companies meant fewer cash-flush buyers. Competition, and therefore prices, dropped as many affluent buyers opted to invest in the stock market instead.”